A Business Owner’s Guide to Tax Obligations

Owning a business is both rewarding and exhausting. Entrepreneurs must spend as much time working on the business as they do in the business. Any financially sound business must stay up to date on all tax categories.

Know Your Taxes

Federal requirements for business owners change practically every year, so it is important to trust a tax advisor to ensure all taxes are paid and no credits are missed. Federal and state taxes can usually be paid quarterly to avoid a hefty payment due at the end of the fiscal year. Each state has unique business organization and tax implications. Some states require local tax payments for municipalities or counties.

Track Deadlines

In addition to knowing which taxes must be paid to stay in accordance with federal, state, and local laws, business owners must also know when taxes are due. Specific sales taxes and license fees may be due annually while other taxes and business use fees are due quarterly or even monthly. Inadvertently missing a deadline could result in steep penalties and fees.

Organize Records

In order to avoid potential tax penalties and exorbitant fees, business owners must keep carefully organized records. Tax software programs and personal administrative assistants are helpful ways to establish reminders for important due dates. Many federal and state agencies offer automatic payment options so the total amount due is withdrawn from a bank account or charged to a credit or debit card on the due date. Well organized financial documents are also vital in case of audits or important business decisions such as loans, mergers, or acquisitions.

Identify Deductions

Most business owners trying to stay afloat in the midst of fluctuating tax laws often overlook helpful deductions when they file their annual returns. Savvy entrepreneurs who are well versed in current tax law are able to find every available tax deduction. Itemized business tax credits and deductions are helpful ways to limit tax liability for business owners. Some uncommon deductions are overlooked in favor of more widely known credits such as equipment depreciation, healthcare sponsorship, and transportation expenses.

Get Professional Help

Understanding and maximizing tax deductions is not a task for every business owner. Most entrepreneurs and small business owners consider hiring a CPA for guidance when it comes to their important business functions. Certified tax professionals are able to explain the technical processes to their clients and ensure that not even uncommon deductions are not missed. Aside from filing important tax documents, a CPA can assist business owners in other ways, like understanding their average cash flow and expenditures.

Business owners must be interested and involved in the overall financial health of their business. Although they need to understand the difference between profits and losses or assets and liabilities, entrepreneurs are not required to have all the professional knowledge of a CPA or tax expert. Knowing were to find the correct answer is the same as already knowing the answers. Smart business owners know how to find a trusted advisor to help them expand their organization.