Now that tax season is almost upon us, it’s a great time for businesses to take a look at your accounting system, tools and processes in order to make sure you don’t end up scrambling to get things in order come April. It’s extra important for startups, especially, to make sure you’re dong everything you can to maximize income and lower your taxes. Accounting needs are just as important as growth and raising money when it comes to bolstering the business, and addressing your tax needs early on can help you develop the solid foundation you need to build your business. You have plenty of time to make sure your business is in good shape for the coming tax season – here are some tips to help you along.
Use a good bookkeeping system
There is plenty of excellent accounting software out there that startups can take advantage of, including QuickBooks, FreshBooks and Xero. Using a software throughout the year is one of the smartest tax tips; it can help you keep track of receipts, expenses, payroll, quarterly taxes and more. If you don’t have an accountant on staff, you can outsource this work through a company like Vesper.
Pay Estimated Taxes
Many small businesses, such as sole proprietors, self-employed individuals, partners and S Corp shareholders who expect to owe more than $1,000 in taxes have to pay estimated taxes on income. This calculates the tax to be paid on income that’s not subject to withholding and have to be filed quarterly by April 15, June 15, September 15 and January 15 each year. Here’s a helpful guide to estimated taxes from the IRS if you want to learn more.
Set up a retirement plan
Getting a startup on its feet can be so all-consuming it makes it hard to think far ahead in the future, especially when you need all the cash you can get your hands on. But it’s important to think about retirement in the early days – and retirement plans are tax deductible. You will get a business deduction for setting up a retirement plan and also make your company more attractive to potential employees by offering them the option.
Develop a Relationship with a CPA for More Helpful Tax Tips
Even if you use accounting software for the bulk of your tax needs, it’s important to have a good CPA that you trust and can go to for occasional advice. They can even give you advice about which bookkeeping software is right for your business and help you get set up if you need it. You don’t have to have a CPA on payroll, but meeting with one now and then is a smart way to spend your money. CPAs can often help you come up with tax solutions that you wouldn’t otherwise know about.
Track expenses by using a company card
Separating your business and personal expenses is important for startups, which are often funded with a lot of out-of-pocket cash. Paying vendors or making business purchases with personal credit cards should always be tracked with receipts, but try to also use the company card whenever you can – it provides an easy record that you can reference at any time.
Have questions or need help with getting tax-ready this year? We’ll be happy to share what we’ve done to get organized.