Ask the Expert: How should I complete taxes as a startup?
Starting a business is exciting, but it often comes with many risks and uncertainties. For most entrepreneurs, having a trusted resource when problems arise can often be the very element needed to achieve game changing success.
“Ask the Expert”, our new biweekly feature designed especially for startups, invites North Texas industry thought leaders to share helpful advice and strategies with current and aspiring business owners.
Meet Smart Business Concepts Founder Clint Bowers
Clint Bowers is the owner of Smart Business Concepts, a tech savvy, forward thinking company located in the Dallas Design District.
With over a decade of experience in accounting, Bowers shares his guidance for startups who are trying to tread through the complicated waters of filing their own taxes. Of course, each person’s situation is different, but his tips below will hopefully get you thinking about your own situation.
Better Books, Smarter Business
As we enter the tax filing season, our team always get questions from startups and small business owners about what they could or should start doing to make things easier, in an effort to pay less taxes and/or staying out of trouble with the IRS. This year is certainly no different with the tax law changes enacted.
#Tip 1: Do Something!
Yes, please just do something! If you can file your business and/or personal return on time, that is obviously optimal, but, at the very least, file an extension. However, one thing to remember, filing an extension extends your time to file, but not your time to pay. Failure to make estimated tax payments can result in late payment penalties and interest. Be sure to pay at least 110 percent of last year’s taxes with your extension.
Tip #2: Keep your financials clean and up-to-date
Filing taxes and making sure you are achieving the most efficient tax position requires a clean set of books. If you don’t know how much money the company is making or losing during the actual year (meaning not the following April), then there is really no clear guidance anyone can give you to help reduce your potential tax liability.
This can include potential tax saving initiatives such as capital investment, profit sharing contributions, entity structure changes and many other options to help achieve the optimal solution for the business.
Tip #3: Pay your quarterly tax estimates
As the gig economy continues to grow and 1099 payments become more prevalent, it is important to remember that you could still have an obligation to estimate and pay quarterly payments to the IRS. We know this isn’t fun!
Remember, when you were on a W-2, you were sending the IRS federal income tax payments each time you received a paycheck. That changes when you start freelancing or enter into a partnership. This will reduce the end of year tax payment and help keep the IRS happy.
These are just a few tips our team recommends to our clients as a way to help make the best informed decisions and help stay compliant with the IRS.
With the new tax law enacted, which is effective for the 2018 tax year, there are additional complexities for businesses in some cases. We would encourage you to talk with your tax professional and make sure you have a solid path for 2018 and moving forward based upon your set of circumstances and future outlook.
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