Business owners always do prep works for their annual taxes. According to the US Small Business Administration's Office of Advocacy, small businesses collectively face an average tax rate of 19.8 per cent. Financial experts say that entrepreneurs who start preparing early can reap tons of money in deductions for the next year, according to CNBC. Here are five key moves that you should take to make the big change happen:
1. Separate your business accounts from personal. You are not required to keep a separate bank account for your business if you are not an incorporated company but according to a CPA in Martinsville, New Jersey - Gail Rosen - it could be a useful idea. "The thing to do is to have a separate checking account for any business-related expenses. You could open up a credit card that you only use for business expenses, and that will solve about 90 per cent of your problems," John Wheeler, a CPA and senior financial consultant at Castle Wealth Advisors in Indianapolis, said.
2. As you go, follow expenses and taxes. "Trying to remember what you spent money on six or nine months ago is a waste of time when you could easily report that in the moment. A lot of us tell this old story of how this is going to take so long, or how we don't have time. It's a lie," said an organizational expert and author of "Unstuff Your Life", Andrew Mellen, said.
3. Claim your home office deduction in the right way. "Many people shy away from the home office deduction, or they just use the simple method. They're leaving money that's owed to them on the table. You can't have any personal activities going on in that home office," Rosen said.
4. Track your car activity, especially the miles that you have driven. Business owners should indeed keep track and careful records of their expenses throughout the year - gas, maintenance, repairs, tires, insurance, deprecation and other car-related finances.
5. Consider hiring a family member if you have an opening in your small business. For instance, hiring a child under the age of 21 can save you a great deal from paying Federal Unemployment Tax Act taxes on those wages.
