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Small Business Tax Tips

Small business owners encounter complex tax issues for business and personal taxes. When tax time rolls around most taxpayers are not prepared. These helpful small business tax tips will ease the pain of small business taxes.

(1) Pay what you owe, when you owe it

For every conscientious tax-paying entrepreneur there is another one who thinks he can put off paying his taxes indefinitely. This is especially true in small businesses that are experiencing a period of limited cash flow. However, there is no escaping the IRS. They will catch up with you, and when they do taxpayers will be required to pay the full amount you owe plus interest plus a penalty fee. You are better off trying to pay your taxes when they are due, even if it means negotiating a different repayment schedule with your other creditors.

(2) Be proactive about year-end tax planning

Even though you cannot avoid paying taxes, there are a number of things you can legally do to reduce your tax liability. This is especially true as you approach your year-end tax deadline. Some of the most common things you can do at year-end include:

- Deferring income
- Paying bills early
- Buying supplies and equipment
- Investing in a retirement plan

(3) Keep up-to-date financial records

There’s nothing worse than sorting through a shoebox full of receipts to patch together your company’s tax information. Keeping your company’s financial records organized and current makes your life a lot easier when tax season rolls around. More importantly, it lessens the chance that you will miss legitimate expenses due to lost receipts. Remember, every dollar of documented expenses translates into one less dollar of taxable income.

(4) Hire a professional to prepare your tax return

Paying for professional tax preparation on top of your tax bill feels like pouring lemon juice on a paper cut. But the pennies you save in doing your own income tax preparation can cost you big money.

Professional tax preparers specialize in helping small businesses minimize their tax liability. No matter how good your intentions, as a business owner you simply do not have the time to stay current on the ever-changing list of tax regulations that tax preparers deal with on a daily basis. Although there are many tasks you can do yourself, tax preparation is one area where it pays to leave it to the pros.

Individual Tax Tips

Filing an Extension

If you can't meet the April 15 deadline to file your tax return, you can get an automatic six-month extension of time to file from the IRS. The extension will give you extra time to get the paperwork into the IRS, but it does not extend the time you have to pay any tax due.

You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.

To get the automatic extension, file Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 15 deadline, or make an extension-related electronic payment.

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