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All Too Common Mistakes Small Businesses Make Going Into Tax Season

Posted on by Uptick Marketing

There are tons of articles out there all about what small businesses should do to prepare for tax season—but what about what not to do? That list is equally important! As a small business owner, you’re an expert in your niche and industry—not necessarily a tax expert. That’s why it’s important to seek out professional guidance to make sure you do everything by the book. Keep reading for some of our best tips for avoiding common mistakes this year. 

Don’t Overestimate How Much of Your Startup Costs Are Deductible

This will come as no surprise, but your first small business tax season is when slip-ups are the most likely. That means you should go in with as much knowledge and as much preparation as possible. This includes triple checking how much of your startup costs are tax deductible. Although many people think it’s all deductible, this misconception can get you in trouble!

For starters, you have to make a sale before anything is deductible. After that, those expenses are deducted over the course of the next 15 years. If your total first-year expenses were less than $50,000, the IRS will allow up to $10,000 in deductions. If your first-year expenses were more than $50,000, you can still receive your deduction, but it will be reduced by how much over $50,000 your expenses were. 

Don’t Choose the Wrong Entity When Registering Your Business

Making the wrong choice here can double the taxes you owe, which definitely isn’t ideal for a small business just starting out. The business tax entity you choose will depend on several factors, including what you want your business structure to look like, your future financial goals, and how many people you plan on employing. 

Here are the most common entities:

  • Sole-Proprietorship;
  • C-Corp;
  • Nonprofit;
  • LLC;
  • Partnership. 

Each option comes with its own benefits and its own potential downfalls, so it’s important that you do in-depth research or consult with a professional to make sure you’re choosing the right entity. 

Don’t Mix Your Business & Personal Finances

Did you know that client dinners aren’t always deductible? Or that the cost of your commute isn’t a write-off? Even business trips (which has the word “business” in it!) can get complicated when it comes to tax law. Not knowing where the line is between your personal and business expenses is a huge red flag to the IRS, so it’s very important to keep things clean and organized. As with most of these tips, it’s always safest to consult a professional tax professional. 

Don’t Keep Poor, Disorganized Records

In a sense, you should always be preparing for tax season. If you maintain this attitude, you won’t be left scrambling come tax time to get everything in order! Not only can disorganized records cost you money in lost deductions, they can also lead to bigger problems if your business is ever audited. Make sure you’re adding every receipt to your files and updating your accounting software regularly. 

We Can Help Make Tax Season a Breeze

This list is a great place to start when it comes to the “dos” and “don’ts” of small business tax season—but it’s only scratching the surface! Things get complicated fast, and navigating taxes isn’t every business owner’s strong suit. Trust the experts at Banks, Finley, White & Co. to help you with whatever you need. Get in touch with one of our professional accountants today, and know that your small business is in good hands!

What to Know & Do Going into 2022 Tax Season for Small Business

Posted on by Uptick Marketing

The 2022 Tax Season for Small Business: How to Start

2020 was not a perfect year to say the least. It’s not easy to keep tax prep in mind during a normal year, let alone a year like that one! Luckily, we specialize in small business finance—and have some helpful tips for you to navigate the 2022 tax season like a pro. 

Organize Your Financial Records

The first step in preparing for just about anything? Getting organized! Take time to get all of your business’s income statements, payroll documents, credit card statements, receipts, etc. together before you do anything else. Getting organized for tax season also involves getting important dates and deadlines on your calendar. Depending on what type of business entity you own, tax deadlines will vary—so be sure to know when things are due!

Fill Out All Necessary Tax Forms

In addition to getting all of your financial statements and reports together, you’ll need to find out which forms are necessary for your business. These forms (whichever apply to you) will be in addition to your personal 1040 form. Keep in mind that you may need to fill out additional forms if you’re self-employed, you run your business from home, etc. 

Things to Consider When Preparing for Tax Season

Since things haven’t exactly been “normal” over the past couple of years, there are other things you should think about when prepping your taxes. Some of these things include:

Did you work in multiple states?

If you did, you’ll need to file taxes for the state that you live in and the states you worked in. This process varies from business to business but, generally speaking, you won’t have to pay taxes multiple times on the same income. 

Did you start freelancing?

The freelancing market has surged in the last couple of years thanks to the pandemic. If you were a part of that surge, the IRS considers you a small business. You’ll need to pay taxes on every dollar you earn. When you work with a W-2 company, they automatically withhold these taxes from your paychecks. When you freelance, however, you pay those taxes after the fact. A good rule of thumb for freelancing is to save 30% of your freelance income for tax season or make estimated payments every quarter. 

Did you receive a loan from the PPP?

To keep things simple, PPP loans that have been forgiven are not considered taxable income. Even if the loan is forgiven, business expenses paid for with a PPP loan are deductible. These are general rules when it comes to federal taxes—but be sure to check if your state has a different set of rules. 

We’re Ready to Help You Navigate the Upcoming Tax Season

It’s probably no surprise that our biggest piece of advice is to seek help from a professional accountant. Regardless of what industry you’re in, an accountant is one of the best investments you can make—especially when you’re just starting out. Make sure you’re ready for tax season with Banks, Finley, White & Co. Contact us today to get started with an accountant who specializes in small businesses!

EOY Tax Season Prep for Your Business: What You Need to Know

Posted on by Uptick Marketing

Tax season will be here before you know it, but the right preparation can turn that thought from terrifying to triumphant! Keep reading for some important tips you can use to make sure your business is as prepared as possible for this upcoming tax season. 

Prepping for Tax Season

Developing strong end-of-year practices is one of the best ways to make each tax season a breeze. And these practices are even more important for small businesses. If you want to make sure you’re reaping all the benefits of tax advantages like deductions and write-offs, work with a professional accountant that specializes in small business’ finances. 

Plus, keep reading for some end-of-year best practices!

#1: Make Sure You’re Caught Up

The first step toward not getting overwhelmed by tax season is making sure all your financials are up to date. Most small businesses pay estimated taxes based on the previous year’s figures—so do your best to determine how the past three quarters compare to last year. This means, as a business owner, you can keep track of your expenses in the buildup to tax filing in April, and offset any costs that occur between this period and their final submission to the IRS. 

#2: Double Check Inventory & Uncollectable Debts

Some situations for small  businesses aren’t ideal—like products that just don’t seem to sell, or debts that just aren’t collected—but they’re at least deductible! Old or unsellable inventory can be counted as a deductible when tax time rolls around. This applies to uncollected debt as well. What qualifies as uncollected debt will depend on your particular business model. Regardless, you’ll need to be sure you have proper documentation!

#3: Year-End Investments

The more deductions, the better. Make sure you’re saving as much as possible on your taxes, and taking advantage of all the government-sanctioned exceptions you can. If you’ve been considering upgrading some equipment or purchasing some extra business property, now’s the time to do it! But don’t do this just for the sake of doing it. If you’re going to make bigger purchases, make sure they will increase the profitability of your business as well. 

#4: Check Your Business’s Retirement Plan

It’s not uncommon for small businesses to offer less conventional perks to their employees, but it’s hard to beat the tried-and-true perk of a great retirement plan. As you’re prepping for tax season, take a look at your retirement offerings. As a small business, you have access to specialty retirement plans separate from the regular 401(k) and IRA plans. 

#5: Work With a Professional

You most likely saw this tip coming—one of the best things you can do for your small business finances is trust them to a professional. They’ll make sure you’re getting all the tax benefits you can, and that everything stays organized and compliant. Tax law is complicated. Failing to correctly file your taxes as an individual can lead to a sticky situation, but for a small business it can mean disaster. Make sure you’re working with someone you trust!

Small Business Tax Experts

Banks, Finley, White & Co. is standing by, ready to help you with all of your small business accounting needs! Over the past 45 years, we’ve evolved with the changing accounting landscape. We can help you navigate tax time with ease. Reach out to us today to get started!

Small Business Accounting Tips That Will Save You Time & Money

Posted on by Uptick Marketing

 

Small business accounting is no small task—there are a lot of considerations and, if you aren’t a trained accountant, things can seem complicated and daunting. Luckily, we’ve compiled a helpful list of some small business accounting tips that will save you both time and money. 

Separate Business and Personal Expenses

This tip might seem obvious, but a lot of small business owners overlook it. A separate, dedicated bank account for business expenses will save you lots of time when it comes to figuring out deductibles. If you own an LLC or a corporation, doing this will also help limit legal exposure to business debts. 

Keep Up With Labor Costs

Labor costs make up a huge part of your expenses, sometimes up to 70% of your small business’s budget. Make sure you’re keeping track of everything in this department, including benefits and overtime. Consider hiring a professional accountant to help you with payroll taxes, since they’re separate and due at a different time than other taxes. 

Track Everything

Organization is key when managing small business finances. Make sure you’re very detailed with your expenses, as this will help your business maximize credits and tax write-offs. Using your business credit card will help with this, and make it easier to keep track of things. Investing in a good accounting software can help you keep track of things as well. 

Hire a Professional

It’s no secret that hiring a professional is the best way to make sure everything stays organized, accurate, and beneficial to your business. If hiring a full-time accountant isn’t in your budget at this time, consider hiring one temporarily to get things in order—or during important times of the year like tax time. 

Update Your Books

Calendar blocking is a great way to make sure you get the important things done! Block off time every week on your calendar to get your paperwork in order. After invoices and receipts pile up, it’s much harder to get them under control. Staying on top of them regularly will go a long way in keeping things streamlined. 

Plan for Major Expenses

The better you can plan, the better off your business’s finances will be. Whether it’s equipment upgrades, tax time, or staff adjustments, being prepared for larger expenses will help lessen the blow when the time comes. 

Look to the Future

In addition to looking ahead to large business expenses, it’s important to make future financial projections. While no one can truly predict the future, do your best to predict how your small business’s expenses and profits might change going forward. Consider natural forces like inflation, how you plan to grow, changes you know you’ll have to make, etc. This will help guide you in your decision-making. 

Need More Accounting Help?

Managing your small business finances is a full-time job. If you’re looking for extra help, Banks, Finley, White & Company is ready to help. We specialize in small business accounting, and can guide you through all the complicated moving parts. Contact us today to get started! 

Five Accounting Issues That Small Businesses Struggle With & How To Fix Them

Posted on by Uptick Marketing

Statistics show that approximately one in two small and medium businesses never make it past the first five years on the market. Odds are—if you know another person who runs a business, one of you will close down before the five-year mark.

There are several reasons why a business can fail. Sometimes, the idea is simply not good enough, or the competition is too high. Sometimes, business owners don’t have the right mindset to run a successful company.

But even if you’re an excellent entrepreneur and you’ve found the perfect niche for your business, you’re most likely facing these 5 most common small business accounting issues. Let’s look at what they are and how you can fix them as soon as possible.

1. Incorrect Management of Cash Flow

To fix this issue, you need to properly track the stream of revenue coming in and going out to gain insight into profitability vs. cash. Don’t rely on traditional financial statements for this. Instead, use management reports and automate the billing and collections processes.

2. Inefficient Hiring and Retention Processes

While you can’t prevent the natural churn of employees, you can have measures in place that prevent this from becoming an issue for the company. Hiring and training a new employee is more costly than most business owners realize. Cutting down on these costs starts with ensuring you’re hiring the right people for the job.

3. Missing Standardized Processes

By having standardized processes in place in your organization, you can guarantee that you are delivering a consistent and high-quality product or service every time. This increases customer satisfaction and helps you know exactly how much each product or service cost. This allows you to bill your clients correctly and not risk losing money.

4. Faulty Reporting

As a business owner, every moment you’re not fully aware of your finances is a moment you are at risk of losing money. You must always have a clear understanding of what is happening in your business. This requires access to full reports in a timely manner. When you have a clear picture of the present, you can make strategic plans for the future.

5. Not Working with an Expert Accountant

Owning a business can be overwhelming. There are many moving parts to keep an eye on, and it’s not just inside the company (finding clients, developing products or services, hiring employees, etc.). But also outside of it (ever-changing laws and regulations, fluctuating markets, issues with suppliers, and so on).

Get A Small Business Accounting Expert

You need an accountant that understands your business and can take some of these responsibilities off your shoulders so that you can focus on growing your company. Here at Banks, Finley, White & Co., we do just that. Get in touch with us for a quote today!