Taxes can be complex for small-business owners. This is especially true if you’re self-employed or own a business that’s structured as a sole proprietorship or partnership. In these cases, you’re considered to be self-employed and are responsible for paying both your individual income taxes and your business taxes.
There are a few things you can do to make tax season a bit less stressful:
1. Keep good records.
One way to make tax season less stressful is to keep good records. This includes tracking your expenses and income, as well as any deductions or credits you may be eligible for.
Another way to reduce stress during tax season is to file your taxes electronically. This can help you get your refund faster, and it’s also easier and more accurate than filing by hand.
Finally, don’t wait until the last minute to file your taxes. Leave yourself plenty of time so that you can take your time and make sure everything is done correctly.
Make sure you keep track of all your business expenses so you can claim them on your tax return.
2. Get organized.
Use a good accounting software program to track your income and expenses, or hire an accountant to help you prepare your returns. This will help you keep track of your income and expenses, as well as your deductions, so you can accurately file your taxes.
Another tip is to consult with a tax professional. They can help you ensure that you’re taking all the deductions you’re entitled to and filing in the most advantageous way possible. Finally, be sure to submit your return on time so there are no penalties or interest charges applied.
3. Be proactive.
Filing an extension can be a huge stress reliever because it gives you more time to gather your receipts and prepare your tax return. The extension also buys you some time if you’re waiting for a tax refund.
Note that if you file an extension, you still have to pay any taxes that are due by the original deadline. So it’s important to estimate how much you owe and make sure you have that money ready. You can use IRS Form 1040-ES to estimate your taxes. And if you end up owing more money than you thought, you can always arrange a payment plan with the IRS.
4. Maximize retirement savings.
Tax season can be a stressful time for many people, but one way to reduce the stress is by maximizing your retirement savings contributions. This will help you reduce your taxable income and could potentially save you a lot of money on taxes.
Make the most of any retirement or individual retirement account available to you, including a SEP-IRA for small-business owners, traditional IRA, SIMPLE IRA or Roth IRA.
Contributing to a tax-deductible retirement account, such as a 401(k), can also help reduce your overall tax bill. By contributing to a retirement account, you can save money on taxes now and avoid paying taxes on those funds when you withdraw them in the future. So if you’re looking for ways to reduce your stress during tax season, consider maximizing your retirement contributions.
5. Self-employed health insurance.
Review whether you’re eligible for a tax credit to help offset the cost of buying your own health insurance.
For example, self-employed individuals can deduct their health insurance premiums from their income. So make sure you keep track of your health insurance costs throughout the year. Other deductions and credits include things like tuition and student loan interest, mortgage interest, and retirement contributions.
By knowing what’s available, you can claim the deductions and credits that will save you the most money. And that will help reduce the stress of tax season.
6. Shop around for deductible expenses.
Compare the costs and quality of service before making major purchases such as new equipment, software or vehicles for your business.
This means that you’ll want to look for things that you can deduct on your taxes, and then purchase them before the end of the year. Deductible expenses can help reduce the amount of taxable income that you have, so it’s definitely worth looking into.
Some common deductible expenses include things like charitable donations, medical expenses, and job-related costs. You might also be able to get a deduction for things like home office costs or tuition payments. So if you’re feeling stressed out about tax season, start shopping around for some deductible expenses! It will make things a lot easier in the long run.
7. Set up a special savings account.
If you have a big purchase in mind for your business, such as a new vehicle or equipment, open special savings account to help you pay for it without having to dip into your personal funds.
Also, setting up a special savings account specifically for your taxes will help you stay organized and avoid any last-minute surprises.
Plus, by setting money aside each month, you’ll be less likely to have to borrow money or use your credit card to pay your taxes. And that’s definitely something to stress about!
8. Consider hiring an independent contractor.
If you have employees, make sure that anyone who works more than 10 hours per week is classified as an employee rather than an independent contractor.
Hiring an independent contractor can help you focus on your business and leave the paperwork to someone else. You can also file early to get a head start and be sure to keep good records throughout the year so filing is easier come tax time.
Finally, if you’re feeling overwhelmed, don’t hesitate to seek help from a professional accountant. They’ll be able to guide you through the process and make sure everything is done correctly.
9. Claim deductions for miles traveled for business purposes
You get a tax deduction for every mile you drive for business purposes depending on the circumstances. Generally, you can only deduct the cost of gas and oil for business miles driven.
If you use your car for both personal and business purposes, you must divide the miles driven between personal and business use. You can claim a deduction for the business use of your car only if you use it to meet the following tests:
1. The car is used to carry goods or passengers for hire;
2. The car is used in connection with a trade or business;
3. The car is used to get to and from a regular place of work; or
4. The car is used to go directly from one workplace location to another (e.g., client meetings).
10. Leverage tax breaks for retirement savings
There are a few different types of tax breaks that you can get for retirement savings. One is an employer match, which is where your employer will match a certain percentage of what you save in your retirement account. This is a great way to boost your savings because you’re essentially getting free money from your employer.
Another type of tax break is the Saver’s Credit, which is a credit that can be applied to your taxes for contributing to a retirement account. The amount of the credit depends on how much you contribute and your income level. And finally, contributions to 401(k)s and IRAs are tax-deductible, so you’re not taxed on that money when you save it. This is another great way to reduce your taxable income.
Conclusion
Although tax season can be stressful, there are ways to make it less so. By understanding the process and planning ahead, you can minimize the stress and maximize your refund. We hope these tips have been helpful and wish you the best of luck with your taxes this year!