The overwhelming importance of sorting out your accounting details come tumbling down when you have to file your tax returns or you have to apply for funds or concessions (and you have to present your financial data to make a point). As a small business maintaining tax details and maintaining individual entries can be a formidable task and consequently many small business owners leave this activity to the last and by the time they realize that lack of proper tax accounting can jeopardize their business, it is too late.

The key to maintaining immaculate tax records (as far as bookkeeping goes) is less about knowing the nitty-gritty of filing tax returns (that you can easily leave to your tax consultant or accountant) and more about persistent record keeping and following a disciplined regime of tracking incomes and expenses under various categories. Listed below are some highly useful small business tax tips that will save you from the last minute heart burns and sleepless nights.

Understand the nature of your business – your expenses and incomes

There are different businesses that have different tax requirements and many businesses get tax rebates if you know your way around the intricate taxation laws. Therefore it is very important to understand the exact nature of your business vis-a-vis your tax laws at the outset and thereafter prepare your accounting books accordingly. Not all incomes are taxable and there are many expenses that although, don’t seem to be direct business expenses, can accrew considerable tax deductions. An experienced and capable accountant or tax consultant can set you in the right direction and save you a considerable amount of money when you file your returns.

Keep your accounting books up-to-date

As already mentioned above, this will save you lots of last-minute sleepless nights. Just imagine, trying to track an expense or a revenue instance in February that happened in August. Your tax details are not an afterthought, although right now they don’t seem to be directly affecting your business (unless you are a big business and most of your accounting is automated and well established), they are an integral part of your business and they can cost you your business if you ignore them. That’s why, it makes sense to hire a full-time bookkeeper well versed with the basic accounting principles, if you can afford one.

Increase your expenses as much as possible, legitimately

As a small business you might be incurring many business expenses you are not even aware of. Suppose you run your small business from your residence, and it means at least some portion of the upkeep and maintenance of your residence goes towards your business expense. If you live in a rented apartment some portion of your monthly rent must go towards your business expense. Similarly business outings and meetings that cost you lunches and dinners must be added to your business expenses. Even during holidays, when you have to meet some business obligations on the way, you can add a portion of your travel expenses to your business expenses. This way, create a list of all the expenses that you can show as business expenses and in the end it will help you save on taxes.

Record depreciation of every business equipment

All the computers, laptops, Tablet PCs, printers, modems, vehicles, telephones and air-conditioners (you can make the list as comprehensive as possible) deppreciate continuously and that is an expense. You should spend some time with a qualified accountant and calculate how much depreciation takes place annually at your workplace and add it accordingly to your business expenses.

Defer revenue payments if possible

If you are at the end of the tax cycle if possible, you should defer rvenue payments to the next month so that you have less taxable income for this year. Of course this depends on how your business regulations are defined and whether the revenue that you are getting is taxable or not.

Employ your family and distribute your income

There are many tasks that can be performed by your kids or your younger siblings and then you can pay them for this work. This way, the money remains in the family, goes to someone whose taxable income will be a lot less than yours and you can show the payment as a business expense, reducing your tax returns consequently.

Contribute to your retirement plan

There are many retirement plans and insurance schemes that come with tax benefits. At year-end, you can purchase more retirement schemes to save more and save on your taxes too.

Closely work with an experienced and competent accountant

Since you don’t need a full-time accountant as a small business you can partner with VN Accounting Solutions for your regular accounting needs. Trying to maintain your own financial data and taking tax-based decisions is replete with pitfalls because you are not equipped with all the information you may need. An accountant can advise you on various strategic steps to take to reduce your taxes and optimize your business transactions.

By: Steven Roberts

Author of this article is a professional financial adviser and planner, has years of experience in accounting and bookkeeping, provides financial and accounting services to individuals, small and medium-sized businesses.

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Article Tags: Small Business , Tax Advice , Taxes

Submitted On Dec 28, 2011. Viewed 11 times.