Small Business Tax Tips

As tax season approaches, it is important to get prepared in order to file taxes properly and in a timely manner. The National Small Business Association reported that last year, 40% of small business owners spent at least 80 hours on their federal taxes. Below are 6 small business tax tips to help you get prepared for tax season.


1. Federal and State Income Taxes – When filing taxes, it is important to determine your federal and state income tax obligations. The type of business you have (sole proprietorship, partnership, LLC) determines which income tax return form(s) you must file. State tax requirements vary depending on where your business is located. Check out the U.S. Small Business Administration's information on how to determine your state tax obligations. The picture below lists the four basic types of taxes the federal government levies.

2. Maintain Business Records – Staying organized during the year will help relieve stress during tax season. TurboTax suggests organizing your tax forms into categories. Keep anything related to income, like W-2s and 1099s together. Then make sure to save business receipts for expenses in a safe place. Common receipts to keep include: property taxes, charitable contributions, and business expenses. Maintaining your business records and organizing them properly will help make tax filing easier. Make sure to stick with an organizational system that works for you.

3. Know Your Deductions – There are many activities a business does throughout the year that can be claimed as a tax deduction. It is important to know the possible deductions and how to claim them properly. One example is if you business makes contributions to charity? The IRS website explains; donations for a qualified organization can be claimed, but contributions made to specific individuals, political organizations and candidates cannot be deducted.

4. Avoid Audit Traps – There is no way to determine what brings about an audit, but there are red flags to be aware of. Below is information from on how to avoid the IRS taking a second glace at your business.

5. Personal vs. Business – Make sure to maintain separation between your personal expenses and your business expenses. Keep separate bank and credit cards accounts for your business.  The IRS will examine personal expenses that may have been claimed as a business expense. One way to avoid confusion; have proper documentation of business and personal expenses. 

6. Ask A Professional – When in doubt, ask for help. For the 2013 tax season, 26 million people visited the website.  According to a survey by, 46% of small business owners do not work with an accountant. The survey also found:

  • 12% of small business owners have no idea how much they owe in income taxes.
  • 74% of small business owners know a “ballpark” figure of what they owe in income taxes.
  • 15% of small business owners actually know what they owe in income taxes.

If you're having a hard time filing your taxes or if you have questions, hire a certified public accountant (CPA). CPA's specialize in knowing the federal and state tax laws and can help you understand your business better.

In order to have a successful tax season, make sure to get organized, ask questions, and understand what is needed from your business to file. Let's make this tax season a stress free time and start preparing now!

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