When you start a new business, you will enter a whole new world of taxes. Even if you are familiar with paying taxes as an individual, this will not necessarily have you ready for the business field – you will face plenty more deadlines and different write-offs that you must manage. You will also be subject to audits by the government to ensure your company is law-abiding.
This article will advise you on how to manage your taxes as a family business owner so that you can do this efficiently and successfully.
Know The Financial Jargon
One of the main things you should aim to do is to get familiar with the financial jargon. Managing your business’s taxes can be difficult if you are unsure of what you are doing. One of the reasons people get overwhelmed when it comes to this subject is the amount of jargon that is used, which makes it difficult to understand. Unless you have gone to school to study this or have been working within this field, you may struggle to come to terms with the jargon. Nevertheless, it remains an important step. The best way is to always write down the difficult words you are unsure of the meaning and find out what they mean. Before you know it, you will be an expert.
Have a Tax Plan
You may have heard of a business plan… as a business owner, you will also need a tax plan. Business taxes will be more challenging to manage, especially during the initial phases of the business, as you get used to it. You will have more responsibility over what needs to be paid and should have a better knowledge of what is required of you as a business owner. Any entrepreneur should devote time to preparing and planning for taxes as a way to avoid paying more than necessary. If you plan in advance, you are less likely to struggle and make mistakes that may be easily avoided in retrospect.
Be Prepared for Audits
As a business owner, you will most certainly be visited by a professional auditor, who will review your business plan and systems to ensure that you are following protocols and adhering to local laws. You cannot avoid these, therefore being prepared for them will make things easier. You will usually be provided with a date for when the audit will take place. If you give them a call, they may be able to provide you with guidance on what will happen during the audit and what is required of you. This can be particularly helpful before your very first audit as you get your head around these processes.
Separate Business and Personal Expenses
A big mistake, particularly for individuals that have family businesses, is the inability to keep business and personal expenses separate. It can make things very confusing if you are unsure of what expenses you have and what you should submit on your files. When you first start your company, you should create a new bank account – most banks will have business accounts specially tailored to business owners. Managing separate accounts for your business and personal transactions will simplify the process of writing off your expenses, and your private records will be kept private from the audits.
Good Expenses Record Keeping
Keeping track of your expenses is crucial if you want to manage your taxes efficiently. In addition to this, the state will want to check your taxes during audits and failing to keep accurate records may result in the IRS shutting down your small business. However, it is absolutely possible to prevent it from happening. Firstly, you will need to create a system that works for you. You can keep track of paperwork and receipts in a filing cabinet, for example, or you may use technological software to your advantage. The latter makes things easier to monitor and manage and reduces the likelihood of mistakes being made.
Prepare For Tax Season in Advance
When tax season approaches, it can be overwhelming for business owners as they try to gather all paperwork and information required as part of this process. This can be overwhelming if you are unprepared and rushing the process. This is why it is crucial for you to be prepared for tax season in advance. It can be easy to forget about this until the deadline approaches, but it is not advisable. Find out what dates are important and when the deadlines are and beat them.
Have a Tax Adviser
You will have a variety of responsibilities as part of your family business. Managing the taxes may not be your priority when you have other things to think about. Nevertheless, this remains a vital task to ensure that your business’s finances run smoothly. You may consider hiring a tax adviser or consultant to deal with your taxes for you. Failing to dedicate the appropriate amount to this may result in this task being done incorrectly, resulting in consequences for your business with the IRS.
Managing your taxes as a business owner does not have to be difficult. As long as you know what you are doing, you will do this successfully. Learning the information provided on this page is a good place to start.
