In addition to the day-to-day hustle and operations, small business owners must contend with the convoluted web of IRS regulations and requirements to ensure compliance and good standing.
Embedded within the web of IRS regulations are plenty of business credits and deductions that can benefit the small business owner, but they are not always clear-cut or easily visible to the naked eye. It takes a tax expert to know and understand how these regulations can be applied to every business as they grow and expand or as circumstances change.
What is on the horizon for small businesses? Here’s what you need to know to make the most out of your tax situation this year and in the future.
Do you need to assess the state of your business in Alabama? Our team can help. Call us today — (205) 402-4245
The State of the Economy After Coronavirus and Unprecedented Economic Circumstances
Talk around Main Street suggests that a recession might be looming. Wall Street insiders suggest that the Federal Reserve’s hike in the interest rates will destabilize the balance sheet and lead to a recession.
According to a report by CNBC, 8 in 10 small business owners are convinced that the U.S economy is headed nose-first into a recession. When small business owners have a negative outlook towards the economy, growth stagnates. People hold back from making investments in their business, avoid taking chances on new opportunities or innovations, or simply hold back in fear of future losses.
Small business owners are seeing a unique landscape they must navigate to enhance business growth. In recent months, the Fed has been forced to raise interest rates because of economic growth and inflation conditions on the ground. This has begun to put some strain on small business owners that continue to adapt and pivot their business models to fit the new consumer market and demands.
Whether it’s embracing online sales or marketing, incorporating more technology in their business, or growing their workforce, there’s a lot to be said for maintaining a solid foundation of tax strategies and rebuilding with professional tax guidance.
5 Tax Tips Every Small Business Owner Should Implement
As business owners learn to navigate the changing economic landscape, there are a few tax tips that remain tried and true advice for all businesses.
#1) Classify your business accurately
What form your business takes will have important implications for revenue growth and tax filings for years to come.
Speaking with a tax professional to ensure you are classifying your business accurately and choosing the right business structure is a good way to get started on the right foot.
The basic business structures include the following:
- Sole proprietorship
- Limited liability corporation
#2) Keep ample and detailed records
Keeping accurate records is a big part of maintaining a small business. Not only do records help in organizing your expenses and expenditures, but they provide numerical proof of losses or profits so you can make better decisions or adjust your business plan accordingly.
Maintaining detailed and organized records is also an important part of smart tax planning. Business records that the IRS is interested in include any supporting business documents such as purchases, sales, payroll, and other transactions. They can be in the form of sales slips, receipts, checks or canceled checks, etc.
#3) Keep business and personal expenses separate
For smaller businesses such as sole proprietorships, it can often be difficult to separate the line between the personal and the business-related. This is especially true for those just starting out.
Keeping expenses distinctly separate is essential for business owners to ensure they are accurately tracking their expenses and profits. Tips for doing this are opening a small business account, applying for a DUNS number, setting up utilities, and bills, and applying for credit with the company name.
#4) Claim all income reported to the IRS
Claiming all your income is essential in maintaining compliance with the IRS. The Internal Revenue Service has clear rules about what can be claimed and deducted as business-related.
For example, business expenses should be necessary for the business to operate. At the same time, it’s essential to report all income (money, property, or services) to the IRS. Reporting all taxable income ensures you are in compliance with tax law.
#5) Team up with a trusted accountant or CPA
The ins and outs of tax regulation can easily get a little tricky. Your most favorable tax strategies are different from someone else’s. The type of business you run, how you run it, as well as your short-term and long-term goals, affect the decisions you make and how you should handle your profits, expenditures, etc.
Teaming up with a trusted tax expert is a good way to build a solid foundation and stay on the right path as your business grows.
The Sovereign CPA team is here to help — Call us today (205) 402-4245
Need Tax Strategies for Your Small Business? Call a Trusted CPA
As experienced tax professionals, the team at Sovereign CPA has been helping small business owners throughout the Birmingham, Alabama region and throughout the state figure out their tax situations and maximize their earnings.
If you’re looking for seasoned tax professionals to walk you through tax strategies for your business, then we’d be glad to help. We will leverage available tax credits and incentives to maximize your earnings.