Friday, March 4, 2016

6 Smart Ways to Keep Tax Season From Slowing Your Company Growth

With tax time well underway, can you turn a painful slog into a path to faster growth? Try these six tips.



My grandfather, my father, and my uncle ran a regional accounting firm for decades before they sold it.

I worked there one summer and realized without causing major damage to the firm that it was not going to be my cup of tea.

But my months working there gave me a deeper respect for people who help small businesses to do their taxes.

I realize that business taxes are like the sewer system -- nobody notices them until they break.
And this means that every business owner ought to use the tax code legitimately to minimize taxes, pay on time what they owe the IRS, and do all that in a way that slashes the risk of nasty distractions like an IRS audit.

Here are six ways to keep tax season from slowing your small business growth.

1. Hire a business tax expert

I used to be afraid to admit I did not know all the answers.

Now I am very comfortable admitting I am not good at doing taxes. So I hire help.

Most business owners do that too. A National Small Business Association survey conducted in 2015 found that 85% of the roughly 675 owners surveyed said they hired a professional tax preparer.

Be very careful in making this decision. Get names of such preparers from people you trust, then check at least five references for the best ones.

2. Use software to keep records up to date

Many business owners throw paper records of cash receipts and expenses in a shoe box or folder during the year. A few weeks before taxes are due, they try to sort through all the little pieces of paper to prepare their taxes.

Accounting software has been developed that gets data from online checking accounts. Moreover, financial records can be linked with tax preparation software.

Both of these features save business owners time when they need to prepare their taxes and it helps them to give borrowers and investors the information they need to raise capital to grow.

3. Take business lessons from your tax return

While many business owners do their tax returns and set them aside, the smartest ones look at it as a learning experience.

If the business is losing money, the tax return might help highlight trends that lead to further investigation -- the results of which can lead to better business decisions.

For example, if sales are going down from year to year, you should explore why. Are customers getting a better deal from a competitor? If so, how can you improve the value you provide customers and grow faster?

Which expense lines are growing fastest? Can you take action to control these expenses?

And if you are losing money, how are you going to use those losses to lower your tax burden?

Answers to these questions can help your business grow faster in the future.

4. Make sure your freelancers are independent

Companies trying to avoid the costs of full-time employees -- such as paying their Social Security and health insurance -- often contract with freelancers.

But if companies treat those freelancers like employees by controlling too tightly what they do, then tax officials will get suspicious.

And that could mean that your freelancers are going to cost you a boatload more money and hassle.

So if you have freelancers, make sure you know the rules and follow them closely.

5. Be cautious when it comes to deducting your home office and car

The IRS does not allow you to deduct a home office unless it is a separate space used solely for business purposes. It also demands that you keep detailed records of when you use your car for business purposes alone.

Unless you make the investment to comply with these rules, don't deduct the home office and car from your income.

If you do, you could invite an IRS audit which would probably cost you so much time that it would dwarf whatever tiny tax savings you were getting from those shaky deductions.

6. Comply with The Affordable Care Act

If your business has between 51 and 99 employees, it must provide health insurance to employees and must tell the IRS what type of coverage it has supplied them.

Janemarie Mulvey, former chief economist for the U.S. Small Business Administration's Office of Advocacy, told smallbizdaily that such businesses must offer health insurance to "at least 70% of their full-time-equivalent employees or face a tax penalty of $2,000 per employee."

There are plenty more tips on taxes for small business, but follow these six and you will be on the way to turning tax time into less of a painful detour and more of road to faster business growth.





Source: http://www.inc.com/

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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