5 Ways to Prepare for Tax Payments
While there are many different kinds of small businesses, they all have one thing in common: taxes.
SMALL BUSINESS TAXES
Establish a tax-savvy strategy for your new business
As you organize your new venture, it pays to prepare for the tax obligations your business will face.
Prepare your new business for tax obligations
When organizing a new business, pay attention to the tax implications of your various options. It may seem complicated at first, but with a little planning, you can set yourself up as a tax-smart business. Setting money aside from the start can help you prepare for future tax obligations. These three simple tips are a great way to start.
Keep your accounts separate
Always deposit business revenue into your business account, not your personal account, and use your business account to pay for all business expenses.
Work with a pro
If possible, look for an experienced accountant who knows your industry and can keep you up to date with tax laws, withholding rates, deductions and overall tax strategy.
Maintain good records
Keep track of revenue, expenses and any tax obligations in a clear manner. If record keeping isn’t your strength, consider hiring a bookkeeper or invest in one of the popular accounting software offerings.
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Top questions, answered by our experts.
What taxes do businesses pay?
Which taxes any given business will be responsible for paying depends on a variety of factors, including location, industry, form of business organization, number of employees, products and services sold and other variables. Some common business taxes include payroll taxes and withholding, self-employment tax, business income tax, corporation tax, sales tax and local or municipal tax.
Business owners should consult a tax professional to get a clear understanding of how their business is taxed. M&T Bank can recommend vetted accountants and tax professionals to help you with things like keeping your personal and business finances separated so that you can better take advantage of tax write-off opportunities. Having a solid plan for managing your tax burden will help your budget and will allow you to avoid penalties and interest.
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Do I file my personal taxes with my business taxes?
Unless your new business is a corporation or an LLC treated by the IRS as a corporation, you will file your personal and business taxes together. In the case of most new small businesses, such as sole proprietorships and partnerships, the business is not considered by the IRS to be a separate taxpayer. Instead, earnings and losses are reported on the personal tax returns of any stakeholders.
While you may be likely to file your personal and business taxes together, it’s very important not to commingle finances. By keeping a clean division between your personal and business expenses, you’ll free your accountant to pursue tax-saving opportunities rather than spend time determining if a receipt is for personal or business. You’ll also be better positioned to secure financing and to take advantage of tax write-offs.
Are you starting a business? Learn more about:
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This article is for informational purposes. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.