As an entrepreneur, you know how to innovate. As an expert in your field, you’re driven, curious and tenacious. You know how to get the job done. But do those same qualities persist when it comes to your business accounting?
While businesses fail for all sorts of reasons, poor accounting doesn’t have to be one of them.
Choosing an expert accountant team to provide advice and assistance saves you hours of time maintaining financial records and filing taxes. The best way to grow your business and build your legacy is to establish a relationship with a local accountant from the start.
A knowledgeable accountant supports your business by helping you reduce your taxes and stay on the right side of the Internal Revenue Service. At Prime Ledger, we recommend every entrepreneur follow these guidelines to do so:
#1. Separate business and personal expenses
When you run your own business, you get used to doing everything yourself. Work seeps into your personal life. And the personal bleeds into your work life. While this may be sustainable for day-to-day tasks, mixing the two isn’t the right approach for your expenses. Keeping business and personal expenses separate is important for tax purposes and for ensuring you always know how healthy your business is.
A LOCAL ACCOUNTANT FOR ENTREPRENEURS CAN HELP
For example, more than one-quarter of small business owners and managers don’t have a separate bank account for their business. This simple decision, usually made out of ignorance, puts them at risk for missing deductions, violating tax law, and never fully understanding their business profitability. But when you have an accountant on your business team, you know the dos and don’ts of your business accounting.
An experienced accountant will encourage you to set up a completely separate accounting system for your business. Your business expenses will be easier to track, and you will clearly demonstrate to the IRS that your business is legitimate.
KNOWING YOUR PROFITABILITY
Growing your business and establishing a legacy are wonderful goals. But to achieve those goals, you need data. Running your business like an ATM, withdrawing money whenever you like, guarantees you’ll never have a clear and accurate picture of how profitable your business is. And if you don’t understand where you stand financially, you can’t make informed decisions about the future of your business.
#2. Take advantage of business deductible expenses
One of the biggest ways entrepreneurs can save—and lose—money is through business deductibles. Your deductibles need to be monitored to ensure you’re only taking what’s allowable, while not leaving money on the table. Here are the top 15 business deductions that can lower your net income and tax liability. These are:
- home office deduction,
- internet and phone bills,
- health insurance premiums,
- meals deduction,
- publications and subscriptions,
- education and trainings,
- business insurances,
- start-up costs,
- office furniture, and
Business tax structures are complex, but there are almost always ways to save. And, don’t worry, even the IRS wants you to take advantage of these deductions! As an experienced accountant to entrepreneurs, our team understands how to maximize your deductions legally.
#3. Pay your quarterly estimated taxes
Get in front of any potential end-of-tax year issues by paying quarterly estimated taxes. The IRS does expect businesses, just like individuals, to pay taxes throughout the year. One more bonus? You’ll never experience sticker shock when a huge lump sum comes due at the end of the year! Use the quarterly estimated tax system to pay tax on income that isn’t subject to withholding, including earnings from self-employment, interest, dividends, rents, and alimony.
If you wait until the end of the year to pay tax, you run the risk of making a mistake or missing an expense. And, if you pay less than 90% of your tax liability during the tax year, you will incur an underpayment penalty. By filing quarterly, you can account for overages or underages and rest assured your tax payment is accurate.
#4. Get organized
Organize your financial documents so your accountant can give the IRS the right info the first time. For example, keeping all your receipts may feel excessive, but the benefits outweigh the time cost of filing a few slips of paper each week. Keeping track of your receipts doesn’t just help your accountant confirm you’re claiming every deduction possible, you also protect yourself in case you’re ever audited by the IRS.
Deadlines are another important piece of the financial health of your business. Of course, business returns, personal returns, 1099s, federal tax payments, and state tax payments all have their own deadlines throughout the year. The good news is that when you have an accountant on your team, you don’t have to keep track of these deadlines on your own.
You’ve done the hard work to build your business. As an accounting firm for entrepreneurs my team and I can help you reduce your taxes and stay on the right side of the IRS. Want to know how you can improve? Schedule a consultation call today, and let’s review together!