As the April 18th deadline for filing taxes looms on the horizon, you may be in the enviable position of having already filed your tax return. If you haven’t already filed, however, as a small business owner or entrepreneur you are probably working overtime to get it done. Depending on the kind and size of business you run, you might have a tax preparation professional do your taxes for you. But you may be just starting out and want to save the expense; if that’s the case – and even if it’s not – there are a few things to keep in mind.
1. Know what you owe
As a small business, you should probably be paying your taxes quarterly. These payments can be easy to forget, though, especially if you are a sole proprietor working in the creative economy or the gig economy.
If you did make your final quarterly payment on January 15th, make sure you take that into account when you file. Take the time to deduct any levies or account for any late fees and penalties the IRS may impose if you happened to miss a payment.
2. Accelerate or defer.
Many sole proprietors use cash basis accounting – which means they report income when payments are received. Depending on the kind of business you have, you might consider scheduling your billing so clients can pay early in the new year for work you completed late in the previous year.
The advantage to this is that you’re getting income early in the year.
However, if you had a successful year you could accelerate your deductible expenses. There are a few things you can do to help relieve your tax burden if you plan ahead, such as:
- making extra charitable donations,
- renewing professional journals and licenses before the year ends, or
- replacing old business equipment.
If you are in the position to, you might also consider
- prepaying your state income tax,
- selling an investment property at a loss, or
- selling securities at a loss.
If you’re a small business owner or entrepreneur, there’s nothing you can do about taxes. They are as much a part of your business as your customers or client base. The trick to making it all less odious, though, is to be proactive. Think ahead early in the year so the end of the year doesn’t hit you any harder than it needs to.