Did you know that almost 52 million tax refunds have already been submitted this year alone?
Tax season isn’t something anyone looks forward to — especially LLC owners — but it’s something that none of us can avoid. With a bit of planning and forward-thinking, though, LLC tax planning can be a breeze. Luckily, we’re here with a few of the best things to carry you through the season.
Read on to learn eight of the best business tax strategy tips.
1. Hire an Accountant
If you hire the right accountant, they’re going to be willing to take on whatever you need. Most of the time, they’ll be able to take on more than financial statements and taxes, especially if you’re working together year-round.
They can work to help you track your income and spending throughout the year, make sure you don’t have a cash flow problem, and even monitor your gross and net profits every quarter.
If you can swing it, you should hire an accountant as you’re opening your business, rather than only seeking out a CPA each tax season.
2. Find the Right Software
Whether you have an accountant or not, though, having the proper software is going to help you stay afloat when you need it most.
Tracking and managing your finances and taxes with pen and paper might sound smart, but this way leaves you more susceptible to mistakes throughout the process. With the right software, you’ll know that you’re in good hands from the beginning, and you’re only going to save money in the long run.
3. Claim All Income Reported to the IRS
The IRS is going to get a copy of the 1099-MISC forms you receive so they can match them up to the income you’ve provided when reporting taxes. It’s crucial to make sure these numbers match up on both ends, otherwise you’ll be a walking red flag.
Even if you don’t get a 1099 form from your client, it’s still crucial to ensure that income gets reported. The same is going to apply to state and local taxes where it’s applicable.
4. Keep Accurate Records
Keeping thorough and concise records throughout the year is going to help ensure your tax return is correct once the time comes. Without those records, you could essentially be leaving money on the table during tax season.
You could also be leaving yourself susceptible to an audit. Those tend to come randomly, but if you have accurate records, then you won’t have anything to worry about.
5. Separate Business From Personal Expenses
If you do end up getting a dreaded audit, or the IRS just finds that your business and personal expenses have been mixed up, and your expenses aren’t separate, they’re just going to lump everything together. That means your personal accounts and money are both left susceptible to being taxed.
It’s essential to get a bank account that’s separate from your personal so this doesn’t happen.
Most LLCs are eligible for a business account, but if you’re not, then there’s no need to worry. A separate personal spending account is OK to have, just keep the expenses separate.
6. Correctly Classify Your Business
If your business isn’t correctly classified, you could end up overpaying. If you’re reading this, it’s safe to assume your business is classified as an LLC, but it’s important to make sure that’s the right classification.
An easy move is to meet with a business attorney and accountant to help determine how your business should be qualified.
7. Take Advantage of Deductions
If you take advantage of the right deductions, it’s very likely that your business is going to save a lot of money each year. They work by reducing your taxable income, ensuring more money stays in your wallet.
That’s why having a proper bookkeeping system or software is crucial throughout the entire year. If you wait until the very end to gather everything up, then not only are you going to get overwhelmed, but there’s also a good chance you’ll miss out on certain things that could’ve been deducted.
The other important part of your deductions is ensuring you have proof of purchase. It’s important to safeguard your receipts, whether it’s in a separate box or stashed away in a safe folder on your computer. Whenever you buy something for work, make sure that the receipt makes it to its corresponding spot so you don’t have to worry about them later.
If you have an accountant, then be sure to send them the documents they need to keep track of that expense as soon as it comes up. Don’t wait around until you accidentally lose it.
8. Take Your Accountant’s Advice
If your accountant gives you advice for growing your business or maintaining different aspects of your finances, then you should be sure to listen to what they have to say. If you’re curious, be sure to seek it out.
Whether it’s how much to contribute to your retirement fund or if you should take a bonus out that year, what they have to say can have a significant impact on your business’s success.
Ready to Get Started With LLC Tax Planning?
Now that we’ve gone over a few of the best basics for LLC tax planning, are you ready to get started? Whether you’re doing small business taxes for the first time or you’re simply looking to revamp your process, these tips are sure to help you out.
Remember, though, if you’re feeling too overwhelmed, you can always hire an expert.
At Bennett Financials, we work hard to help you with bookkeeping, tax planning, and tax resolution throughout the season so you’re never left with any surprises. Book a consultation with us today to get started.