Time is Running Out! Remember These 5 Tax Challenges and the Solutions to Overcome Them
It’s tax season, and that means small business owners everywhere are starting to worry about how and when they’ll file their year-end returns. Tax season is a stressful time for everyone, but especially for small business owners, who often have more complex financials to work with than individuals — but considering there are close to 28 million small businesses in the United States, at least you’re in good company.
It helps to thoroughly understand why the season is stressful, pinpointing the biggest and most significant worries so you can address them proactively. So what are the chief concerns of small business owners during this hectic period?
The Biggest Small Business Tax Issues
These are usually their most pressing concerns:
1. Timing. Timing is an issue for all small business. Between daily operations and long-term management issues, you have enough to worry about — adding a heap of tax considerations at the beginning of the year makes it even more difficult to properly manage your time. That’s why online services have cropped up to try and streamline the process; they can shave hours off the manual process of filing taxes and give you checklists to ensure you haven’t missed anything, but can’t eliminate the burden entirely. On top of that, many small business owners end up filing late, which comes with its own share of problems.
2. Record keeping. There’s a lot to keep track of in a small business, including your revenue and expenses. You should have every receipt for business-related purchases stored somewhere you can access them easily, but for most small business owners, that’s a tall order. One of the best solutions for this is utilizing a receipt scanning app, like Shoeboxed or Wave, which will automatically and digitally store this information. You’ll still have to make a concentrated effort throughout the year to scan and store this information properly, but it will be worth it when you shave hours off your time and rest easy knowing all your records are kept accurately.
3. Underreporting. Unfortunately, many small business owners run into the problem of underreporting income or expenses. Because they often deal with a larger number of small clients, they might forget about a section of income, or neglect to take advantage of a significant deduction. Underreporting in small amounts generally isn’t an issue, but in large enough volume, it can land your business in hot water. Accurate record keeping and detailed reporting are your best preventative tools here.
4. Complex advantages. There are some significant advantages specifically meant for small businesses, such as the Section 179 expense deduction and certain capital gains taxes. However, many of these are complicated, with special requirements that make them harder to take advantage of. In addition, some of them expire and are replaced practically every year. Knowing how best to utilize these savings is an elusive art form, but working with a professional can help you sort things out.
5. Ambiguous deductions. Small business owners can also be confused by the nature of deductions; what counts as a business expense isn’t always clear, especially when your personal and professional lives seem to blur together. For example, should you deduct the costs of maintaining a home office if you only use it one or two days a week? Again, the best solution here is to work with a professional, who will help you figure out the exact requirements here.
Overall, there are three simple actions you can take to make your life much less stressful:
- Plan ahead. The further ahead you plan, the better, for nearly every aspect of the tax filing process. Thinking ahead will keep your records better organized, and will help you manage your time so you can file before the deadline.
- Work with a professional. Even if you’re experienced in filing business taxes, it’s a good idea to work with a professional. They may know things you don’t, giving you greater advantages, and they’ll be able to do the work more efficiently as well.
- Keep things organized. As much as possible, keep your records organized throughout the year. It will save you time and stress come tax season.
There isn’t much you can do to restructure the tax system, but you can take control over the issues in front of you. Work with your team to proactively identify your most significant problem areas, and squash them in time to feel confident about your tax strategy.
Photo via Shutterstock
This article, “Time is Running Out! Remember These 5 Tax Challenges and the Solutions to Overcome Them” was first published on Small Business Trends