Houston, the city of Texas, is home to many businesses with its economic environment.
It provides many perks to business owners on taxes who use the right strategies on tax day, so business owners get the opportunity to reduce their taxable income. However, some business owners do not understand the importance of tax day preparation and end up paying penalties and interest due to negligence.
If you want personal guidance on this matter, you can contact a CPA in Houston, TX.
5 Tax Day Preparation Tips For Small Business Owners.
- Separate your personal and business expenses.
Having a separate bank account for your business is important to avoid confusion during tax filing.
Therefore, separate your personal account from your business account with a dedicated credit card and make all your business-related transactions strictly limited to the business account.
This will help you avoid the IRS from examining your account since the chances of misunderstandings with tax authorities increase when your business transactions are done using your personal account’s credit card.
- Gather the important documents.
One important thing to do before the tax day arrives is to gather all the important documents for tax filing. Gathering these documents will save the cost and time needed to complete the process. You can gather documents to file for tax returns by handing them to a certified accountant you hired for the tax work.
So, gather these documents before the tax date arrives.
- Gross receipts
- Previous year’s tax return
- Expenses
- Purchases
- Travel and transportation expenses
- Gifts received
- Employment taxes
- Financial statement
- Cross-check the deadline and tax changes.
The tax rules and laws keep changing throughout the year. Therefore, keep yourself updated with the latest laws and regulations to ensure your small business does not get impacted negatively on tax day. For this, you can hire a professional accountant to keep you updated on any changes in the regulations and deadlines.
Missing the deadlines can result in penalties and interest impacting your pocket.
Furthermore, different small businesses have different due dates for tax payments, so to avoid confusion and rush at the last moment, ask a professional before the due date arrives.
- Know your earnings.
You should know the difference between your net and gross income to avoid losing all your money on taxes. When you distinguish between your net and gross income, you know what you are earning, and this way, you can reduce the overall tax payment.
As you know, the tax deduction opportunity is eligible. For instance, if you sell a shirt for $250 and it costs you $150, then your gross income is $100. But your net income will be reduced to $70 after deducting expenses.
- Calculate quarterly tax payments.
Businesses operating under sole proprietorship, corporation, or partnership are eligible to make estimated tax payments throughout the year. Therefore, estimate and make tax payments quarterly instead of paying the whole tax yearly to avoid unpleasant surprises. This way, you will stay on the safer side during tax day.
