6 Tips For Keeping Your Taxes In Order As A Startup
Wednesday, August 9, 2017, 6:00 AM | Leave Comment
When the time comes to pay your taxes, it can often turn into a real nightmare.
But even if unpleasant, it remains one of the most important tasks for any startup owner. Like with all things, there’s the right way and the wrong way of dealing with your taxes.
Instead of waiting until the last minute, you should actually be preparing through the whole year for the tax season.
Following this guide will not only save you the headaches when it comes to taxes but also save you some valuable time and money.
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Separate Business and Personal Funds
The most common mistake small business owners make is to mix their personal funds with the business ones. Not only that this doesn’t look professional, but it also signals the IRS that you’re actually running a hobby.
Another reason is that you’ll want to be able to claim your expenses as deductions and to do this you must be in a position to show that these deductions were indeed for business purposes.
Keep your business and personal accounts separate, and you’ll be set for an easier time when the tax day comes.
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Hire Independent Contractors Instead of Employees
Most startups can’t afford to hire employees anyway since they have to pay for payroll taxes and other benefits.
If you choose to hire independent contractors instead, you won’t have to pay any of these. It’s important that you know about the differences between the two because if your independent contractor meets the legal definition of an employee, you could be in trouble.
If you’re unsure if about the status of your workers, keep in mind that IRS will always treat them as employees by default.
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Use Accounting Software
If you use an accounting software right, it can make tax-time really easy. Choose one of the accounting tools that fits your purposes and start inserting all of your revenues and expenses. This way you can rapidly create financial statements which you can forward to your Certified Public Accountant (CPA) and file your tax return.
Accounting software can save you a lot of time and is usually quite easy to use, so don’t shy away from it.
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File Your Tax Returns Electronically
By filing your tax returns electronically, you’ll not only make sure that your tax return is received in time, but you’ll also save some of your valuable time too.
You can use a software like Turbo Tax, which will allow you to file your federal tax return for free while filing a state tax return costs a small fee.
Once you filed your tax returns, you will get a confirmation as soon as the IRS receives it. If you need additional info on e-filing, consult the IRS page on electronic filing options for businesses.
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Tax Professionals
Sometimes using tax professionals can be more affordable than managing your own taxes, especially if you have little to none experience in the field.
By hiring tax professionals like Accountants Sydney you’ll make sure that your returns are prepared and filed properly.
You’ll also make sure that you maximize your tax deductions and benefits, which alone can save you a lot of money.
When tax day comes and you don’t have to worry about it at all, that’s worth something, right?
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Don’t Store, Donate Instead
If you happen to have some unused inventory, you should donate it and get the tax deductions. This way you’ll save money by not paying for storage, but also on your tax deductions too.
There are donation limits, of course, but they’re set very high. So only if you are trying to donate 20% of your total income to charity you should be worried about these limitations.
Also, always make sure that you’re donating items in good condition since IRS won’t accept deductions for items in bad condition.
Conclusion
Paying taxes doesn’t have to be as complicated as people make it, but it takes planning and effort to make it go smooth.
By following our guide, you’ll make sure to make the whole process easier, faster, and also save some money through tax deductions.
Do remember though that if you find yourself in a difficult position it’s always better to ask the professionals for help than to have countless sleepless nights because of the tax season.
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