Starting and running a business can be a very rewarding experience. However, as any small business owner will agree, this path is not an easy one. It’s a known fact that the majority of people end up working much harder and longer hours as a business owner than they would as an employee in a cushy job.
One of the reasons that small business owners have to work so hard is there are a lot of hats they have to wear. That being said, it’s important that owners don’t try to manage everything on their own forever. As a business grows, new challenges and responsibilities are going to come up.
When that happens, an owner needs to be willing to delegate some of the things they were doing so they have time to focus on continuing to move the business forward. Accounting is the perfect example of a task an owner should delegate sooner than later.
By putting accounting in the hands of experienced professionals, an owner can take a very time-consuming and complex task off their plate. While moving to a professional accountant can be a major win for a small business, we understand it can take a little time before an owner is ready for this. That’s why we want to cover five tax tips that small business owners should know about from the start of launching their business:
1. Track All Business Expenses
The most common mistake business owners make is not being diligent about tracking every single expense. Sticking with proper tracking is crucial for both accurate accounting and tax savings.
2. Keep Track of All Vendors and Contractors
Many small businesses rely heavily on vendors and contractors. For those that you pay more than $600 to over the course of the year, you’ll need to send them a 1099-Misc form.
3. Keep Track of Costs of Launching a Business
If you’re in the process of starting your business, you’ll be pleased to know that you can deduct up to $5,000 during your first year of business.
4. Actual Auto Expenses Versus Mileage
The IRS provides two options for calculating deductible car expenses. The best rule of thumb is if you qualify for both methods, you should calculate your deduction via both and then choose the method that will provide you with the largest deduction.
5. Keep Business and Personal Expenses Separate
At first, having business and personal expenses in the same account may not seem like a big deal. But it won’t take long at all before it gets very challenging to keep up with properly recording both. To avoid this extra layer of confusion and stress, a business owner should keep their business and personal expenses separate by using different accounts.
If you have any other tax questions about your small business or you’re interested in making the transition to a professional accounting service, you can easily get in touch with Tristate Accounting by calling 513-791-6288.