Today, I’m going to share some simple tips with you about how to save money on your small business taxes.
I believe everyone should pay their fair share of taxes, but not a dollar more nor a dollar less. Although I am not a CPA, bookkeeper or accountant, I have manged my own business books and done my own business taxes for almost 16-years now. Along the way I have learned some helpful tips that will benefit any small business owner, even network marketers.
Most of these tips are not rocket science, but they are very helpful.
1. Educate Yourself
The most important thing you should do to save money on your small business taxes is educate yourself. You should read a book or two about what you can and can’t legally deduct. You should hire an accountant for an hour or two and ask them any tax questions you might have. You should have your bookkeeper give you updates about the financial progress of your business and areas you can improve upon.
Keep a journal or notebook with you at all times and write down your tax or bookkeeping questions whenever you think of them. In addition, you should talk with other entrepreneurs in similar industries about any tax tips they could offer.
By no means do you need to be a tax expert yourself, but you should have some basic fundamental knowledge about what is deductible and what isn’t. That way, you can ask your advisors informed questions.
2. Work with a CPA
Every penny you spend with your small business CPA is money well spent. I think so anyway. If you are sick, you go to a doctor. If you need your teeth cleaned you visit a dentist. If you need help with your small business taxes, you should visit a CPA.
I highly recommend you work with a CPA who specializes in small business. This doesn’t mean you need a CPA to actually prepare your taxes (unless you want them to), but you should have a CPA as your trusted adviser to help you with your overall tax planning and tax strategy.
You want a CPA who UNDERSTANDS YOUR BUSINESS. Every business in different. Every industry is unique. Talk to a few of your competitors and see who they use. Look for an established CPA with a great reputation. Make sure you do some research on the person you intend to hire.
3. Utilize Accounting Software
There are so many different software programs out there that help you manage your business finances. The most popular one is QuickBooks. Personally, I just use Microsoft Excel to track my expenses and income. I enjoy doing it this way and it works great for me.
Whatever you do, pick a software program that is easy for you to use, something that you understand. The benefit of using software is that it lets you create reports such as your profit and loss statement and balance sheet. These reports let you know where your business stands financially at all times. It also makes preparing for tax time much easier.
The size of your business (income and employees) will dictate the type of software you use. For most small businesses, QuickBooks is a great option.
4. When In Doubt, Ask an Expert
The IRS talks about how many people cheat on their taxes each year. I’m sure that’s true, but what they fail to mention is the amount of people who overpay in taxes each year because they don’t maximize their LEGAL tax deductions.
If you have categories or expenses that you are unsure of, please consult with your CPA before you decide NOT to claim them. There are so many legal tax deductions for small business owners that most people don’t know about and don’t use. When you fail to deduct things you legally can, you end up overpaying your taxes. Don’t make that common mistake.
I’ll admit, I’m not the most organized guy in the world. But when it comes to my business paperwork and business finances I am one of the most organized guys you will meet.
You need a filing cabinet, drawer or dedicated space for your business paperwork. You should organize all your receipts by month. You should have a system for managing invoices. You need to keep copies of your back taxes.
What you need to do is create an organization system that works for you and stick to it. You don’t want to be the person who brings a bunch of receipts to their CPA at the end of the year for them to sort through and figure out.
As an extra bonus tip, I would tell you to update your financial reports every month. Minimum once a month take an hour or two and update your profit and loss statement. This will give you an “eagle eye view” about the financial health of your small business. You shouldn’t wait until tax time to know where your business stands financially.
- Order Quickbooks for Your Business
- 2018 Small Business Taxes Guide
- 475 Tax Deductions for Small Business Owners
In summary, these are my five best ways to save money on your small business taxes. As a small business owner, you should do whatever you can do to legally minimize your tax burden. I’m all about paying our fair share of taxes, but not a dollar more.
On a side note, if you have any experience with small business taxes, I would love to hear from you. What are your best tips on how to save money on your small business taxes? Just leave a comment to share your thoughts.