4 Ways to simplify taxes for small business owners


While it might be too late to help you this year, I want to share some things we've done to simplify our small business tax situation, so you won't have to dread taxes quite so much next year!

Effectively, my fellow small enterprise house owners, you’ve bought a month left to get your taxes collectively.  In the event you’ve bought your geese in a row, then you definitely’ve most likely been finished for weeks.  In the event you’re not so organized, then you definitely’re most likely dreading the following month.

Whereas it is likely to be too late that can assist you this 12 months, I need to share some issues we’ve finished to simplify our small enterprise tax scenario, so that you received’t must dread taxes fairly a lot subsequent 12 months!

And since we’re  removed from excellent and simply studying as we go alongside, I’m additionally sharing what we’re doing in another way this 12 months to make issues even simpler for subsequent 12 months.  I’d love to listen to your concepts and expertise within the feedback!

Monitor revenue and bills faithfully

Identical to your loved ones funds, your corporation funds want common consideration.  In the event you’re not within the behavior of monitoring your corporation revenue and bills, then tax time could very nicely be a nightmare.  Going again by way of twelve months of financial institution and bank card statements is an effective way to deliver on a migraine.

Save your self the difficulty and observe your corporation revenue and bills alongside the best way.  Use any software that works for you, a pocket book, a spreadsheet, or a software program program, however observe bills and revenue as they occur!  Attempting to reconstruct revenue and bills for months at a time will depart you drained and dissatisfied.  And also you’re much more prone to have errors.

Once I ran an Etsy store, I saved a easy spreadsheet the place I tracked my revenue every month from gross sales and transport charges, in addition to my bills corresponding to provides, postage, Etsy charges, and PayPal charges.  It wasn’t fairly, nevertheless it confirmed me the revenue I used to be making and had all of the numbers I wanted for tax time.  We all the time did our personal taxes, so once we bought to the components for self-employment, I might merely learn off the numbers as my husband requested for them.  Straightforward peasy!

By the point I began running a blog, I used to be already devoted at monitoring my enterprise funds.  I tweaked and improved my spreadsheet system from my Etsy enterprise to make it tailor-made for running a blog.  Then the numbers nerd in me added some further options.  In case your small enterprise is a weblog, you need to take a look at my Weblog Finance Spreadsheets.  Along with monitoring your weblog revenue in classes that make sense for bloggers, there’s a ledger the place I observe my enterprise bills within the month they happen.  It’s even arrange for categorizing your bills in keeping with the Schedule C tax deductible bills.  You may see the opposite cool options right here.

Monitor miles

Some enterprise miles is usually a tax deduction.  Earlier than you get too excited, your regular commute from residence to work is not tax deductible.  In the event you use your private automobile to journey to a couple of work web site, or have to go to prospects, or run errands, miles out of your main administrative center to these different websites and again are all tax deductible.

Mileage logging might be intimidating and irritating, leaving you feeling such as you’re consistently failing.   In the event you’re going to say miles, you’ll want to observe them.  That doesn’t imply sitting down at tax time and approximating  your mileage over the previous 12 months.  That received’t maintain up in an audit.  So as to declare your corporation miles as a tax deduction, you want a file with dates, mileage, function, and beginning-and end-of-year odometer readings.

If conserving a file sounds overwhelming or tedious, haven’t any concern.  Expertise’s bought you lined.  My husband makes use of MileIQ which makes it tremendous easy. He carries his cellphone with him in every single place, and the MileIQ app makes use of the cellphone’s GPS and WiFi sign to trace of all his journeys.

On the finish of the day, he opens the app.  For any journey that’s private, he swipes left.  For any journey that’s business-related, he swipes proper.  Left and proper swipes let him select which class the journey falls in (between workplaces, buyer visits, errands, medical, charitable miles, commute, and so forth.)

If the journey wasn’t in his regular commuter automotive, he selects the right automobile.  If he wants so as to add notes, he places in a fast description or particulars of the journey.  Most days it takes just some seconds a day, and MileIQ prepares a spreadsheet displaying the dates, occasions, beginning and stopping places, class, automobile, and extra particulars that makes it tremendous simple, at tax time, to get to a easy variety of miles for every deductible class (enterprise, charitable miles, medical miles).

He was somewhat hesitant when he began utilizing it that it might be definitely worth the $5 a month value.  Spending cash to save cash is all the time iffy, however at 54 cents a mile, all it takes to pay for itself is one journey a month he in any other case would have missed, and that’s earlier than bearing in mind the comfort issue (which is big!).  After a 12 months and a half of MileIQ, he can’t stay with out it.  In the event you’re , you may join a check run with this this hyperlink and in the event you resolve to pay for it, you’ll get 20% off your annual subscription, taking the price down from $60/12 months to simply $48/12 months.

Meet with a tax advisor

Relying on what your corporation is, you would possibly need to speak to a tax advisor from the very starting.  Nonetheless, in the event you’re beginning a weblog or opening an Etsy store, I don’t assume that’s needed proper from the get-go.  My husband and I’ve had facet companies for years, however we didn’t meet with a tax advisor till final 12 months, when our incomes considerably elevated and our tax scenario bought extra sophisticated.

After explaining the fundamentals of our companies to our tax man, he was in a position to clue us in on some tax deductions that we weren’t taking (and weren’t even conscious of!), like deducting the mileage between his day job and small enterprise.  He additionally shared with us some total tax methods that with some foresight and planning might actually profit our particular person scenario.

We’re nonetheless studying as our scenario modifications, however we’re actually appreciating having an skilled by our sides.

In the event you’re searching for a tax man who works particularly with on-line companies, let me introduce you to my good friend Mark Tew at Not Your Dad’s CPA.  He’s savvy about on-line enterprise (however does all the non-public tax stuff too), so he can positively enable you out regardless of the stage your corporation.  In reality, proper now, on his web site, you will get a free guidelines of issues try to be doing proper now to keep away from enterprise or tax surprises, which is able to enable you get off to an important begin!

Put aside cash for taxes/ pay estimated quarterlies

In the event you’ve been following us lately you’ve heard me point out that our tax invoice this 12 months is fairly hefty.  On first look (or after scrutiny) you would possibly assume we’re simply irresponsible, however hear me out and I’ll clarify why we did what we did and what we’ll do in another way for subsequent 12 months.

In all probability the simplest method to stop getting hit with a hefty tax invoice is to put aside cash for taxes every month.  The favored quantity (at the least amongst many on-line entrepreneurs) is 30%.  After all the precise quantity you’ll pay in taxes while you’re self-employed takes in so many different components that it’s unattainable to make a rule throughout the board.  Clearly, in the event you’re setting apart 30% (or any proportion for that matter) you’ll be higher off than the one who units apart nothing.

And that was us.

In 2016 we earned far more from our self employment than we ever have earlier than, but we set nothing apart.  After all, that was as a result of we had been working tirelessly to repay six figures of pupil mortgage debt as quick as doable. so we made a acutely aware determination to place our self employment taxes off till the final minute (which has us scrambling proper now).

Remember to pay your estimated quarterly tax funds, each to keep away from the penalty for not doing so, and to ease the burden of an enormous sum due on April 15th.  Whereas they may seem to be a ache, they pressure you to not procrastinate your taxes till the top.

One method to fulfill the estimated quarterly tax requirement is to pay the protected harbor quantity, which is actually one fourth of the tax legal responsibility from the earlier 12 months (which isn’t essentially 1/four of what you paid in taxes)Watch out to nonetheless put aside cash for tax time (along with your estimated quarterlies) in the event you’re seeing development in your income.  We paid estimated quarterlies throughout 2016 (in keeping with the protected harbor quantity) and nonetheless have a hefty tax invoice.

This 12 months we’re going to apply what I simply preached. 🙂  We’re going to put aside further funds for tax time subsequent 12 months regardless that we don’t anticipate large development (my husband is hoping to chop again on his personal agency work to have extra time at residence).   Plus we can be paying estimated quarterlies primarily based on the earlier 12 months’s taxes (our huge tax 12 months), so the funds can be a lot larger.

Originally of the 12 months I began placing 30% of my running a blog income right into a financial savings account earmarked for taxes.  My husband primarily does the identical.  Subsequent 12 months’s taxes can be a lot easier once we don’t must scramble to provide you with the cash we owe for taxes!

Recommendation to new enterprise house owners

In the event you’re simply beginning out, you may not have very a lot revenue to talk of.  In reality, relying on your corporation, your bills could far outweigh any revenue.  Making the hassle to arrange a system to trace your revenue and bills would possibly sound pointless and tedious at this level.

Don’t make the error of ready till you’re incomes cash to begin conserving your monetary information.

Monitoring your corporation funds is a straightforward behavior to begin from the start.  Simply discover the system that works greatest for you. Then, when your corporation begins getting busy earning profits, you’ll have a system already set as much as deal with the whole lot!  When tax time rolls round, you’ll be so glad you’re ready!

How about you?

  • What tax suggestions do you’ve gotten for small enterprise house owners?

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