Get An Early Start On Your Taxes | Tips for Your Small Business
Too often, small business owners find themselves waiting until the last minute to start thinking about their taxes. But the better approach…is to start planning from now – – today is November 1st, 2021 and the clock’s been ticking.
With the new month starting, let me first mention a few things that you should be doing:
Pull out last month’s bank statement and review your transactions. As a matter of fact, it would be even better for you to do a bank reconciliation by comparing the entries to what you have in your bookkeeping system. You should be checking for the deposits that show up on your statement and compare them to the deposits in your bookkeeping. You should also check for the expense transactions that came out of your bank and make sure they’re in your bookkeeping. This is very important so that at the end of the year, when you populate your Profit and Loss Statement, that everything is accurate.
But I would like you to do something else as you look at last month’s statement – – I would like you to “audit” your statement. You should be checking for things that shouldn’t be there. When I audited my own statement, I found out that I was still paying for a subscription to something that I stopped using many months ago but apparently I forgot to cancel it.
So yes…doing a self-audit of your statement can actually. help you save money. You should be doing this each month. A few other tasks that are helpful is to”
Also check your business credit card statement and make sure you’ve captured the business expenses into your bookkeeping.
Create a Profit and Loss Statement for last month and also a “year to date”.
Review your business budget from last month and see if you stayed within your budget or if you overspent. Also plan for this month’s budget.
Check your personal bank statement and see if there are any transactions that took place that can be categorized as a business expense and make sure you enter it into your bookkeeping. You don’t want to overlook an opportunity for a business tax deduction.
Once you’ve ran your year to date P&L, find out how much your projected tax liability is for the year. You can calculate this using a tax calculator.
After you calculate the amount “to date”, then take a look back at what you’ve already paid out for the year. Does it look like you’ll owe more? Or have you paid out too much?
Here’s a tax tip…if you see that you might still winding up owing more money, now might be a good idea to invest into your business. What I mean by that is, if you make an ordinary and necessary purchase for your business, it will count as a business tax deduction which will reduce what you were going to have to pay out in taxes, if you follow what I’m saying. Lol, why give it all to them?
You can spend that money to purchase some sort of new equipment or pay a bonus to your employee (or independent contractor) or plan a business holiday event to celebrate.
Now is also a good time to begin to start gathering your documentation. Don’t wait until the last minute. Below is a video I did called “What Documents Do I need to File My Income Tax Returns” which I’m sure you will find very helpful.
Speaking of employees and independent contractors…make sure you have all of the wage and payout calculations ready so that you can file accurate W-2 forms and issue form 1099-NEC. You are required to issue form 1099-NEC to anyone whom you pay more than $600 to in total for the year. This also provides support for you to claim this as a business expense.
Did you find some helpful information in this post? Please let me know in the comment and be sure to share it with one of your small business owner friends. Here’s a bonus as a way of saying thanks: download my free report “10 Smart Tax Strategies for Small Business Owners that the IRS is Hoping You Don’t Find Out About“. Also follow me on Instagram where I post content daily.
As a Tax Strategist, Consultant and Educator, I’ve been helping other Entrepreneurs (and Individuals) around the U.S. just like you, save thousands of their hard-earned tax dollars, increased their refunds, and solve multiple tax problems. Beyond taxes, I am your “GPS” to starting and growing your own business. Be sure to download my ebook Taxes & The New (or “Early-Stage”) Entrepreneur: What You Need to Know