My Advice to Make Your Small Business Taxes Less Taxing
Unless you are one of us rare people who daydream about spreadsheets, speak the language of finance, or the word “budget” makes you do a happy dance, then it is quite likely that the idea of tax season for your creative business gives you chills.
You are definitely not alone.
Most individuals, especially small business owners and independent contractors, dread tax season like the plague. It is, by all accounts, the most stressful time of the year for anyone living in the United States.
However, there are a select few who do not seem frazzled by April 18th. I’m sure you have met some of them. While everyone else is scrambling to find receipts from 3 months ago, they are calm.
Sipping mojitos on a pool floatie calm.
It is highly likely that the reason that these individuals are so unreasonably calm is because they have hired a bookkeeper. It could also be that they have learned and implemented tips and tricks to make tax time less tedious. My advice to make your creative business taxes less taxing?
Do all of the above.
So let’s dive a little deeper into how to make tax season less like a nightmare and more like a vacation.
Quarterly Tax Payments
One of the first things that a bookkeeper will explain is that as a small business owner, you should be making quarterly tax payments. These will include income and self-employment taxes. If you know that you will owe more than $1,000 in taxes at the end of the year, you will need to contribute every three months, starting on April 18th.
(Note: This is usually the 15th, but that falls on a weekend this year - woo, extra days!)
It will also be beneficial for you to set aside funds for employment and payroll taxes: federal income tax, Social Security, and Medicare. My advice to make your small business taxes less taxing is to set aside these funds, as well as the quarterly payments, in a separate bank account so that you don’t accidentally spend the cash on something else.
Using the Correct Business Model
Small business owners and independent contractors must be aware of the type of business entity that they are filing as. It is important to note that different entities not only file at different times or in different ways, but they also have several pros and cons that may impact your financial goals.
Don’t let the last get-rich-quick TikTok you watched influence this decision.
My advice to make your small business taxes less taxing is to let your bookkeeper advise you if your creative business’s structure should be a sole proprietor, S-Corp, C-Corp, partnership, or LLC. They can explain the tax efficiencies of the business entity that you are currently using and also clarify the disparities between all of the options.
When to File Taxes
As a small business owner or independent contractor, one of the things that you will have to decide is if to file early, late, or on time. To some, this may seem like a no-brainer.
Of course you have to file on-time!
However, a bookkeeper may advise you, based on the business of your business around April 18th, to plan to file an extension. This can seriously reduce your stress level.
Otherwise, your bookkeeper can help you to determine if you should file your taxes early or on time. Both options have pros and cons. For example, if you file early, it gives you extra time to find documents that you may need and correct mistakes before the deadline. Alternately, if you take daily steps to maintain records, filing on time may be a breeze.
My advice to make your small business taxes less taxing?
Decide earlier - rather than later - when you intend to file your taxes.
Making that simple decision and taking the necessary steps toward it, can make tax season a lot less stressful.
Don’t DIY
As stated earlier, unless you are one of those people who can talk about finances and budgeting with the same enthusiasm that my BFF talks about The Bachelor, doing your own books and taxes is probably not a good idea. Just like you wouldn’t suggest that your photography client does their own editing of their wedding photos - it’s best left to the pros! It is always best to outsource the tasks that are tedious for you so that you can focus on the equally important items that bring you joy.
Hiring a bookkeeper to prep your books as a small biz owner or independent contractor is one of the ways that you can ease the anxiety of tax time. These professionals are trained to lighten your load and make preparing for tax season as easy as 1-2-3.
Small business owner: you have a lot on your plate.
You are a leader, artist, admin, and public relations manager of your small biz. But what’s crucial to remember is that you do not have to do this alone. My advice to make your small business taxes less taxing is to be aware of your creative business’s structure, make your necessary quarterly payments, decide when you will file your taxes, and outsource these tasks to qualified professionals.
