Each and every penny counts if you are an Entrepreneur. Operating a small business is expensive if an owner pays more taxes than what they owe.
Most owners say that the worst part of operating a small business is dealing with taxes. Taxes can cause a major void on finances if not prepared well. The growing population of small business owners must learn the proper documentation and understand how taxes work by complying with the Internal Revenue Service and respecting the deadlines. These are the keys to success.
- Plan and Organize
A business identifies its goals through planning. Planning helps set goals and businesses to reach its objectives. Organize by having a good tax planning. Tax planning happens when you keep records about how you spend your own money for the business. Take advantage of every tax situation as it is crucial for every business owner. Keep track of expenses by saving receipts or transferring receipts to accounting files or through software programs that can help an owner track the expenses online. Download applications that allow creating an Internal Revenue Service approved digital receipts using a smartphone.
Use a Tax Planning Software to prepare and file taxes online easier. This method is applicable to online business entrepreneurs as it protects the business by backing up files with proficiency and ensures an accurate return. There must be a refund or reimbursement guarantees of any fee or penalty that has been charged.
- Stock Up on Inventory and Supplies
Stocking up on inventory and supplies can increase expenses and lower profits. Stock up on supplies by purchasing through a business credit card or the use of a credit line.
Replenish office supplies and copy paper to a reasonable amount by making an effort to look and search for supplies. Stock up on supplies that can be used regularly from work, warehouse or a factory.
- Pre-Pay Expenses
Unlike conventional expenses, this helps a business make payments for goods and services that are ought to be received in the future. Its value benefits the business in the near future or over time.
- Pre-pay insurances such as business insurance depending on the type of business
- Pre-pay the rent or mortgage
- Pre-pay on subscriptions
- Use Uncollected Debts and Inventory to Lower Profits
Uncollected debts or bad debts are often used to lower profits as it is written off before a year ends. Accounts receivable are collected during the year however some have trouble in collecting the accounts receivable.
If a customer has not paid you for a long time or is no longer active, reduce an income by making a report or cut the customer’s balance from the business’ total sales.
Write off all the uncollected debts then add it all up. Take note that an owner must declare the payment as income and reverse a write off if the money that will be received from the customer happens later on. Have a tax adviser to review your list.
Equipment that is damaged or obsolete can be taken off the accounting records to lower the tax liability and at the same time increasing the expenses. Make a list of every equipment that is present in the company including equipment that is used to make products and office equipment. Mark all the obsolete and damaged equipment.
- Seek a Professional
Hire a bookkeeper or a tax professional for deducting expenses to ensure that you have the right information about your expenses as an online business owner in order to pay less in taxes. Remember that any small or missed deductions can add up to tax.
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