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  • Writer's pictureThe Lincoln Accounting Team

Top 10 Tax Tips for All You Savvy Business Owners

Running a successful business involves not only providing quality products or services but also managing your finances wisely. One critical aspect of financial management is taxes. To help you navigate the complex world of business taxes, we've compiled a list of the top ten tax tips for savvy business owners. Here we go!

1. Organized Record-Keeping: Don't minimize this. Most small businesses have messy books and this can really hurt come tax time. Maintain meticulous records of all financial transactions. This includes income, expenses, receipts, and invoices. Having organized records will make tax filing smoother and help you claim deductions accurately. We use QBO, Digits, and Ramp to really reign in the accounting.

2. Choose the Right Business Structure: Selecting the appropriate legal structure for your business (such as sole proprietorship, LLC, S-corp) can impact your tax liability. Each entity has its own advantages and disadvantages so be sure to look into this thoroughly before making the decision. Timing is also important (think Unemployment Tax at quarter end or Sales Tax implications depending on frequency of filing).

3. Deductible Expenses: Familiarize yourself with deductible business expenses. These can include office supplies, travel expenses, marketing costs, and more. Keep receipts and documentation to support your claims. This is more important - and easier - than ever before. There's no excuse nowadays for not snapping a picture of that receipt and writing a memo in QBO for your accountant to log.

4. Claim All Applicable Deductions: Research and identify all tax deductions that apply to your industry and business type. Common deductions include home office expenses, mileage, and business-related meals. Don't leave easy money on the table. The key is tax avoidance; not to be confused with its illegal cousin - tax evasion.

5. Separate Personal and Business Finances: Maintain separate bank accounts and credit cards for your business to avoid commingling funds. This separation simplifies tracking and ensures you can accurately report business-related transactions. Never commingle funds, this is bad on all accounts, literally.

6. Estimated Tax Payments: Stay on top of your estimated quarterly tax payments to avoid underpayment penalties. Calculating and paying estimated taxes can help you manage your cash flow more effectively. Not only that, but eventually you will get hit with penalties and interest if you're not staying on schedule with your tax liabilities as they occur throughout the year.

7. Hire a Professional: Consider hiring a qualified tax professional or accountant with expertise in business taxes. They can help you optimize your tax strategy, ensure compliance, and identify potential savings. This is not the time to be experimenting in TurboTax; seek out those professionals who can help with both advisory and compliance.

8. Stay Updated on Tax Laws: Tax laws and regulations can change frequently. Stay informed about updates that could impact your business, such as changes to tax rates, deductions, or credits. Look for firms that use technology to stay on top of all the tax trends; ditch the old timers who break out the code and spend half a day trying to find that obscure regulation.

9. Take Advantage of Tax Credits: Research and apply for any available tax credits specific to your business. These credits can provide significant savings and incentives for various activities, such as research and development or hiring certain employees. From ERCs to PPPs, this will help make or break you during these trying times.

10. Plan Ahead: Implement a proactive tax planning strategy. This involves forecasting your income, expenses, and potential tax liabilities for the coming year. By planning ahead, you can make informed decisions to minimize your tax burden. Q1 for the year prior is too late to be making tax strategies; these have to start in January for the very same year you'll be filing your return.

Navigating the complexities of business taxes may seem daunting, but with careful planning and adherence to these top ten tax tips, you'll be well-equipped to manage your tax obligations effectively. Keep more of that hard earned money by taking a proactive stance to your taxes and your business.

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