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Five Steps for Small Business Owners to Survive Tax Season

by ShannonCherry on March 6th, 2008

With more than 64% of small business owners filing their own taxes, a lot of anxiety surrounds small business owners as they begin tax preparation.

So I asked my bookkeeper, Jessica Salzman, about ways to reduce the stress this tax season. Jessica owns Behind the Scenes, LLC which help small business owners to increase profits, reduce taxes, and improve cash flow. Founded in 2006, the company maximizes small businesses’ resources by offering a customized approach to professional bookkeeping, accounting, payroll and tax-related services to small businesses and solopreneurs.

She shares five secrets to reduce IRS anxiety, maximize 2007 tax benefits, and turn problems into profits:

1. Gather all necessary documentation long before you sit down to prepare your taxes. Much of the stress associated with preparing taxes has to do with locating and collecting the proper documentation. Take the time to find all tax-related material needed.
2. Separate business and personal funds. Many small business owners make the mistake of mingling business funds and legitimate business expenses with personal finances. “It’s good business practice to open a separate checking account for managing business finances. It’s also a great idea to take it one step further and also maintain a credit card account that is used solely for business purchases,” says Salzman. “It’s much easier to keep track of business expenses when there aren’t personal purchases thrown into the mix that later need to be weeded out.”
3. Check for inventory write-offs. Look through inventory to see if any products are damaged or outdated. Noting market-value loss could provide additional tax deductions.
4. Contribute to a retirement plan. “Small business owners and entrepreneurs should recognize that being your own boss means you are responsible for your own retirement,” she says. “If you haven’t started contributing to a retirement account, now is the time. Most contributions made are tax deductible.”
5. Above all, don’t procrastinate, seek professional help. Don’t wait until April to enlist the help of a tax professional. Chances are they’ll be hard-pressed to fit you in that late in the game. “Tax laws can be confusing and deductions difficult for the layperson to recognize. Consult with a professional early in the year and come equipped with well-organized documentation. You’ll be ready for a stress-free tax season,” says Salzman.

And don’t forget to check out our own Kelly at TaxGirl.com.  I’m re she has some great tips for you too!

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POSTED IN: Entrepreneurship