Tax season is officially upon us with this year’s Tax Day falling on April 18, 2023. If you’re an SMB, you’re probably working toward a seamless tax season where all employees receive the correct W2 information and the payroll/benefits process goes without a hitch. You’ll want to avoid potential problems like poor record keeping and the underpayment of taxes which cost you more later. And no matter what, always file your taxes on time. Try following these three tips for tax season:
1. Correctly deposit employee taxes
During tax season, business owners must correctly deposit the employee taxes they withheld throughout the year plus their share of business taxes. These funds are expected to be paid to the IRS correctly and on time to avoid being charged a penalty. If you need further help on how to accomplish this, be sure to visit the IRS website.
To avoid unnecessary issues, be sure that all employees are classified correctly. You’ll need to keep a specific record of whether the employee is an independent contractor vs. a W2 employee. If you misclassify an employee as an independent contractor and do not pay that employee’s fair share of taxes, you’ll be liable for employment taxes for that worker.
2. Separate business from personal expenses
Although it’s tempting to use a business credit card for personal expenses sometimes, resist the urge, especially if your business is a sole proprietorship. If you start mixing expenses, it’s difficult to tell a business from personal expense, making claiming deductions more difficult. If you’re ever subject to an IRS audit, this is the start of a problem.
3. Study financial jargon
Whether you’re filing your taxes on your own or working with an accountant, you’ll want to be aware of common financial terms. Some common ones you’ll see on your balance sheet include revenue, cost of goods sold, net sales, gross profit, and more. Business owners often overlook the difference between their net and gross profit, so they know the difference. Net profit is the amount of money you have left over after paying business expenses, while gross profit is the amount you have left over after deducting the cost of goods sold from total revenue.
Worried about managing taxes in the spring while keeping your business running? Try reaching out to the team at Payroll Office of America by clicking here or calling 904-596-2847. Payroll Office of America offers a simple software solution that automatically manages payroll, time and labor, and HR processes. Instead of stressing during tax season, you’ll receive tax table updates built into the payroll process to support regional tax requirements.
