Tips, strategies for owners to survive tax season
A new year brings a new tax season. With April 18th still in the rearview mirror, many small business owners are breathing a sigh of relief after having completed filing their taxes. Whether you are a sole proprietor or individual running an organized business entity, filing taxes can be stressful, but the process for small business owners can be especially complex and overwhelming due to the daily demands on their time. With constantly changing tax laws and complex regulations, it can be difficult for small businesses to keep up and ensure they do not get penalized. Below are a few strategies and reminders to keep in mind for next year to alleviate some of the stress of tax season.
1. Take advantage of external resources
Filing taxes is time-consuming and challenging, and is not everyone's area of expertise. Small business owners should take advantage of outside resources that can do the work for them, so they can focus their valuable time on running their business. Suggested resources include an accountant or bookkeeper, but finding the right one is something that should not be taken lightly. If you are looking for an accountant or bookkeeper, reach out to your peers, a mentor or a small business banker for recommendations. Ideally, you should identify someone that specializes in your industry or business size. It is also extremely important to find someone you feel comfortable with because you will need to give them details about your business. Your working relationship should be communicative, strong and honest.
Small businesses should turn to these resources not only around tax season, but throughout the year to discuss any large purchases or expenses that will be made.
2. Learn about policy changes
Small business owners should be aware of any new laws or changes to regulations that are implemented each year - both at the federal and state level. For example, effective January 1, 2017, the IRS made changes to the tax brackets for the 2017 calendar year. Also, with a new administration, there will likely be changes that will affect small business owners this tax year and next. Be sure to learn of any changes that might impact your filing and conduct appropriate research to find answers to any questions.
3. Stay organized and track expenditures
Staying organized is an easy and important action that will not only help small business owners during tax season, but throughout the entire year. There are platforms and tools available to help keep you organized in all aspects of your business, such as managing accounts, expenses and payroll. Also, remember to track more than just the typical expenditures. If you use your car for business purposes, you could use an app to keep track of the mileage related to business activities. By keeping on top of your records throughout the year, you can take steps to estimate your taxes quarterly and hopefully avoid surprises when tax season rolls around.
4. Go digital
Technology has become a large part of our lives, so it should be no different when it comes to taxes. There are countless software solutions out there that can assist with creating tax records, tracking expenses and reporting deductions. These solutions can help keep small business owners organized throughout the year, making tax season a little less stressful.
Technology doesn't just keep you organized, it is also there to help. The IRS has a great app called IRS2Go, which can help answer smaller tax questions year round.
Bank of America, N.A. provides informational reading materials for your discussion and review purposes only. Please consult your tax adviser, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.
• Jim Holmes is senior vice president small business banking manager for the Chicago Metro Markets & North Shore at Bank of America.