Taxes are central to the accounting work at businesses. When you're setting up your accounting at your company's start, you need to think about how taxes fit into the picture. An accountant will want you to take care of these five things as you address your operation's tax obligations.
Identify the Obligations
Every business will pay a range of taxes. When you acquire equipment, there will be sales tax. Payroll taxes apply to every employee. The company also pays taxes on income and property. You want to itemize every possible tax so you can ensure that you're taking appropriate deductions and paying the full amount.
If your business has operations in more than one location, you need to be aware of how the taxes will vary. An accountant can help you identify where you'll pay taxes and what the differences between each place will be. They may include different payroll, income, and property tax structures, especially if you have operations in different states or countries.
Also, never assume that an internet-only business will be clear of these sorts of localized taxes. Particularly when it comes to sales tax, you can expect taxation to chew into your numbers.
An employer identification number is like a Social Security number for your business. It tells the government who you are. Many payroll processors also use the EIN to streamline their services. Request an EIN as soon as possible so you can enter it into your payroll, accounting, and tax software.
A tax deduction is your best friend. Many tax deductions require supporting documentation, and that's where receipts become invaluable. Even if you're unsure whether a receipt is going to cover something deductible, collect it. Make sure that you and everybody at your business make a religion out of collecting receipts. The difference between running a profit or slowly heading for bankruptcy may boil down to how well you deduct your expenses.
After the taxes themselves, penalties are the next biggest thing that'll chew into your profits. The business tax cycle is different than the personal one. State and federal agencies expect most businesses to file income and payroll taxes quarterly. Failing to pay the quarterlies on time will lead to penalties. Even if the penalties represent a small percentage of your overall revenue, they can reduce your profit margin significantly.
If you have a reason that you can't pay on time, ask for an extension. Your accountant can help you figure out which agencies to contact and how to file for one.
Contact a local accountant to learn more.