Now’s The Best Time To Plan For Next Tax Season
If this is your first tax season as a newly self-employed entrepreneur, you may be feeling a bit of shock or surprise at how your tax season turned out. Rarely do taxes come out the way you thought they would. While we entrepreneurs may be shrewd about other financial matters, we’re typically not so shrewd when it comes to doing taxes.
I speak from experience. We entrepreneurs are do-it-yourselfers. We take pride in our ability to micromanage every aspect of our business. But taxes are one area where you should definitely seek professional help.
Now that your first tax season is behind you (or your second or third) it’s a great time to reassess and to plan differently for the upcoming year. With the first quarter performance to look at as well, you can use the first quarter profitability to make adjustments to your goals moving forward.
Planning And Goal-setting Based On Last Year’s Returns.
No matter how much or little you generate in sales, the most important key is generating bottom-line profit. Profit is what provides opportunities for future growth and expansion. While you also want to pay as little in taxes as possible, you don’t want to compromise your growth.
I have two tips for making tax time much easier. Well, let’s say three tips because the first one is to hire an accountant or tax professional to do your taxes moving forward. Now for the other two.
Pay estimated quarterly taxes
Many first-time business owners forget to make quarterly estimated tax payments the first time they have self-employment income. Since you’re used to having taxes withheld from your paychecks, you’ll need to work with your accountant to figure out how much you need to pay each quarter. And don’t forget to factor in any state, county or city taxes you may owe.
Don’t mingle business and personal expenses.
First-time business owners are notorious for mingling bank accounts and expenses. At the end of the year, someone, either you or your accountant has to sort through it all, which significantly jacks up the cost or the time spent on tax preparation. Fortunately, it’s a mistake that most business owners make only once. The easiest way to avoid this mess: Set up separate checking and credit card accounts for your business.
A Few Ways To Cut Costs And Improve Your Bottom Line
Do more networking and less paid advertising. At this stage of your business, you’ll make new contacts, so the cost will be less, and the returns will ultimately be greater. People buy from people they know. So, get out and network with potential clients and referral partners.
Reimburse employees for mileage rather than providing a company car. It will save you on insurance, maintenance and multiple other costs. And, of course, use subcontractors if you only need part-time help. You only have to pay for labor that you need versus having unbillable bench time. It will also save you money on payroll taxes and insurance.
Provide insurance allowances to your employees instead of offering group health insurance. Small businesses often can’t afford to offer health insurance, but you can still provide a benefit to your employees by putting some money toward their insurance costs. It will save you money and still provide a benefit to your employees.
As you grow in entrepreneurial experience, you’ll also get better at knowing how your tax season will turn out. I hope the above tips will help make a positive diff