The New Year is upon us, and with that comes prepping for our tax appointments or filings. I can hear the “ugh,” “yuck,” “blah” comments right now. This is not a fun topic like window displays or hosting a fun store event, BUT it is necessary. I hear so many retail business owners say they push off bookkeeping and tax responsibilities, sometimes for a full year and this is scary to me. So I want to give you some helpful small business tax tips and habits so you aren’t scrambling, or worse- delinquent!
Let me start by mentioning that every business, every city, region, each state is DIFFERENT. I won’t be able to cover WHICH taxes you are required to pay, it really is individual and you’ll have to research this for yourself. This article is more about setting up good practices and habits around taxes throughout the year and as you prepare for your tax appointment in 2020.
While doing research for this article, I was surprised at how many taxes some brick and mortar store owners have to pay. Some the taxes you might pay include:
- Property taxes – if you own your property (good for you!) you also want to make sure you’re paying those property taxes – hopefully this is something that is set up and paid for automatically through your mortgage
- Personal property taxes – depending on the state, apparently in MD if a business owner has an LLC they are required to pay property taxes on anything they own.
- If you have employees, there’s Unemployment tax and Payroll tax
- Income taxes
- Self-employment taxes
- Privilege or Sales taxes
Here’s a list of 10 small business tax tips:
#1: Set up a separate bank account for taxes
Create an ADDITIONAL account specifically for taxes. Personally, I have a sales tax account AND an IRS tax account. This ensures that when it’s time for me to pay those taxes, the money is in each account and I don’t have to worry about where I’ll get the funds. This is optional of course but I find it very helpful! And if you haven’t separated your personal finances from your business finances – you probably want to consider doing that as soon as possible.
#2: Make a decision about bookkeeping
For the love of all things – stop putting this off. If you think you can handle bookkeeping, do it, or take an online lesson so you can learn how to do it. But If you hate the numbers and bookkeeping or just don’t understand it – HIRE someone! Get over your fear of being judged. Bookkeepers WANT to help you with your business and they can provide you with additional guidance regarding your business finances.
#3: Prepay taxes if you can
Prepaying, if it’s an option, is a good practice and offers PEACE OF MIND – for instance, I prepay IRS taxes quarterly – the amount I pay is based on the amount my tax accountant advises. This alleviates any kind of anxiety around Federal tax time. Once it’s time for my tax appointment, I don’t have to worry about how much I will have to pay since I’ve prepaid throughout the year. Even if I owe, it’s never an amount that would overwhelm me.
#4: File your sales taxes (or any taxes) on a schedule
This could be monthly, quarterly, bi-annually – not every region or state has sales tax but in Ohio we do. The rate is different in each county but the system as a whole is managed by the State. When we first started our business the State of Ohio had us filing and paying sales taxes biannually. After we reached a certain amount of sales, the State of Ohio sent us a notification to pay monthly and the process is very simple online.
#5: Schedule reminders in your phone or on a planner
Every 15th of the month, I have a reminder set in an app on my phone to remind me to file and pay sales taxes online and to mail in my IRS tax payment quarterly. Another tip related to this is if you need accountability, find a biz bestie, someone that can keep you on track – hold each other accountable for completing this task every month.
#6: Use online bookkeeping software
There are many online software programs that can help you with bookkeeping. What’s so great about these software programs is that they sync with bank accounts, Etsy accounts, credit card accounts, Paypal and more so once you connect these accounts with the bookkeeping software you choose, these programs will import all of your transactions for you – you don’t have to manually add each transaction. You do have to look for duplicate entries, make sure there aren’t any discrepancies and reconcile accounts each month but if it saves me time, I’m all in. If all of this sounds like a foreign language – you most likely want to hire a bookkeeper! Wave Accounting, Quickbooks, Xero are all popular options.
#7: Set up a system for receipts
I don’t care if it’s a paper file or if you use an app to scan and store them, just make sure you are SAVING them in some way. I use the Wave Receipts app which syncs with our Wave account.
#8: Use a mileage app
If you’re delivering goods and traveling for your business, you definitely want to track your mileage so you can write this off. Speaking of write-offs, make sure you check with your accountant on ALL THE THINGS you can write off. Taxes can be frustrating and sometimes having to pay them can be infuriating so make sure you are taking advantage of any and all write-offs but remember a professional should guide you on this.
#9: Make an early appointment with your tax accountant
If you can schedule an appointment for 2020 now, go ahead and do that or make sure you book it early in 2020. Yes, you might be able to file for an extension but I’m talking about GOOD practices today and really, filing for an extension will only prolong the inevitable. I like to get this task done and out of the way as soon as possible!
#10: Use professionals!
As much as I like to learn things and DIY, I know my limitations and I know when I need to ask a professional for help. You should be doing the same thing. Please make wise decisions about this aspect of your business!
If you struggle in this area, choose 2-3 of the above good practices and start there. It can be hard to implement all of these small business tax tips at one time. I totally understand, but you’ll need to start somewhere.
I’m sure there are so many other ways, practices, and tools you can use to help you streamline and be proactive about your taxes but this should be a good start.
What are your best small business tax tips? Tell us about it in the comments!
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Since founding The Salvaged Boutique with her sister in 2013, Kathy watched her passion grow from a fun blog and hobby with her sister on the side of her full-time job, to a thriving brick and mortar home decor store. After running the store for years, she saw the need for an online community where small business owners could find resources. So she took it upon herself to create Savvy Shopkeeper, a blog and online business dedicated to educating, motivating and building a community of shop owners. From a full-time job to full-time entrepreneur, Kathy helps hundreds of store owners and makers navigate store ownership while running a store herself.