As a small business owner, you must ensure that your business complies with all applicable tax laws. Depending on the structure of your small business, you may be required to pay different types of taxes, including income tax, self-employment tax, and payroll tax. While it can all seem overwhelming, it certainly doesn’t have to be. With these essential tips, you can hopefully keep track of all your tax needs.
1. Claim for Work from Home Costs
As a small business owner, you’re always likely looking for ways to save money on taxes. And one way you can save money on taxes is by claiming a deduction for costs associated with working from home.
There are a few things you need to keep in mind in order to claim this deduction:
- You can only claim the tax deduction if you have a dedicated workspace in your home. This means an area that is used exclusively for work and is not used for any other purpose.
- You can only claim a deduction for the portion of your home expenses that are attributable to your workspace. This includes things like rent, mortgage interest, property taxes, and utilities.
- You can only claim the tax deduction if you are self-employed or an employee of a company that allows its employees to work from home.
- You can only claim the deduction if you itemize your deductions on your tax return.
2. Make Use of Accounting Software
As a small business owner, it is important to be aware of the various tax deductions and credits that you may be eligible for. One way to maximize your tax savings is to make use of accounting software to track your expenses and income.
There are a number of different accounting software programs available, so it is important to choose one that is compatible with your accounting system and meets your specific needs. Some of the more popular accounting software programs include QuickBooks, FreshBooks, and Xero.
Once you have selected the right accounting software for your business, you can use it to track your expenses and income. This information will be useful come tax time, as you will be able to easily identify which expenses are tax-deductible. Additionally, having this information readily available will make it easier to prepare your taxes and avoid any potential mistakes.
If you are not already using accounting software, now is the time to start. It can save you a significant amount of time and money come tax time and will help you to keep better track of your finances throughout the year.
3. Keep Business and Personal Finances Separate
One of the benefits of owning and running a small business is the potential to deduct business expenses from your taxes. However, in order to deduct these expenses, you must maintain separate personal and business finances. This means having separate bank accounts, credit cards, and accounting records.
While it may seem like extra work to keep your finances separate, it can actually save you time, and money come tax time. This is because you will have a clear and accurate record of all your business expenses, which will make it easier to deduct them from your tax return.
So, if you are a small business owner, be sure to keep your finances separate in order to maximize your tax deductions and protect yourself in the event of an audit.
Final Thoughts
Small business owners definitely have a lot to think about when it comes to taxes. They need to make sure they are keeping up with the latest changes and taking advantage of all the tax deductions and credits they are entitled to. While it can be a lot to keep track of, working with a qualified tax professional can help ease the burden and ensure that your business is getting the most favourable tax treatment possible.
Keep track of your business tax with the help of Accountants247. We are an accounting service that helps business owners, managers, investors and other stakeholders to evaluate the financial performance of their businesses. Your dedicated accountant will conduct regular tax efficiency reviews throughout your financial year, ensuring your business is being run in the most tax-efficient way. Get a quote now!
