This article comes from QuickBooks, a Salesforce partner.
Nearly 77% of small business owners admit they don’t have a business degree, according to a 2019 small business report. Around half of them say they’ve taken some business classes but nothing extensive. The other half has no formal business education.
Degree or no degree, around half of all small business owners say they only feel somewhat confident or not confident running their businesses. And it’s not hard to understand why.
Do you know anyone who started their company because they loved paying taxes? Around 40% are trying to live out their dreams and pursue their passions. And those dreams don’t involve paying taxes.
But as every seasoned business owner knows, taxes play a big role in a company’s success. After all, taxes are a year-round obligation. Failing to keep track of tax deadlines throughout the year or filing taxes incorrectly can have expensive consequences. It’s a mistake you would be wise to avoid, as nearly 30% of small businesses fail due to cash flow problems.
But if you plan ahead, claim the right deductions, and abide by these small business best practices, paying taxes is a lot less, well, taxing.
No matter how you slice it, taxes are hard. Most small business owners have to pay the IRS quarterly, so there are lots of deadlines to keep track of. Not to mention deductions to consider and documents to organize. An accountant can help, especially one paired with an accounting solution that makes record-keeping and income reporting easy. Look for someone who has experience in your industry, is communicative, and within budget.
The IRS will match any income reported against actual income received — and those numbers need to match. Be sure to report all income received, even if you don’t receive official payment records. If you use automated accounting software to track income and deductions, reporting income is as easy as importing that information directly to your tax return. Otherwise, you’ll have to track all transactions manually and fill out the correct tax forms to report your income.
Inadequate record-keeping puts your small business at risk for an audit. Don’t leave money on the table. Keep records of all your income and expenses, including gross receipts, interest payments, sales and return records, income statements, employee wages paid, insurance costs, office rent and supplies, and travel costs. Invest in smart accounting software, like QuickBooks, to help you keep track of it all.
Are you a C Corporation, S Corporation, Limited Liability Partnership, Limited Liability Company, Simple Member LLC, or Sole Proprietor? Your business classification affects the taxes you need to pay, how much you pay, and when you pay. Work with an accountant to determine how your business should be registered and classified, and reassess your classification annually.
The IRS checks every quarter to see if you’ve paid your payroll taxes. Payroll taxes are any taxes paid on the wages of employees. They’re typically used to finance insurance programs, like Social Security and Medicare. These taxes are the second-largest source of government revenue in the United States. If you’re using a payroll service, make sure they’re paying your company’s payroll taxes consistently. Or you’ll be on the hook.
Keep track of these common tax deductions
Of course, it’s always best to work with an accountant to ensure you’re claiming the right tax deductions and maximizing your return. There are tons of tax breaks out there for business owners, from business travel and gift deductions to work opportunity credits. A qualified accountant can help you find them.
Myranda Mondry is a copywriter and researcher for TSheets by QuickBooks, an employee time tracking and scheduling software that's used by businesses worldwide. Based in the up-and-coming tech community of Boise, Idaho, she has a journalism degree from Boise State University and a serious passion for helping small businesses succeed. In her spare time, she can usually be found curled up with a good book or hiking Boise's famous foothills.