Suppose you’re the owner of an entrepreneur with a limited budget. In that case, it can be difficult to believe that you’re in charge of everything, including product development, marketing, payroll, and of course, taxes. Basic knowledge of the tax system could assist you in managing this annual process; however, there’s no substitute for a professional.
If you still need to prepare to engage an expert, consider using one of the top accounting software companies to guide you. If you’d prefer to hand the task to an expert, you can consult your tax preparation expert and follow these suggestions to help you get through tax time.
COVID-19-related tax law changes in March 2023. The IRS adopted policies related to COVID-19. Paid sick time is required for employees who work as long as 80 hours, and extended childcare leave must be provided if “employees have children’s schools that are shut or the child care provider is not available.”
Employers will receive a complete reimbursement for your leave, with no tax on the payroll. Small businesses with less than 50 employees can qualify for an exemption from extended childcare leave if it could affect the company’s viability. There are rules to make the reimbursement swift and easy to receive.
If you didn’t offer your workers sick pay, you might be required to prove its impact on your ability to continue to be solvent.
Tips for cutting down on your tax bill
1. Make use of accountable plans.
Accountable plans permit employees to deduct business expenses. Keeping these expenses in a log to allow employees to take them off later can be an attractive incentive for your employees. It could also lower the tax burden for your company.
These are the rules to follow for a fully accountable and compliant plan:
- The expense must be to fulfill a legitimate business requirement.
- The fees must be paid within the appropriate timeframe.
- All funds that are not utilized must be returned to your employer in a reasonable period.
- If the standards aren’t met, reimbursements will be tax deductible.
2. Keep track of your the adjusted gross income.
A crucial suggestion is to pay particular attention to your adjusted gross income. The Adjusted Gross Income directly affects the credits and deductions that your business can claim. Although the specifics of determining this amount depend on particular tax laws, it is important to be aware of this as you prepare for tax season. Talk to your accountant or tax consultant for specific guidelines.
3. Track receipts.
The best way to maximize your deductions is to know how you spent your money over the year (which can be helpful in understanding the flow of cash). Organizing and tracking receipts makes it simpler to record deductions promptly and to submit an accurate tax return. If your company is subject to audit, your receipts and proof of expenses will prove that your costs were properly reported.
Tracking every transaction can be a challenge, and it’s essential to look over the functions of accounting software and choose one that will make tracking receipts more efficient and simpler.
FYI, FYI Document tracking systems allow users to digitally store and secure important documents such as receipts and other records made of paper.
4. Beware of penalties for late payments.
Gathering your paperwork earlier in the year will ensure timely filings and unexpected costs. Business and short-term working capital tax debt loans can make tax payments more affordable and reduce penalties for late payments.
5. You should consider changing your plans.
In formally launching your company, you must choose which business entity you want to create. The kind of company you choose will come with specific tax policies and deductions, not to mention the income tax form you’ll use to report your taxes. It’s recommended to examine your business structure every few years to determine if changing it makes sense in light of your objectives and overall performance.
6. Utilize software to prepare and file taxes.
Tax filing and preparation software will automatically consider taxes and tax regulations. This will simplify filing, decreasing the chance of making mistakes and allowing you to take advantage of the possibilities available fully. For many business owners using software for filing, it is among the easiest and most cost-effective ways to complete the tax return.
Tipp: A great general rule of thumb for anyone who owns a small business is to think about taxes throughout the year to be well-prepared and handle your taxes more efficiently.
7. Make the most of Section 179 opportunities.
It is a Section 179 deduction that allows businesses to deduct the total cost of purchasing qualified assets they finance during the tax year, making it a great option for companies requiring new equipment. The deductions you can make from your gross income can help you increase the value of your business purchase of equipment and other similar investments as they reduce your tax base. Like any tax law, knowing the regulations and limits, you must be aware of is important.
8. Pay attention to the benefits plans offered to employees.
You can claim a tax deduction on your tax return to cover the cost of offering employee benefits. Learn more about the different types of gifts you can take advantage of and any limitations or restrictions that apply to those benefits by visiting the IRS Employee Benefits page.
Did you know? Did you know? The most beneficial benefits for employees are:
- The ability to take advantage of unlimited pay time off (PTO).
- Performance-based bonuses.
- Custom-designed benefits packages.
9. Keep track of the Paycheck Protection Program loans.
If you’re among the numerous business owners who have received the PPP loan, bear at heart that IRS declared in December 2020 that admissible expenses incurred with money from the loan are tax-deductible.
If you still need to, you should seek PPP loans forgiven by the Small Business Administration to ensure you’re not responsible for the repayment. The program was introduced as a component of the Coronavirus Aid, Relief, and Economic Security (CARES) Act; PPP loans were intended to be forgiven if borrowed cash was utilized to pay for business costs such as rent, payroll, or utilities.
Accounting software can be helpful in tax time.
Accounting software with built-in tax functions can greatly assist with tax preparation for small-sized businesses, regardless of whether you speak with an expert tax advisor. Here are a few of our most popular accounting software solutions for tax preparation.
- Oracle NetSuite: The complete accounting software comes with tax management tools that can handle both taxes for the global and domestic markets. Check out our full Oracle NetSuite review for more details.
- FreshBooks: This program is among the best at accounting for business taxes, making it easy to track taxes, expense reports, and profit and loss statements. FreshBooks is also a breeze to export every piece you make. Please take a look at our extensive FreshBooks review to learn more.
The importance of planning for tax time
Every year brings a fresh cycle of tax law changes. Tax law changes can be unpredictable and significantly affect your deductions and tax returns. The new year may be positive due to an especially business-friendly environment, but it could also bring increased costs and pressure to alter how you handle your financials.
Consult with an accountant to ensure you know the specific tax regulations and tax changes that apply to your company if you adhere to the top practices and suggestions we’ve provided to help you prepare for success when it comes time to file this year’s tax returns.
