Gathering business records. Looking over balance sheets. Reviewing receipts. Gathering more records. Reviewing more receipts. Preparing for Tax Day doesn’t just seem tedious – it is. No wonder small businesses report spending around 2.5 billion hours working on their taxes, which is the equivalent of 1.25 million full-time jobs.1
Admittedly, there’s no secret for avoiding all the work (and headaches) that come with preparing taxes for your small- or medium-sized business (SMB). But whether you hire a tax professional, or file your taxes on your own, these tips can help you get ready for Tax Day – and make the most of potential deductions.
Business and personal expenses can easily – and understandably – blend together when you’re an SMB owner. Here are three common areas that can create confusion:
Bonus tip: As a rule of thumb, deductible business expenses are ordinary and necessary. If you’re unsure about whether a purchase constitutes business expense, hold onto the record for the transaction and consult a professional accountant.
Keeping track of every purchase can be cumbersome – especially smaller ones. Consider using one payment method for all business expenses. For example, you can use a small business credit card and get supplementary cards for employees. When it’s time to file your taxes, all your business purchases are in your monthly invoices.
Bonus tip: With the Amazon Business Prime American Express Card, you can earn rewards or choose flexible payment terms like 5% Back or 90 Day Terms on U.S. purchases at Amazon Business, AWS, Amazon.com, and Whole Foods Market with an eligible Prime membership. Earn 5% Back on the first $120,000 in purchases each calendar year, 1% Back thereafter.
The tax code changes often, making it difficult to know what’s deductible from year to year. While there are rarely drastic changes to the tax code, you can reasonably assume some purchases will remain deductible, it’s possible to miss new deductions, especially on smaller purchases, including:
Bonus tip: For a full review of deductions, consult Publication 535 Business Expenses from the IRS or speak with a tax preparer.
Businesses that expect to owe more than $1,000 in taxes are required to make quarterly payments to the IRS. Most small businesses, even sole proprietorships, fall within that range. Although paying estimated taxes can cut into your cash flow, it’s important to stay on top of those payments. By doing so, you’ll avoid IRS penalties, namely being charged interest on your back taxes.
If you’re concerned that your organization won’t be able to set aside enough cash to make quarterly estimated payments, consider applying for a business line of credit to maintain cash flow.
Bonus tip: Check out the IRS tax calendar. Use this helpful tool to map out your entire fiscal year and set reminders for each tax payment.
Have you been putting off a large equipment purchase or making a sizable investment because your organization doesn’t have the cash on hand? One approach is to make the purchase using expended payment terms. That way, you can delay payment until after Tax Day while still being able to deduct the purchase from your taxes.
Bonus tip: The Amazon Business American Express Card offers Extended Payment Terms that allow you to take extra time to pay, interest free. Terms apply.
There are plenty of issues that SMB owners address on a daily basis, so keeping track of every expense can quickly get lost in the shuffle.
By planning ahead and using tools that make it easier to keep track of every purchase, tax time can be manageable – and you’ll be able to focus on the things that are most important to your organization, your customers.
Quick tip for easily tracking business expenses - use a business credit card.
Interested in more benefits of a business credit card?
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