Seven Tax Tips for Small Business Owners This Year
Good tax habits start at the beginning of the year. The sooner you get organized and start documenting your expenses, the better off you will be once it is time to file. Even though you are still thinking about your 2023 taxes, you can set yourself up for success in 2024. Here are seven tax tips for small business owners to help you save money.
1. Mark Your Estimated Tax Dates
If you are a sole proprietor, you are responsible for paying your own taxes. Mark the quarterly estimated tax dates on your calendar so you don’t miss them. You can also meet with a tax consultant to estimate how much you should pay.
Making these quarterly payments will prevent you from receiving an exceptionally large tax bill when you file in the spring.
2. Know Your Home Office Deductions
Many tax tips for small business owners focus on reporting the right deductions to help you save money. If you work from home, you can deduct the expenses related to your office space from your taxes. This deduction is either based on the square footage of your office or the percentage of your office compared to the rest of your home.
You can deduct a portion of your mortgage interest, insurance, utilities, and repairs when filing your taxes. For example, if you repaired your air conditioner this year, a portion of those costs could be deducted from your taxes. This is because you need air conditioning to work comfortably.
3. Download a Mileage Tracker App
If you use your vehicle for work, you can deduct a variety of expenses from your taxes. This is because the car is an essential tool for you to do your job. You can deduct gas costs, repairs, depreciation, tires, and lease payments.
There are two ways to track your expenses: you can keep up with each possible deduction and report it to the IRS or you can use a mileage app. The first option is similar to deducting home office expenses, where a percentage of the overall usage is dedicated. The second option is easier. Log your mileage throughout the year and then multiply it by $0.58. This is your deduction.
4. Find an Expense Tracker That Works for You
While you are downloading your mileage app, look for a tool that helps you manage all of your business expenses in one space. Today’s tracker apps allow you to upload receipts, sort expenses by category, and review spending reports.
This is one of the top tax tips for small business owners who need to get organized. When it’s time to file in the spring, you can easily download an expense report and complete the reporting process.
5. Set Aside a Bookkeeping Hour Each Month
Don’t let your invoices, bills, and other financial records overwhelm you. Set aside an hour each month to send out invoices and see who needs to pay you. You can also use this time to review your expenses and record each of your receipts.
Taking care of your bookkeeping on a monthly or weekly basis can prevent your files from building up and overwhelming you. A little work now will save you a lot of stress later.
6. Start Planning for Tax Season Early
While you have until April 15 to pay your taxes, you don’t have to wait to get started! Some people start filling out information in their tax software in early January. Even if you simply collect the right documents, you can save time and lower your stress levels.
The sooner you file your taxes, the sooner you don’t have to think about them anymore.
7. Hire an Accountant
As your business grows, its financial demands will increase along with it. If accounting is your least favorite part of being an entrepreneur, let someone handle this task for you. A certified public accountant (CPA) can help you file your taxes and will make sure you get the deductions and credits you deserve.
Hiring an accountant is an expense, but they save you time on your taxes and lower your stress levels. This frees up your schedule (and mental energy) to devote more work hours to your clients.
Good Tax Habits Can Last for Years
It’s hard to establish some of these best practices at first, but building healthy habits can make filing your taxes so much easier. You don’t have to reach your destination all at once—a few small steps at a time add up to make a big difference!
Implement a few of these tax tips for small business owners for better recordkeeping and work with mentors in your industry who can offer support along the way. Soon, you will have a thriving business with careful documentation for tax time.
If you are ready to grow your business, reach out to the professionals at Sweet Sleep Academy. Our coaching and mentorship sessions can help you achieve your dreams. Review our courses and upcoming events to learn more.
