If you’re an entrepreneur who would rather do almost anything but think about taxes, you’re not alone. However, your successful business can grow even faster if you plan with taxes in mind. Below you’ll find some tips we’ve collected from successful accountants.
3 Tax Tips from Successful Accountants
- Startup Costs Aren’t the Same as Post-Sale Business Expenses
Gail Rosen, a CPA with decades of experience, offered a great tip for startup founders. The IRS treats startup expenses differently than businesses expenses. Startup costs include expenses before making the first sale, but business expenses are those costs incurred after making a sale. You may need to amortize startup costs for a few years and you can’t always take them in the year you paid for them.
Common misconceptions about startup costs generate higher tax bills than many business founders anticipate. Knowing the difference can help you make business plans that increase deductions and reduce taxes.
- Small Businesses Can Benefit from Accounting Tech
Venar Ayar has served small business clients as a tax lawyer for 25 years. He mentioned that small businesses don’t always keep the best records, and that can cost them money in the long run. He suggests using quality cloud-based accounting software. Not only is this kind of software convenient, it can also help enforce proper accounting and bookkeeping practices. This kind of software usually integrates easily with other business systems, making proper record keeping almost effortless.
- Look at the Tax System as Incentives
Tom Wheelwright is a tax expert, published author and CEO. He says that tax laws were never put in place to penalize small business owners; rather they have been developed to create incentives for companies to act in specific ways. This attitude toward taxes can help startups and small businesses create tax strategies that work with the system and not against it.
Since expenses may be deductible, it’s important to consider different actions with their real cost in mind. Here are a couple of examples:
- You might wonder if you should rent office space or utilize a home office. Tom pointed out that a home office might also allow you to deduct move travel and car expenses, since you won’t have the nondeductible expense of normal commuting from your house to your office. You might have other reasons to choose to rent an office outside of your home, but if you’re deciding between the two, you should consider the advantages of a home office and whether it will help you save money in the long run.
- You could be wondering if you should open a revolving line of credit to help manage your cash flow. Although you will have to pay fees or interest on money that you borrow, you might be able to deduct these expenses from your taxes, so the actual cost to your business might be less than the cost of the loan.
Why Consult a Tax Professional for Your Business?
Typically, seasoned tax professionals will save your company more than they charge you. If you haven’t already, reach out to a tax professional today to learn more about how they can help your business maximize tax incentives.