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Reasons Your Small Business Needs Professional Tax Preparation Services

Reasons Your Small Business Needs Professional Tax Preparation Services

The demand for professional Tax Preparation Services has continued to increase for many years. Taxpayers are seeking more help than ever because of the Tax Cuts and Jobs Act. Whether you have a small business, freelancer, larger business it’s important to choose a professional tax preparer. Many of the taxpayers are choosing to perform complex tax preparation all by themselves, which is a perilous task. But it is vital to have a tax preparation professional rather than doing the taxes yourself. 

We’ve listed legit reasons that will convince you to appoint tax professional for your small business.

Legit reasons why your small business needs professional Tax Preparation Services:

  • More time to grow your business:

Growing and sustaining your business takes time. You invest day and night to grow your business successfully. In the early stages of your small business, you’re the marketer, salesperson, product or service delivery, and everything in between. Accounting may also be part of the above list. However, tax filing can be left to the professionals as it is very important to be prepared correctly. Instead, you must focus on other core activities of the business inorder to grow. Taxes are time-consuming. The IRS estimates that it takes 16 hours to prepare to file a tax return with the long form 1040. 

Delegate the task of tax filing to tax preparation services. A tax professional will reduce your time it takes to gather tax documents, forward them to office, review the final return for accuracy and much more. This will also give you peace of mind because filing taxes will not bother you. This will lower your stress and help you become more efficient. 

Also Read – A Step-By-Step Guide to Ensure Payroll Compliance!

  • Tax law is too complicated:

No wonder taxes are dreadfully confusing! There are a lot of details, jargons and barrages of numbers. It is common to make a mistake especially if you’re not trained to handle the complicated tax preparation. One mistake in tax filing can be a big deal for your business. One error can trigger the IRS to question you and ultimately you might end up paying thousands in penalties and interest. New tax laws are enacted every now and then, making it tough to keep up with the changes and how they might affect your business. 

But an accountant who specialises in tax preparation services will help you avoid mistakes or errors. A tax accountant is trained on complicated tax laws, provisions, policies and tax methods. The accountant knows what should be done and what strategies must be applied. The Accountant must be knowledgeable about the Tax Cuts and Jobs act as well. The TCJA has implemented dozens of changes such as retirement tax policies, excise tax, foreign business taxes, corporate tax adjustment, additional business deductions and reduced tax payments for individuals. 

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  • Maximize deductions and Tax savings:

There are thousands of tax deductions, credits and loopholes available for taxpayers and you must know which ones apply to you. Obviously, you won’t be spending too much time reading 70,000 pages of the Internal Revenue Code (IRS) to figure it out.

But a tax accountant can help you make the most of the deductions and savings by using their expertise. An experienced tax preparer knows all the tax deductions that your business may qualify for such as employee wages, costs of goods sold, employee health insurance, rent, vehicle expenses and more. With the use of tax planning, you can consult in the areas you can save with your tax accountant.  

  • Better understanding of your tax situation:

A business with better understanding of tax situations is wise and rare. Once you’ve started analyzing your business taxes on your own, you’ll need the preparation of tax preparation services. It’s good to know your books and more better to allow the professional to perform the task. A tax accountant specializes in accounting books, testing formulas and understanding taxes at all possible angles. An accountant will never miss the tax deadline or tax detail. 

Working with Professional Tax Preparation Services will raise your level of tax awareness. You will understand the importance of tax forms and how far tax deductions can go. You’ll understand how a proper tax service can improve the cash flow of your business. 

Suggested Reads – Ways to Maximize your Tax Benefits During Covid-19

  • Addressing IRS concerns: 

Receiving letters from the IRS is a serious concern. If you have tax preparation services, you’ll have peace of mind. Tax professionals are aware how to address IRS letters and concerns.  They can formulate counter-strategies and help explain your tax situation to the tax auditor. It’s always advisable to have a tax accountant by your side when dealing with the IRS. 

A tax professional does more than just filling your business taxes with the IRS. They keep up with the tax laws to help business plan for the future while remaining compliant with the law and minimizing their tax burden. They also help to resolve issues and change the way a business operates to avoid any issues in the future. 

Conclusion:

If you’re trying to get the most out of your tax refund, thus saving the most money possible, you must consider hiring a tax preparer. Have you now agreed with us on how important tax preparation services can be for your small business? If yes, then you shouldn’t wait any longer! Contact us to get our best professional tax preparer to help you. Tax preparers could provide you with every possible deduction and provide considerable financial value.

How a Small Business should Prepare for the Tax Season?

How a Small Business should Prepare for the Tax Season?

Business and tax are two inseparable entities that can’t stay away from one another for long enough. Every year the tax season arrives and with it comes the tax filing complexities. Even though the tax season arrives yearly it is advisable to work on it all throughout the year else you’ll end up creating a mess with excessive workload to handle. In this post, we will take a deeper look into How to do tax preparation for small business for tax season efficiently.

Small Business preparation for Tax Season 

 

  • Keep organized and updated throughout the year

Preparing for tax season isn’t a task that needs to be done only when the filing season is near. It is a process that should be well organized throughout the year. Keeping your financial position up-to date will not only make it easy for you to be well-prepared in advance but also ensure that you have your financial state at your disposal at all times so that you can make business decisions accordingly. 

A professional bookkeeper can help small business owners in keeping the financial work organized all throughout the year, making it easy when the tax season arrives. 

  • Seek professional help

According to the financeonline.com, “21% of SMB owners feel that they are not knowledgeable enough about accounting and finance”. However, many small business owners avoid seeking professional help when preparing and filing taxes. While small businesses can save a handsome a few bucks if they don’t hire a professional, it can also backfire in many ways. As said above, preparing for tax season is a continuous process that requires tracking and recording of financial transactions throughout the year, SMB owners who prefer taking care of their Accounting and Bookkeeping by themselves can end up making mistakes as well as spend their valuable time doing something that they shouldn’t be doing. 

Also, if you hire a professional Accountant who is more qualified to advise you on tax matters, you can save more money than you can lose if you do it by yourself.

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  • Separate business from personal expenses

While many business owners do spend from their own pockets, they should keep the expenses separate as it not only simplifies the process of managing finances but also helps in claiming tax relief when the tax season arrives.

  • Know which business tax return you need to file

Small Businesses can fall under many different categories like Limited Liability Partnership, Limited Liability Company, Single Member LLC or Sole Proprietor. And each category has it’s different set of rules and tax rates. Therefore, business owners need to classify their business before they go for filing their tax return. Businesses can lose a significant amount of capital as they could end up overpaying taxes, failing to classify their business.

  • Leverage Technology

Technology has made our lives easier and the Accounting profession isn’t new to it. Using Accounting software like QuickBooks can help small business owners automate their day to day tasks and keep the financial records organized while they are safe and secure under multi-layer data encryption that accounting software uses.

Summing up:

Tax preparation for Small Business – Preparing for tax season isn’t as difficult as it sounds. All that needs to be done is keep the financial processes well-organized all throughout the year. While business owners have other core responsibilities to handle, they can hire a professional bookkeeper to maintain their books.

Most Common Small Business Tax Deductions

Most Common Small Business Tax Deductions

Every small business owner wants to save some money. Small business tax deductions can help you save that money. Taxes can be complicated especially for small business owners. 

What is a tax deduction?

A tax deduction also known as tax write-off is an expense that you can deduct from your taxable income. Tax write-off allows you to pay a smaller tax bill. You take the amount of the expense and subtract it from taxable income. The expense has to fit the IRS tax deduction criteria. 

When you deduct an expense on your tax return, you’re lowering your taxable income and thereby reducing your tax liability. This means you have more money to invest in your business by reducing the amount you owe to the IRS each year.

Following are the most common tax deductions for small business:

  • Car and truck expenses:

Most small businesses use a car, van or a small truck for business purposes. Cars can be used to drive for  meetings with the clients or using a light truck to transport equipment. When it’s time to pay the taxes, you can choose to deduct your actual expenses such as gasoline, parking, toll, maintenance etc. OR you can choose a straightforward route of using the IRS standard mileage rate i.s. 58 cents per mile. So for example you drove 3000 miles for business purposes , you’ll be able to deduct $1740 off your taxes. 

The option you choose depends upon how economical your car is, how much it costs you to drive throughout the year, and how well you have documented your car related expenses. So, it’s better you start saving those receipts. 

  • Home office:

Are you utilising part of your apartment as a home office space? If yes, then this is great news for you! You will be able to deduct expenses for the business use of your home, which include mortgage interest or rent,real estate taxes,housekeeping or landscaping service,homeowners association fees, insurance, utilities, repairs and depreciation. This deduction allows small business owners to deduct $5 for every square foot of your home office for upto a maximum of 300 square feet.

This type of deduction is ONLY allowed for you to use your home office space for business purposes on a daily basis. 

  • Qualified Business Income:

According to the new tax law, small businesses including S corporation, partnership, sole proprietorship, LLCs will be able to deduct 20% of their income on their taxes. The Tax Cuts and Jobs Act of 2017 made significant changes to the tax code. For small businesses it was the creation of qualified business income deduction. For example you have earned $1,00,000 in profit, so now you can deduct $20,000 before ordinary income tax rates apply to you. 

However, there are few limits to claiming this deduction. Once your income exceeds $1,57,500 for single filers or $3,15,000 for pass-through business owners who file a joint return, this deduction will phase out. To see if you’re eligible for this pass-through entity deduction also known as 199A deduction reach out to tax pro. 

  • Rent:

As we all know rent is always going up. The cost of renting a space for your small business is deductible, it includes a shop on a busy downtown street, a cupcake shop, an office space for a travel agency etc. 

  • Advertising and Marketing:

You are eligible to deduct the cost of printing business cards on your tax return. So, basically anything you use to promote your business to bring in new customers from social media ads to billboards, all is 100% deductible. All this includes launching a new website, sending cards to clients, sponsoring an event, hiring someone to design a business logo, running a social media ad campaign etc.Great News! Isn’t it? But remember you cannot claim, amount paid to influence legislation i.e. lobbying or sponsor political campaigns or events. 

  • Office supplies and expenses:

Every business requires stocking up on traditional office supplies such as printer inks, pens, post-it notes. These office supplies are totally deductible. Also, if you have bought a new laptop, smartphone or some software that you can use for your small business during the year, you can write-off the entire cost of that expenses. You can also deduct work-related postage and shipping cost if any. Be sure to document all receipts for office supply purchases. 

  • Utilities:

You’re in luck! Everything you spend on utility bills (electricity, phone, internet, water, heat and sewage) for your business is fully deductible. 

  • Repairs:

If you require to repair your office property or it just requires regular maintenance to keep running efficiently, you can write off these costs on your taxes too. 

  • Travel:

Many small business owners have to travel for business purposes. But of course! These expenses of travelling and staying comes with a price. But there is some good news here! You can deduct those expenses for you and for your employees if the trip is taken for a business purpose. For a trip to qualify as a business purpose, it must be ordinary, necessary and away from your tax home. The business travel expense includes the following:

  • Parking and toll fees
  • Tips
  • Meals and lodging
  • Business calls
  • Dry cleaning while on business trip
  • Using your car while at a business location
  • Travel to and fro from your destination by plane, train , bus or a car
  • The cost of public transportation used on business trip
  •  Just keep in mind to save all the receipts and keep detailed records from your travels. 
  • Meals:

If you have taken those meetings out for meals with your clients, well you’ll be able to deduct 50% of the cost for business lunches only if:

  • The expense is an ordinary and necessary part of carrying your business
  • The business owner or employee must be present at the meal
  • The meal cannot be lavish or extravagant under certain circumstances.

The cost of providing meals to your employees at a company picnic or a holiday party are fully deductible. Be sure to keep the documentation for the outing that includes the amount of each expense, the date and place of meal and the business relationship of the person you dined with. 

But remember, ‘entertainment expenses’ with your clients like sporting, events or concerts are not deductible. 

  • Salaries and Employee benefits:

The wages, salaries, bonuses, commissions, vacation time paid are all tax deductible business expenses for your employees. You can also deduct contributions to their retirement plans, education assistance and most other employee benefit program costs. If you have freelancers or contract workers you pay is also tax deductible. This applies only if it fulfills the following criteria:

  • The services were actually provided
  • The salary is ordinary, necessary and reasonable
  • The employee is not a sole proprietor, a partner, or an LLC member. 
  • Taxes:

There are many taxes that you can write off. You can write off $10,000 of state and local income tax, sales tax, real estate tax and personal property taxes. You can also deduct the following taxes:

  • Excise taxes
  • Franchise taxes
  • Occupational taxes
  • Payroll taxes
  • Fuel taxes
  • Business licenses
  • Part of your self-employment tax
  • Insurance:

Every business needs to be protected. To protect it by insuring your business. The cost for insurance premiums like property coverage for your furniture, equipment and buildings,liability insurance, fire and flood insurance, malpractice insurance, workers compensation coverage, auto insurance for business vehicles, business owner’s policy are all deductible. Medical insurance for your employees is also tax deductible under certain circumstances. 

  • Legal and professional fees:

You have the right to deduct and legal or accounting fees charged by attorneys, bookkeepers, and accountants that are related to your business operations.

  • Telephone and Internet expenses:

If telephone and internet are integral to your business, they can be deductible as well. Keep in mind, if you have a landline at home , you cannot deduct the cost of your first line even if it’s used for business purposes. However, if you have a second line at home used for business purposes , the cost of this line is 100% deductible. If you use a cell phone and internet both for personal and business use, you can only deduct the percentage allocable to business use. In case you are audited, keep an itemized bill and details of records to prove the amount of business use. 

Conclusion:

One of the simple ways to reduce your income tax bill is by claiming all the tax deductible available for your small business. Consult with your accountant before claiming a deduction on your tax return.