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March has just begun and the spring season is right around the corner, which means the tax deadline is approaching sooner than you think. As a business owner, whether you maintain a sole proprietorship or LLC operating as a corporation, tax preparation can be daunting. But it’s still crucial to compile, calculate, and prepare sooner rather than later. Understanding your tax obligations and implementing effective strategies can save your business the headache of long spreadsheets and copious amounts of financial data stored in your chosen accounting software. In this blog post, we provide best practices for navigating the tax season and offer our services that lighten the load and burden on you and your business.
Tax Preparation: Best Practices
The ultimate key to tax preparation is having your ducks in a row at all times. Seriously, precise organization, accountability, accuracy, and due diligence make a significant and positive impact on tax preparation and filing. Here are strategies to cover the bases and set your business up for financial success.
Keep Accurate and Detailed Records: Compile all business transactions and double check that everything is correct and up-to-date. These include invoices, receipts, bank statements, expenses, and all other transactions since the prior tax season.
Understand Your Tax Obligations: Know which tax return you’re required to fulfill. The IRS provides information about federal deductions and credits and specific provisions for your business classification. Don’t forget to account for state and local taxes as well.
Separate Personal and Business Expenses: Don’t blindly mix personal and business expenses. The IRS classifies business expenses as either ordinary spending common and accepted in your industry or necessary for your business to function. Even if you operate as a sole proprietorship, you will want to ensure that you have separate bank accounts, debit and credit cards, and financial records from your personal assets.
Maximize Deductions and Credits: Take advantage of all available deductions and credits to reduce your tax liability. The IRS determines credits and deductions, including business expenses, such as office utilities and depreciation; research and development; and hiring targeted individuals classified under the Work Opportunity Tax Credit (WOTC).
Save for Estimated Payments: Set aside 30% monthly income, average annual income, or revenue per sale for quarterly taxes. Most small businesses fall under this obligation, so it’s pivotal to have enough and pay on time to avoid interest and fees.
Seek Professional Help: If you're unsure about any aspect of your tax situation, don't hesitate to seek help from a tax professional. They can provide personalized advice based on your business's specific needs and circumstances.
How Milrich Virtual Professionals Can Help
Our team of virtual bookkeepers assist in day-to-day bookkeeping to keep your financial records accurate and up-to-date. We review all transactions; record expenses, inventory, and payments; and handle entire invoicing and budgeting processes. We are certified Quickbooks Pro Advisors ready to help compile your financial statements and other reports for tax preparation. We save your business time and money by offering competitive rates, flexible contracting hours, and our services from anywhere in the United States. Contact us today by scheduling a call for services or emailing us at contact@milrichvirtualprofessionals.com
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