Tax day is just around the corner! Tax season can be a stressful time for entrepreneurs, so we wanted to reach out to our small business experts and ask them what tricks and tips they utilize to make this time of year as painless as possible.
Here’s what they had to say…
“Have your spouse on your Board of Directors (BOD). The IRS allows 1 BOD trip annually; all expenses are a 100% write off, including meals and entertainment. Nice perk.” –Phil Gafka, LEAP Associates, Inc.
“My tax tip is record everything in the cloud! I use cloud accounting software that I can check from my mobile phone. I can also scan receipts from my phone where they are stored inside my software. I also have a few accountant clients so another big tip is to make sure you have a good accountant to help you work out how to be tax efficient. They keep up to date with the rules and regulations so you don’t have to!” –Karen Weider, Weider Web Solutions
“Keep it simple and regular! Once a month I sit down with a strong coffee and go through my bank statements listing in a spreadsheet what I have spent and earned. Having a bank account used only for business transactions helps keep this process fast and easy. I don’t pay myself until I have done this which keeps me accountable and stops it from piling up.” –Laura Elizabeth, Laurium Design Ltd
“When starting off a good rule of thumb is to save at least 20% of each paycheck you receive for taxes. It’s hard but, you’ll be happy you saved it come tax time. Plus, this is a pretty manageable number if your taxes come in higher or lower.
Favorite tax write off is: movies and Netflix because it’s research for our company.” –Tiffy Diamond, Live Art Love, LLC
“Most small business owners do not realize that they may be entitled to an R&D tax credit for their innovation and manufacturing activities. The changes made to the Federal R&D Tax Credit in December 2015 created additional advantages allowing qualified small business start-up companies to use the credit against payroll taxes. Many industries can qualify for the R&D Tax Credit including software developers, A&E firms, and manufacturers.” –Chris Vignone, PM Business Advisors
“My favorite tax tip is to use Quickbooks Self-Employed app. It can monitor mileage, take pictures of receipts for expenses, and generate easy-to-understand graphs. My favorite write off is my home office deduction.” –Austin Waldo, Illuminated Digital
“Tax Free Fringe Benefits are by far the most overlooked way to get more cash in your pocket! The problem is that most employees do not understand the complexity. Do you use your auto for business? If yes, how are you reimbursed? This makes a big difference for tax purposes. Do you eat lunch at your desk? Do you work while you eat? You may want to look at tax free money… meals for the convenience of the employer. If you are married, own your own business and your spouse works for you…. you may want to look at your wages for social security planning. It’s complicated, but definitely worth looking at it.” –Dawn James, CPA & Co.
“1. Don’t forget to claim exemptions: There are plenty of exemptions available for small business owners when it comes to taxes, but not all of them are taken advantage of. Some common missed exemptions include petty cash purchases, training classes and magazine subscriptions for your office.
2. Contribute to your own retirement plan: There are a lot of plans that offer deductions. By contributing directly to your 401K, you are saving money for the future and getting a nice tax break.
3. Work with tax professionals: While there are plenty of tips that can save you trouble during tax time, filing taxes as a small business owner can lead to increased scrutiny from the IRS. Working with tax professionals at the start of the year can eliminate the stress of filing and free up time for you to run your business.” –Jayson Mullin, Top Tax Defenders
“As a small business owner I set up a business retirement plan called IRA which can give me a significant break on taxes. Not only are the funds tax deductible but I will get a very nice retirement savings. It’s simple to set up an IRA account and very easy to manage, every small business owner should consider this option to help on saving some taxes.” –Lisa Chu, Black N Bianco Kids Apparel
“I take a picture of every receipt as I get it. Seriously – I take a photo of my receipt and use an app so the information is automatically uploaded and available via cloud technology (try the Neat app and Premium Service). If I don’t take a photo of it, I will take it home and scan it, but the moral of the story is that I get the information into some sort of system as soon as possible. This is especially important with receipts since they often wear and then I have trouble reading the details.” –Jen Cohen Crompton, Fuel Cycle Fitness
“Don’t ask for advice from other business owners ask for tax advice from a tax professional like a CPA. Your fellow business owner is not going to defend you in an audit inquiry. Everyone’s situation is different and therefore their tax deductions apply differently. A farmer can’t write off a Ferrari but a Ferrari dealer can.” –Meghan Blair-Valero, Fogged In Bookkeeping, Inc.
“As a small business owner, I’ve been using quickbooks to get all of my tax information in order. It sorts everything into categories so all I have to do is pull the numbers from the system. It’s that easy. I don’t have to worry about having to go back through thousands of receipts and paperwork to figure out what goes where. My best tip is to have a system in place that logs all of your sales, discounts and inventory. Make sure it categorizes for you so at tax time, it’s not stressful. My favorite write off are the countless samples I give away to potential customers. After a while, it adds up.” –Zondra Wilson, Blu Skin Care, LLC
“Don’t mix personal and business expenses. Your accountant will have to sort through all of these expenses and will most likely charge you for the time it takes to do so. Also, if personal and business funds are mingled together, the founders could potentially find themselves responsible for tax debts for the business. You should have one account for business and one for personal and never misuse them.” –Lori Cheek, Cheekd
“Be sure to track itemized deductions, like assets. Running a business is not cheap. Don’t overlook computers, printers, licensed software, delivery trucks and more. Expensing these items can result in a large return for your business. Keep track of these items over the year to help you stay organized come tax time.” –Brian Sutter, Wasp Barcode Technologies
“Whether it’s sales, payroll, income, or even excise taxes, nothing makes taxes simpler than good record-keeping. Good record-keeping makes finding information easier and, at its core, tax returns are all about finding and reporting information.” –Michael Eckstein, Eckstein Tax Services
“A favorite write off (and pastime) is going to the movies, and I’m lucky that as a TV/movie tour company I can sometimes write off movies as research!” –Georgette Blau, On Location Tours
“My best tip for doing small business taxes is to prepare your return, whether you use online software, an accountant, or do it on your own, then wait a few days before you submit it. Usually, it’s good to have this down time to think about any deductions you might have originally forgotten about, some expenses you failed to input, or any other errors you may have made on your return. The last thing you want as a small business owner is to leave money on the table, or even worse, become subject to an audit.” –Andrew Schrage, Money Crashers
“Hire a Great Tax Advisor – Hire the right tax advisor and tax preparer. The best tax professionals are always CPAs, Certified Public Accountants. Most small business owners should use a CPA because these professionals are the most knowledgeable about business taxes and how to reduce them. The second option is an Enrolled Agent, and finally, there are the mass production companies like H&R Block and Jackson Hewitt. Some very small businesses should use an Enrolled Agent, and business owners should NEVER use a mass production company or do their own taxes. Secondly, almost every dollar is deductible – Remember that every dollar you spend could be a tax deduction under the right facts and circumstances. So, if you want to change your tax, simply change your facts. Your tax advisor can tell you which facts to change and how to change your facts so that more of your expenses are deductible. For example, you can deduct more of your car expenses simply by having a home office. Why? Because a home office eliminates the portion of your travel that has to be attributed to nondeductible commuting.” –Tom Wheelwright, ProVision Wealth
“Use the Mac Numbers program template called “Personal Budget” for your business budget as for me, it keeps all my business spending and descriptions of expenses in 1 place when spending with a credit card/s and cash. Update the template at least every 2 weeks. It was extremely helpful when I did my taxes this year.” –Tina Lo, Klarety