Meet our contributor this month Nicole Davis, owner of Reliance Financial Services and our newest member of our board. She is a local finance and business expert helping families and business owners succeed beyond the numbers. She takes the time necessary to gain a clear understanding of the current situation and future vision. It’s this level of attention that provides maximum success in partnering with clients to transform the vision into reality. Feel free to reach out to her directly at (314) 272-0727 or [email protected].
None of us want to think about it, but Tax Season is just around the corner. This month Nicole has shared some excellent business tax tips to help you navigate this difficult topic.
5 Tips to Ready Your 2018 Business Taxes
- Get Organized: Being organized and having your finances in order can save you time and money. You’ll be able to file your taxes on time and take all the deductions you’re entitled to take.
- Contribute to Your Retirement: Be sure to contribute to a retirement plan. No matter the size, every dollar deposited in your retirement plan will go to – (1) reduce your tax liability and (2) allow you to save for your retirement in a tax advantaged way.
- Vehicle & Transportation Expenses: Make sure to track all vehicle and transportation expenses. This will help you, or your tax preparer, determine the most appropriate way to take these deductions. Having all necessary information will make this determination much easier.
- Gather Expenses for Your Home Office: You can take a deduction for expenses related to a home office. You will want to know the expenses related to electric, gas, insurance, home mortgage interest, trash, water, sewer and home telephone. You can take a portion of these expenses as a business expense if you have a dedicated space, at your residence, that is used as a home office.
- Pay Your Estimated Taxes: Filing an extension gives you permission from the IRS to file your taxes by a later deadline, without penalty. However, this does not mean you are exempt from paying your estimated taxes. If you fail to pay your estimated taxes, or if you underpay your taxes, then you will have interest and penalties applied to the underpayment when you file your taxes. The interest and penalties can really add up so be sure to make your estimated tax payments.
5 Tips to Reduce Your 2019 Business Taxes
- Understand Your Profit and Loss Statement: Make sure you understand your business profit and loss statement. By understanding your profitability, on a frequent basis, you will be able to make contributions to retirement plans or invest in training, equipment, or technology before the end of the tax year. For investments, this could mean better dollar cost averaging as you could be making contributions more frequently than just once per year.
- Develop Systems: One of the easiest ways to keep ahead and in front of your business finances is to create a system for tracking your business income and expenses. Use a system that works best for you – It doesn’t matter if the system is in a notebook, spreadsheet or software.
- Monitor your Profit and Loss Statement Monthly: By tracking your income and expenses (see Tip #2 above) on a monthly basis you will be able to monitor your business’ monthly profit and loss. This is beneficial in a couple of ways: (1) you have information that tells you if you are on track with your revenue and expense goals; (2) you can adjust what you are doing to either reinforce your performance or make changes before the end of the year; & (3) allow you to tax plan and minimize your taxes before you get to the end of the year.
- Understand Your Business’ Tax Treatment: Each business structure is taxed differently. Understand how your business is currently taxed. Learn about the different tax treatment options and the pros and cons of each. Then determine whether a different tax treatment options is right for you. This is an area where you may want to invest in the knowledge of a professional – their input could save you a great deal of money going forward.
- Think about Your Retirement Savings: If you have excess money left at the end of each month, or year, and then you may want to look into either: (1) starting a retirement plan (if you don’t have one already) or (2) review your current retirement plan and compare it to other retirement plans that provide higher levels of savings. This is also an area that you will want to invest in a professional. Each retirement plan has different rules and limitations, as well as features and benefits. Avoid costly mistakes understanding your options before making a decision.