Small Business Tax Preparation
- August 23, 2017
- Posted by: [email protected]
- Category: Business, Taxes
You probably have encountered people panicking when it comes to their tax returns. You see them compiling all their receipts, trying to balance their profits and losses, and sometimes, you keep hearing from them the tax preparations that they have to go through for this quarter.
Oftentimes, small businesses are struggling when it comes to computing their taxes. Especially when the time that their inventory calls for these business owners’ busy attention and let them know that they have yet to face the dreading computations of their profits and losses.
You might want to ask for some guidance and look for some tips on how to file your tax returns within the given schedule. Here is a helpful small business tax preparation tips you could use during seasons like this.
Business and Personal Expenses
Several business owners have forgotten to separate their business and personal expenses, and this particularly happens to sole proprietors. They just can’t avoid the confusion when it comes to determining which one is which.
But this can be prevented if you start to practice precautionary measures and to start getting used to looking into every detail of your expenses. On the perspective of the IRS, business owners must file their taxes under the business category. This means that all the expenses incurred in the business must exclusively be for business taxes.
Hence, they cannot include their personal expenses, as it would lead to the disallowance of their business expenses that are supposed to be subtracted from their income. Once such expenses are not deducted, this could mean that their tax liability might increase.
To prevent this from happening, make sure you keep two separate bank accounts. One would be for your business and the other for your personal transactions or dealings.
Accounts Receivable and Inventory Balances
Always make sure that your accounts receivable and inventory balances are well reviewed. If you think that there are expenses that are considered uncollectible, such expenses should be eliminated right away. Also, if you still have inventories that are no longer in use, such should also be taken away since they might only add up to your tax liabilities.
Did you know that you could reduce your tax liabilities up to $500,000 just because you have properly reviewed and computed your equipment purchases? This is why it is important to carefully look into your purchases from time to time since they can have a massive impact on your tax liabilities.
However, you also have to make sure that you are entering the right numbers and figures since your computations cannot result to tax loss, as it would be deemed impossible. Furthermore, real property can also lead to higher taxes. So you have to watch out for those too, considering that your income is just average.
Moreover, if you feel like you are still having doubts with your taxes, you can always seek help from the experts. You can hire a certified public accountant, a legal firm, or any experienced agent you might know to help you in computing your taxes.