Tracking expenses and income for a small business can be a cumbersome task. If not done correctly, the taxes on a small business can be excruciating. For instance, if working solely on a 1099 form the taxes are 15.3%. They are higher for a LLC, Schedule C, and S Form. Knowing what your deductions are and keeping track of expenses is the best way to go when working on your own. Having a budget planner can be a life saver during tax season, as this will help keep things more organized and clean, which will help avoid red flags that can lead to audits by the IRS.
Here are some of the missed deductions from many small businesses:
- Utilities
- Mileage
- Clothing
- Space rental
- Supplies
- Cars
- Charitable Contributions
- Private healthcare costs
Most of these are for those that have one or two employees, or work at home. However, regardless of the size of your small business, it is wise to plan ahead for taxes, and your liabilities, otherwise there is a large shock that is both terrifying and disappointing. The same goes for state and local taxes as well. Budget planning can help you with quarterly tax payment amounts so that you can have that as part of your expenses. This will also help you keep track of how much you have paid throughout the year, and like many W-2 employees, find that you have a return coming your way.
The Importance Of Staying On Budget
It is vital for a small business to stay within its budget. If a company goes over budget, yet still has profits to show on paper, then the government will still tax on that profit, regardless of over budgeting or not. In order to keep the doors open, every penny must be assigned and accounted for. It could be the difference between staying open, and having to close shop for good.