According to survey results from Staples, more than half of small business owners view tax preparation as complicated and, surprisingly, nearly 50% handle their business taxes on their own. Part of the challenge as I see it stems from two things: (1) confusion about tax rules and (2) disorganization.
Confusion about tax rules
Albert Einstein said “The hardest thing in the world to understand is the income tax.” If a genius like him was perplexed, what’s the average small business owner to do? And adding to the confusion is a slew of new rules introduced by the Tax Cuts and Jobs Act of 2017, most of which become effective in 2018.
What to do:
- Learn about taxes. As a business owner it’s vital to know about taxes so you can make tax-savvy business decisions. For example, you need to understand the different tax treatment for hiring employees versus engaging independent contractors, and buying versus leasing equipment. My book, J.K. Lasser’s Small Business Taxes , is written in easy-to-understand language for small business owners. The IRS also has webinars and videos, a number of which are specifically for small businesses.
- Work with a professional. Consider engaging a CPA or other tax professional to prepare your returns and handle other tax matters. Doing so doesn’t relieve you of tax responsibilities or the need to know about taxes, but it can help you avoid mistakes and save you valuable time.
The Staples survey found that 53% of thriving or surviving small business owners described their workplace as organized, versus only 23% of struggling or failing businesses. Obviously disorganization impacts a company’s productivity, but it also affects tax responsibilities. Without getting organized for taxes, the responsibilities can seem overwhelming. And even worse, you can lose out on legitimate write-offs for lack of necessary paperwork that you can’t find at tax time.
What to do:
- Schedule time. While it takes time to get organized, the investment winds up saving you time in the long run. Benjamin Franklin said that, “For every minute spent organizing, an hour is earned.” Depending on the current level of disorganization, you may need to schedule a day or so to determine what’s needed to become organized and then get to it. Once you’re organized, set aside a portion of each day—whether it’s five minutes or half an hour—to go through your papers and computer files so you stay organized.
- Get supplies. For tax purposes, you need to keep receipts, invoices, canceled checks, and other documentary evidence supporting your claimed deductions and tax credits. To keep your paperwork organized, consider using file folders, expandable files, and storage boxes. If you prefer electronic files, consider using a scanner to capture your paper receipts.
While taxes are likely one of the less fun things you do in your business, they directly impact the amount of money you keep from what you take in. Invest your energies in mastering your tax responsibilities and you’ll be rewarded with the ability to make better business decisions, be more productive, and keep more money after tax.
Bonus for you
To kick-start the year on the right track and help you get organized and ready for tax season, Staples is sponsoring a sweepstakes held on my Twitter account: one small business owner will receive a complimentary, 60-minute business organization video consultation with me!* During the consultation session, I’ll tell you about tax recordkeeping tips and strategies suitable to your organization that you can use to simplify the process, save you time, and ensure you meet IRS requirements.
To enter for a chance to win, just go to my Twitter feed and reply to my pinned tweet with one sentence on what your #1 business goal is this year. A winner from the entrants will be picked at random and will be announced the week of February 12th.
*Contest subject to all sweepstakes laws, rules, and regulations. Prize winner must be 18 or older and based in the United States.
This post was created in partnership with Staples. All opinions expressed in the post are my own and not those of Staples.