Navigating small business taxes
Updated: Mar 14
Happy New Year! Tax season is already among us, friends. If you're a military family, then you can expect the service member's W2 paperwork around the end of January, so I am laying everything out to prepare for its arrival. I'm not a tax advisor, but it is time for all of us to get a handle on your paperwork, and start thinking about how you will be filing this year.
Important Tax documents
Grab yourself a manilla folder and stick all of your important documents in there. Don’t expect to put them in 15 places throughout the year and be able to find them come tax season.
Make sure you are keeping up with any and all of your medical bills and receipts. There is always the possibility you can itemize your deductions and use them.
Receipts showing interest and money paid towards student loans is very important to have for tax season. Your hard work towards lowering your debt to income ratio may pay off after all.
Other documents to keep up with for tax time include, but are not limited to the following: the previous year’s taxes, the bank account interest you received, your IRA deposits, your proof of income (W2), your proof of health insurance (1095), your property tax receipts (homeowners).
It is crucial that you don’t wait until last minute to file your taxes. Typically, tax season is January 1st through April 15th, so you have plenty of time to get your ducks in a row. The earlier you file, the faster you receive your return… or your bill.
I know, no one wants to think about the possibility of owing the government after they spend all year taking your money. It is horrible. The system is heavily flawed. Don’t be fooled! Tax refunds are not as wonderful as you think they are. If you are getting a refund, then you let the government have an interest free loan all year long!! If you find yourself receiving a large refund year after year, then consider evaluating the number of dependents you are claiming.
You have multiple options for filing your taxes. You can file online with one of the many tax software companies, on base if you are a veteran or their family member, or at a tax office. I have always liked filing my taxes online because I can tryout multiple companies and see the suggested refund/ bill amount before I confirm and file. As a military family, different softwares can have a huge impact on your tax return. I wish I knew why that was, or how it made ANY sense at all, but I’m left pondering it year after year.
Small business tax deductions
Book keeping is important for you to be able to file your tax write offs. This is not a place where you want to be throwing out numbers without having the proof. If you've kept up with your receipts, there are a few things that will give you some money back come tax time. The most common deductions are money spent on advertising, equipment, business insurance, travel expenses, and internet expenses. Advertising can include money spent on your website or logo, promotional material like business cards, or the money that you spend on social media.
Don’t count your chickens before they hatch! Your tax estimate might have suggested you would be receiving a return, but in reality you will get a letter in the mail stating that your taxes were evaluated, and now you owe money. Wait until the money is in your account before you devote it to anything.
In fact, keep some of that money in your account!! Roll your tax returns into an IRA or a CD account. Those two types of accounts are a great way to get ahead on your retirement savings, and see substantial interest returns. Of course, you should always check with multiple banks about their accounts, interest rates, and the tax implications.