It’s everyone’s civic and financial duty to pay taxes. Yet, no one actually enjoys giving away money — especially with all of the preparation and paperwork involved.
For many small businesses, in fact, tax season is the least enjoyable time of year.
Though it doesn’t have to be that way. With the right approach, it’s possible to streamline the entire process and reduce the sting of preparing and paying taxes.
Below are some steps to help you get the most out of your next tax season.
1. Keep Personal and Business Separate
It’s not uncommon for startups to use personal credit cards to pay for essential office equipment and materials. However, this makes tax preparation much more difficult down the road.
A better approach is to keep your finances completely separate. Get a dedicated bank account, checkbook and credit card so that all of your business expenses exist within their own category.
2. Take Advantage of Deductions
As a business, you qualify for a range of deductions, including equipment, materials and even mileage (assuming you use your car for business). If you are a startup, however, you potentially qualify for even more deductions, including:
- Initial setup costs. These costs include incorporation fees, business cards, domain name registration, etc.
- Home office allowances. Under the “safe harbor” clause, you can deduct roughly $5 per square foot of your home office (up to $1,500).
- Pizza. In the beginning, you’ll likely spend long hours at the office. You can claim late night snacks as long as you’re on the clock.
3. Use Contractors Instead of Employees
As you begin growing your business, consider hiring full-time contractors instead of traditional employees. Although freelancers typically charge higher per-hour rates, you don’t have to cover additional expenses like health insurance, employee benefits or retirement savings plans.
Not only does this save you money, but preparing your tax paperwork becomes much easier.
Once you do start hiring employees, however, most of your retirement contributions are tax-deductible.
4. Use Tax Prep Software
Not sure what deductions to claim? Don’t know what forms to fill out?
Many businesses use tax attorneys and CPAs to help them, but a cheaper option is to use tax prep software.
We integrate with a number of trusted platforms that sync automatically with BluePay’s secure payment gateway.
Speaking of which...
5. Use Payment Integration
Do you have shoeboxes full of receipts? What about bulky ledgers that you have to balance every day by hand?
If you answered yes to either of these, you’re going about it the wrong way.
With payment integration, it’s possible to sync all incoming sales and outgoing expenses automatically with your bookkeeping software.
In addition to QuickBooks, we support a number of the most popular accounting solutions on the market. For a full list of our payment integration options, click here.
Is This Your First Tax Season As a Small Business?
If you are just starting, it’s easy to feel overwhelmed. So many forms, deadlines and deductions — where do you even begin?
Our advice for first timers is as follows:
- Start early. Doing so gives you plenty of time to gather all of the forms and paperwork you need.
- Stay organized. Tools like payment integration make this step 100 percent automatic.
- Save everything. Keep all invoices, receipts and payments on file for several years. Fortunately, digital scanning makes record-keeping a breeze.
If you have any questions or need additional tax prep help, contact BluePay’s merchant services team today for a free consultation.