No two businesses are exactly alike. For every different kind of small business, there are tax situations that are equally unique.
That’s why having a good small business tax advisor is essential to the success of your company. This post will help clear up exactly what a small business tax advisor does and how you can benefit from teaming up with one.
Small Business Tax
Let’s face it. Taxes are not fun, no one enjoys doing them, and we all feel like we have to pay too much.
We totally understand. For most small businesses, the goal is simple: hold on to as much of your hard-earned money as possible.
Accurately paying small business taxes on time is just a necessary part of running your own company. They don’t have to be overwhelming, though!
There are really only 5 basic types of IRS tax payments, and some of those are based on how your business is set up.
- Income Tax – This is the one everybody pays and it is based on your company’s net revenue after expense deductions are applied. This payment is typically paid when the tax return is filed (if you owe upon filing, which you may not due to the payments shown next).
- Estimated Income Tax – These are quarterly payments small business owners make to the IRS throughout the year based on what they expect their income to be. If you have overpaid at the end of the year, you get money back. If your quarterly estimates end up being too low, you’ll be expected to write a check to make up the difference when you file at the end of the year.
- Self-Employment Tax – If you own the business and it is not a corporation, you are most likely not an employee of it. Therefore, you are responsible for contributing to Social Security and Medicare through the self-employment tax.
- Employment Taxes – If you have people working for you in your business, you are required to pay Social Security and Medicare taxes, federal income tax, and federal unemployment tax for each of them. This is done when you file your payroll tax payments.
- Federal Excise Tax – This one doesn’t apply to most small businesses, but there are some who need to be aware of it. If you sell certain products or use particular equipment in your business, you may be responsible for paying federal excise taxes. The IRS provides full details on its webpage on Excise Tax.
This is just a general summary, of course. You can go more in-depth on these by reading another post we did just on this topic: “5 Types of Business Taxes (And Why Your Business Structure Matters).”
Bookkeeping and Taxes For Small Business
To help keep track of all of these taxes, it’s important to start by making sure your records are always in order. Too many small business owners create unnecessary stress in their lives by failing to store receipts properly or maintain accurate financial records.
In order to avoid headaches and nightmares at tax time, you’ll benefit by having a bookkeeper regularly manage your records and create updated financial statements throughout the year.
You don’t have to hire a full-time employee to do this, either. Bookkeeping can be done on a monthly or quarterly basis by a CPA firm or a contracted individual in your area, or you can even work with someone remotely through one of several reputable online bookkeeping services.
Here are some of the ways a bookkeeper can help you stay on top of your finances:
- Recording transactions
- Entering debits and credits
- Handling Accounts Receivables and Accounts Payable
- Preparing financial reports such as balance sheets, income statements, and cash flows
- Managing the company’s general ledger
- Taking care of bank transactions and bank statements
- Overseeing payroll processing
- Ensuring proper storage of receipts and records
All of these tasks are very closely related to being able to prepare your taxes in order to file them accurately and on time each year. That’s why it’s a double win if you can find a good tax service that can also handle your regular bookkeeping.
Most certified public accountants (CPAs) are able to offer both bookkeeping and tax services, although some may only prefer to specialize in one or the other. You already know you will be paying someone to do these things for you. So why not make sure the firm you are getting the biggest dollar-for-dollar return on that investment?
Combining your bookkeeping and tax preparation under one firm simplifies the process and saves you money. We cover these and more in another article we did recently on “How Good Bookkeeping and Tax Services Can Make a Big Difference.”
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What Can A Tax Advisor For Small Business Do?
To take your business to the next level, consider partnering with someone who can do even more than prepare your taxes and file tax returns. Not all tax situations are equal and they can quickly get pretty complicated, so you deserve to know that the person handling your taxes can do more than simply process forms.
A tax advisor is what you need.
Investopedia defines the role like this: “A tax advisor is a financial professional who provides advice on strategies to minimize taxes owed while staying within the scope of the law and regulation.”
They are usually CPAs, tax lawyers, enrolled agents, or financial advisors. Being able to do the job well requires advanced training and continuing education to stay on top of ever-changing tax laws both at the federal and state levels.
Here are a few of the key things a tax advisor can manage for your small business:
- Tax Laws / Tax Compliance – The Tax Foundation looked into exactly how many words are in the U.S. Tax Code. It is printed in 2 volumes with a total of just over 2,600 pages. With an estimated 450 words per page, it easily has over 1,000,000 words. (By comparison, the King James Bible has 788,820, and War and Peace has 560,000.)
That doesn’t include all of the other IRS regulations and related court case decisions that get published continuously.
- Tax Preparation – With so many forms to fill out and the time it takes to double/triple check them, it’s worth it to find out how a good CPA makes your small business tax preparation easier.
- Tax Optimization – A good tax advisor will also be aware of optimized tax strategies that can save your small business money.
- Tax Savings – The best way to save money on your taxes, though, is to make sure you are taking advantage of every deduction you are entitled to. (For more on those, take a look at a post we did on “16 Small Business Tax Deductions To Really Save You Money”.)
That’s not all they can do! A small business tax advisor is equipped to help you with:
- Growth Strategy
- Financial Planning
- Business Expansion
- Financial Analysis
- Financial Consulting
A Small Business Tax Advisor To Guide You
If you’re looking for a dependable tax pro to help you with the things we’ve covered in this post, our team of tax advisors at CRS CPA is ready to serve. With over 40 years of experience helping small business owners just like you with all kinds of tax situations, we know what it takes to make taxes easy and save you money. Schedule a call today to get started. And be sure to download the free tax calendar we created for you so you’ll have a head start on next year’s taxes.