Oliver Kardos, Senior Vice President, Business Banking, KeyBank
By Oliver Kardos, Senior Vice President, Business Banking, KeyBank
April 15, 2016, is fast approaching. For small business owners, this means it’s time to get your year-end finances in order, because even if you’ve failed to get out in front of your taxes over the past year, there are a number of things you can still do to reduce your tax burden.
For starters, simply filing your taxes accurately and on time can save you money by helping you avoid late payment penalties and other costly mistakes. This starts with being organized, so that your tax advisor or accountant can easily find the information they need.
If your current records look more like a stack of papers than carefully labeled and ordered file folders, then it’s time to get to work. Separating your expenses into the following seven categories can help.
File on time and don’t pay late. If you really find yourself struggling to get your return in by April 15, file for an extension. It is better to file an accurate return than one on time that is full of mistakes. However, the extension is an extension to file your return — not an extension to pay the tax.
Again, the best approach to minimizing your tax burden is to be organized and maintain an open channel of communication with your tax advisor or accountant, as well as your small business banker. It is far easier to plan ahead than play catch up. So think of April 15 not as a finish line. Instead, consider it the
Oliver Kardos is senior vice president and Business Banking market leader for KeyBank in the Capital Region He may be reached by phone at 518-257-8562 or email at firstname.lastname@example.org. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. © KeyCorp 2016. KeyBank Member FDIC.
Looking ahead: Tax tips for launching a small business
Are you getting ready to launch a small business? If so, you’re likely feeling a combination of excitement and stress. Beyond developing your product and service, shaping your brand and figuring out how to bring it to market, you still have to deal with the “money” side of the business. For some, this is a major obstacle, but it doesn’t have to be — provided you have a plan.
First and foremost, make sure you choose the proper business structure for your company. Many small businesses make the mistake of filing as a C Corporation, which leads to double taxation — the profit of the corporation is being taxed when earned and then again when the profit is distributed as dividends. Instead, look into a limited liability company (LLC) or an S corporation. Schedule a meeting with your attorney, tax advisor or business banker to discuss the different types of businesses and what would work best for yours.
Keep personal expenses separate from business expenses. This might sound obvious, but sole proprietors and small business owners often mix the two, which makes separating business expenses from personal expenses difficult and time consuming come tax time. The best way to avoid this is to set up a separate business checking account for all business transactions, including income and expenses.
Consider investing in accounting software. Programs and phone applications such as FreshBooks, Quickbooks, Xero, and Avalara can help you track your income and expenses throughout the year, which will make year-end tax filing easier.
Prioritize budgeting and tax planning. Both tasks should be continuous throughout the year. Running monthly reports and regularly reviewing them with your financial advisor and business banker can help you identify opportunities to both limit your tax liability and grow your business.
Finally, look ahead. Consider deductions for a home office or employing your children; create a health reimbursement arrangement; and research retirement plans designed specifically for the self-employed, including an IRA, SIMPLE, SEP, Single 401(k), and Keogh plan.
These tips will help you position your business for success. And the more you focus on developing and executing your plan, the closer you’ll get to your ultimate goal — developing an exit strategy for a business you have grown and loved on your terms.