Every Day Is Tax Season for Small Business Owners: Business Tax Advice for the Holiday Season
Everywhere you go, which in the age of COVID-19 means every website you visit, you find people lamenting about how different this holiday season is from any other you have experienced. No multigenerational Thanksgiving dinner. No Black Friday crowds. No Secret Santa gift exchanges at the office. If you are a small business owner, though, one thing remains constant, pandemic or no pandemic. Specifically, you are thinking about tax season, which consumes your time and energy for the first quarter of every year. No matter how seriously you take the advice to work on your taxes all year instead of just when the deadline for filing business taxes approaches, business tax season always brings a hefty dose of stress to small business owners. Here are some practical tips for reducing business tax-related stress; working with a small business attorney to plan for taxes and other aspects of your strategy for the coming year can also help you have a stress-free 2021.
Don’t Spend More Money Just to Deduct More Expenses
You have probably heard someone complain about a shopaholic family member who went to the store to buy one sweater but came home with five because they were buy four get one free. People who shop as a hobby are not the only ones who fall for the “spend more to save more” fallacy. Keeping your expenses as low as possible is always good practice in business. Don’t be tempted by tax credits or deductions that you could potentially claim if your company were to make purchases it doesn’t really need.
Be Generous in Order to Reduce Your Taxable Income
If you pay your employees a bonus at the end of the year, everyone wins. Your employees will be delighted to have the additional income, and the bonus is tax-deductible for your company. Besides, getting an end-of-year bonus will make your employees feel appreciated, which will boost company morale, which is a very valuable resource in these trying times.
Keep Your Business Transactions and Personal Transactions Separate
Being able to pay for meals eaten during work with your business credit card is part of the entrepreneurship dream, even for very small businesses. You would have to spend lots of money on things only tangentially related to your business before the IRS got suspicious. You have probably seen the news stories about the business owners who spent PPP loans on Ferraris, boats, and jewelry, for example. They went too far, but you are probably fine if you send clients bouquets of flowers or fruit baskets as thank you gifts, for example. When you are a small business owner, though, the danger lies in not being clear about what is a business expense and what is a personal one. No matter how small your business, it should have its own bank account and credit or debit card.
Enlist the Help of Humans and Machines
Business accounting software that is well suited to your industry can make life a lot easier. Even the best software is no substitute for a human tax accountant and a human lawyer, though.
Let Us Help You Today
Don’t let 2020 end without discussing the old year and the new year with a Washington DC small business lawyer. Contact Tobin, O’Connor & Ewing for help with your case.