With tax season quickly approaching, small business owners around the nation are already beginning to experience familiar feelings of dread. Taxes are expensive, time-consuming, and stressful. What if there was a better way? According to Josh Alballero, tax expert and co-founder of IOOGO, with the right planning and strategic use of technology, founders around the country can save money and experience an easier tax season.
Tip #1: Reconsider how you structure your business.
Many business owners will classify their business as self-employed or single-owner. This may seem like the easier option, but you will end up spending much more in taxes in the end. With this business structure, you and the business are the same entity meaning your personal and business assets are not separate. Not only does this leave you unprotected, but you will pay more in taxes as you are required to pay Social Security and Medicare taxes as an employer and an employee. Structuring your business as an LLC/LLP does not automatically make your tax situation different, as LLC/LLP applies at the state level only. Most LLCs that want to take advantage of tax saving strategies will want to consider incorporating. Seek the advice of a tax professional to determine the best option for your business.
Tip #2: Understand the different opportunities that the different states provide.
There are a number of tax credits that can be claimed at the state depending on where you file your business tax return. The R&D (research and development) tax credit is one such type of credit. The R&D tax credit can be a major benefit to start-ups and small businesses. Having specific tax credits to put towards your research and development can be a monumental help in growing your business. This type of credit, officially known as, Credit for Increasing Research Activity, is available to most small businesses, in many cases, you don’t need to have a research and development department to qualify. Depending on the state you live in, you could receive R&D credit to put towards your state tax and your federal tax. The credit claimed at the state level would only apply to the state tax, and likewise, the credit claimed at the federal level would apply to federal income tax or payroll tax.
Tip #3: Don’t put it off. Take care of your books and accounting early on.
When founders leave their accounting and tax matters until the last minute, they are almost always going to be losing money. Running your business is important, but prioritizing the state of your finances and taxes is equally important. Keeping proper records is an excellent way to avoid unnecessary stress and pain down the road. Taxes and accounting for entrepreneurs and small businesses need not be overwhelming. Simple solutions like IOOGO Accounting can help business owners track expenses, send invoices, manage payroll, and create financial reports. IOOGO Accounting lets a professional do the work for the business owner. The professional takes care of running reports each month so that when tax season comes around, you’ll be better prepared and conscious of your deductible expenses, thus saving you time and money.
Tip 4: Create a custom tax strategy.
Consider consulting with a tax professional to learn how you can reduce your taxes from inception by implementing tax strategies. The tax experts at IOOGO can sit down with you to create a strategy that will save you thousands over the years. “I often see new entrepreneurs struggle to do everything on their own,” says Alballero, “And I get it, I’ve been there myself. But going it alone might not be the best way to go if it means you’re losing out on funding in the process.”
To learn more about hiring a tax professional or taking advantage of IOOGO’s revolutionary tax technology, visit www.ioogo.com.
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