Earning a great salary from a business you created is the dream that many of us have. True, this career path can make money, but it’s not headache free. Many who choose to start their own business are quick to fall into one of the many easy traps that having a small business can present.
Probably the most indiscreet trap is business taxes; a part of running your business that many prefer not to acknowledge. Although filing taxes may seem like a daunting process, a little forethought and organization will quickly lead you past this nuisance of administration.
- Stay organized!
Make sure you have your accounts in order, and keep your receipts. There is hardware and software available for scanning and keeping your receipts organized, so you will never have to deal with a box full of paper again! Make sure that you keep the proper receipts. Expenses can only be claimed if they are somehow related to you earning income from them, so not everything is a business expense!
- Go pro or DIY?
Depending on the amount of extra time you have, and how much you actually know about the taxation system, you could possibly save the money for an accountant and file your business taxes by yourself. There is software and websites available for people like yourself, which are easy to use and give you the maximum amount of return possible.
- Be proactive and think ahead:
Since you have transitioned from a salary job to one where you are your own boss, you might have carried over some of your old habits (good and bad). While previously your taxes were deducted from your paycheck, now you are directly responsible for making sure you have enough money put away to pay your taxes. This could be a big problem, especially for smaller businesses. The way to deal with this situation is discipline. Treat every source of income from your business like it is a paycheck; take away a percentage equal to the tax payable from the amount and put it aside. This way, you will already have the funds necessary to pay your taxes when the time comes.
- Avoid audits!
Don't do anything drastic or out of hand, and don't be greedy. It will only come back to haunt you. Business taxes are a prime candidate for audits. If you are claiming business expenses, make sure you can prove that they were necessary to run your business.
Keep good books and have accurate statements showing how each penny was earned and where it was spent.
File your taxes on time, and don't wait until the week prior to start organizing your documents for submission. Organize your documents early and often!
Business taxes might be a headache to solve, but with a little organization and by reducing the procrastination, you can easily get your taxes filed and finished without having to think about them ever again...that is, until next year!
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