Business and Taxes: Being on the right side of the law
As a small business owner, you are saddled with many roles. You are the marketer, HR manager, salesperson and day-to-day administrator. The list is endless. With all the things that require your attention, sometimes, the last thing on your mind is your taxes. Though most small business owners are aware of the importance of paying taxes, they are often overwhelmed by the amount of time it takes to deal with it, and they wait until the last minute to deal with it – often when the tax authorities come calling, which could result in fines.
However, a small business owner need not deal with handling their taxes alone, they can hire accountants or tax consultants to assist them. There are different levels of taxes to remit, depending on the kind of business. These facts should be confirmed by speaking to an accountant, as well as the frequency the business is mandated to remit them. There are state and federal taxes, and specified taxes that must be remitted to either of them. This should be done once the business has started operations and makes transactions.
Nonetheless, a business owner can ease the process of paying taxes by preparing in advance, and these are steps on how to do so with the help of an expert accountant.
Keep a Record of Everything
Businesses that are not steadfastly run in an organised manner are bound to run into problems. There is only one major rule that trumps everything else: “Keep records of everything”. Keep records of your transactions such as your expenses and activities: marketing, events, inventory, and office assets, among others. Keep the receipts accordingly. If you are paying for a service from vendors, insist on those invoices and file them away.
Keeping a record of everything daily can be as easy as scanning your receipts with your smartphone, saving them on a drive and regularly backing them up in the Clouds. This should also include the documentation. Purchase accounting software such as Inuit QuickBooks to record these transactions. It is important that small business owners are deliberate about recording expenses, and are able to explain items to tax officials when the time for an audit arrives. Accountants come in handy to help sort out how to categorise expenses accordingly. If a small business owner religiously keeps their records diligently, they could hire an accountant every quarter to audit their books, check the state of their finances, and determine the rate of taxes to be remitted – but that depends on the kind of business. It could be more expensive if an accountant has to sort it all out from the beginning to clean up your books, so start now.
Separate Business from Personal Affairs
Part of running an organised business entails separating your personal affairs and from your business. This would help manage business records easier and keep appropriate accounts. To prevent this occurrence, you should pay yourself a stipend on a monthly basis to prevent dipping into company funds to deal with personal issues. This may be necessary if you do not pay yourself remuneration yet. But you can set a monthly stipend to help with personal expenses. This is important so that an accountant can advice if these monthly stipends, which are not meant to be salaries, are taxable or not according to the law. It also allows easy tracking of the expense when it’s time to audit. So, one must separate business expenses from personal expenses, it can mess up the process of sorting out your taxes.
Check your Books Periodically
So far, it is clear that one of the greatest secrets to efficient tax management is consistency. Here is yet another instance where consistency is applicable. Dedicate time to check your books. What works for you? Ensure it is frequent enough to know that you are recording expenses. You may prefer to do this daily, bi-weekly, monthly or quarterly, when to review your books. It might help if you set your calendar to remind you of the next tax cycle – to know when you are to settle various taxes with the authorities. This would greatly help you to avert the common year-end rush by many business owners.
Get Familiar with the Law
The law backs tax regulations, and the only way to remain on the right side of the law to be knowledgeable about the areas that apply to your business – both federal and state. Take time to familiarise yourself with federal and state tax laws and the processes. You can visit their websites, or visit their offices or seek the counsel of an accountant.
Get a Professional
According to an accounting practitioner in an article titled, “Tax-time tips for small businesses,” she states, “I’ve been in this profession for over 25 years, and seen countless instances of small-business taxpayer errors that have dramatic consequences, and can be very punitive.” Therefore, even if you already do your accounts yourself, there are professionals with the expertise to help you. Bringing them on board can help you save on time and money – two of the most precious resources of small businesses.
In summary, being on the right side of the law is very important. And always bear in mind that paying our taxes is one of our civic responsibilities – one of your contributions to the development of state and country.