Entrepreneurs learn early that taxes have to be paid.
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The sooner taxes are addressed the easier tax time will be for the business and the individual. Waiting until tax season may cause more problems than necessary. Entrepreneurs would be wise to start planning right now for the tax season to come. April 16th marks the best day of the year to begin a strong tax plan.
Easy Tips for Taxes
1. Understand deductions – get a list from your account of all deductions available on your recent taxes or just run off a copy from the irs.gov website. Knowing what you have been able to deduct in the past will help you begin to keep records for next year's tax return.
2. Get organized – Label folders with all the different categories for deductions. Any time you spend some money then put the receipt or a copy of the receipt in that folder. Be sure to keep all the receipts in chronological order inside each folder. You may want to keep a computerized version of the folders in excel, Quicken or another similar software to make calculating your deductions easier after the New Year.
3. Stay up to date with tax changes – watch the news and read reports on tax changes that effect small business and entrepreneurs. Changes in the tax law may mean that you need to begin keep up with new files or receipts. The tax professional should know all of the changes and updates, but the more you know about taxes then the more you can work with your accountant or tax professional to reduce your tax debt.
4. Actively search for write off opportunities – entrepreneurs can pay children to work and deduct the amount from the business profits. Entrepreneurs can deduct home expenses when the office is located in the home (in a designated area). Mileage to meetings, hotel stays for meetings and other ordinary expenses involved with being an entrepreneur are all potential deductions.
5. Talk about quarterly filings – the more you make as an entrepreneur then the more often you may need to file your taxes. Having everything organized will make it easier for you to file your taxes no matter when they need to be filed.
6. Set aside one third of income for tax payments – working for yourself means that you will be responsible for paying all taxes (including Medicare and FICA). Although taxes will probably not equal a third of all income, having that amount set aside will guarantee that you have enough to cover taxes and also have some left over to reinvest into your entrepreneurial endeavor.
7. Too much is better than not enough – the more information you have to work with then the easier filing taxes should be. Your tax professional may not need all of the information that you provide but they are unable to use any information that you do NOT provide.
Taxes can be an unexpected and expensive part of launching a business as an entrepreneur. The most important step that anyone can tack is to get organized now for the tax season that is yet to come.