Small business owners complain a lot about taxes. But the issue is typically about all of the filing requirements – all the things you have to do that give you major heartburn.
There are so many tax related activities required for small business that the IRS publishes a small business tax calendar every year. It’s a really useful tool that is normally released during the fourth quarter of the year. It’s out of stock now, but you can still view a handy interactive copy of the tax calendar online. Plus if you want to make sure you don’t miss any deadlines, you can subscribe to the tax calendar in your outlook calendar.
Since taxes are top of mind right now, I checked in with two of my favorite tax professionals, Suzette Flemming, President of Flemming Business Services Inc. and Kay Bell, Tax Journalist and author of The Truth About Paying Fewer Taxes, to get their thoughts on the key obstacles for small business owners, where they take some missteps and what they should do about it.
Key Obstacles for Small Business
“The biggest obstacles for small business owners are knowledge and understanding because tax law is constantly changing,” says Flemming. “Most small business owners have no time or desire to keep up with these changes.
Nobody thinks about taxes when they start a company. Did you?
According to Bell, “The variety of taxes that a small business faces often is a shock to start-ups. In addition to the well-known federal income tax, businesses also face various types of state and local taxes, including income, franchise and/or sales taxes. If you have employees, you must deal with payroll taxes, including not just payments but information filings to the government and your employees. Many businesses also face specific excise taxes. And even the type of business entity you’ve chosen (sole proprietor, partnership, LLC) affects your taxes. Too often a small business overlooks or misfiles some of these tax responsibilities.”
Is your head spinning yet? That’s why so many small business owners take the wrong steps when it comes to taxes.
Common Tax Mistakes Small Business Owners Make
Flemming and Bell both agree that the most common mistakes are not keeping good records, not planning to pay taxes – you know that old saying the only sure thing in life is death and taxes – and not setting aside the funds to pay the taxes you owe.
You also need to be conscious about classifying workers properly. Classifying workers as contractors when they should be employees could get you in a heap of trouble. Make sure you follow the IRS guidelines carefully to save yourself from future headaches (and potential fines and penalties).
Do It Yourself or Hire a Professional?
It’s very tempting to be a “do it yourselfer” when it comes to filing taxes. After all, there are plenty of software packages that will help walk you through the steps. But Flemming and Bell both think you would serve your business better by focusing on what you do best and hiring a professional who specializes in small business to prepare your taxes.
A professional knows the ins and outs of allowable deductions and can help you not only file properly, but will make sure you get the deductions you deserve along with identifying things you can do to reduce your taxes for the following year.
And remember, small business taxes aren’t just a do it once, set it and forget it activity. Bell notes that a tax professional can help you manage and meet these ever-present deadlines.
So where do you weigh in on small business taxes? Are you confident enough to do it yourself or do you place this important activity in the hands of a trustworthy professional? Tell me about your approach by leaving a comment.
Editor’s Note: this article was previously published at OPENForum.com under the title: “Take Steps to Minimize the Pain of Small Business Taxes” It is reprinted here with permission.