Navigating Your Small Business Taxes, Without A Tax Professional
Hey Bestie,
Your Tax Bestie here! One of the common challenges that small business owners face throughout the year is managing their taxes effectively. If you don't have a tax professional actively helping you estimate your taxes each quarter, don’t worry—I've got some tips that might just make your life a bit easier.
Start With Solid Bookkeeping
First things first, ensure that you have consistent bookkeeping practices in place. At the end of every month, take some time to calculate your net profits—this is your gross profits minus your total expenses. This simple step is crucial and forms the foundation of your tax estimation.
Set Aside Taxes Monthly
Based on your net profits, I recommend setting aside an average of 22% for taxes. Transfer this amount to a designated tax savings account. If you don’t have one yet, it’s a good idea to set one up where you already manage your professional finances. However, if you’re looking for recommendations, we often direct our clients to Chase Bank. In fact, here’s a referral link where you can receive a $300 bonus when you open an account—just in case you need a little extra incentive!
Leveraging Tax Deductions
Maximizing your tax deductions can significantly reduce your taxable income. Common deductions include business expenses such as office supplies, travel costs, and even software subscriptions necessary for your operations. Don’t overlook home office deductions if you work from home; just ensure that the space is exclusively used for business. Keeping a detailed record of all expenses will help you maximize these deductions come tax time.
Pay Estimated Taxes Quarterly
Next, at the end of each quarter, use your net profits to calculate and pay your estimated taxes. You can make these payments through an EFTPS (Electronic Federal Tax Payment System) account, or directly via the IRS payment link here. Always ensure that you're paying for the correct quarter and tax year to avoid any penalties or confusion.
Avoid Common Tax Mistakes
Many small business owners fall into the trap of underestimating their tax liabilities or missing deadlines. To avoid penalties, always ensure your bookkeeping is up to date, and set reminders for tax deadlines. Misclassifying employees as independent contractors can lead to significant legal penalties, so it's crucial to understand the distinctions.
Need More Help?
Managing your business finances and staying on top of your taxes can be overwhelming, but you’re not alone. If you need further assistance, feel free to set up a discovery call with us here. We’re here to help you make the most of your financial strategies and keep your business thriving.
Until next time, stay savvy with your taxes,
Your Tax Bestie!