Entrepreneurs have a long road to traverse for the first few years after launching their businesses. You may be well-prepared with adequate funds, extensive research, and good connections, but the smallest details may slip through. Tax planning is often a loose end for startup entrepreneurs as they get complacent about it while focusing on other aspects of running the business. The most daunting part is that you may encounter unique challenges, such as a lack of experience with tax rules, a shortage of time, and funding constraints. But you can take a few measures to stay a step ahead of year-end tax planning. Let us share the best advice startup entrepreneurs can rely on.
Get a head start
Putting off tax planning until the end is the worst mistake a business owner can make, and it gets even worse for a startup entrepreneur. The deadline may arrive sooner than you imagine. You may end up scrambling to get your records together for calculations for filing returns your time. The problem gets more daunting if you do not have enough funds to meet an unexpectedly large bill. It is better to get a head start with timely preparation.
Besides being on time, you must stay organized with your records, receipts, and invoices. While keeping records may not seem a growth-critical task for a new business, it can save you from stress at tax time. The year-end is specifically crucial as you must go through your calendar and check receipts for large purchases, business expenses, and income documentation. Hunt for missing records or seek backup copies from clients and vendors.
Get a tax expert on board
You may not have an in-house team to manage your financial records, accounting, and taxes. Startup owners typically handle these functions on their own or with a small team that doubles up as the accounting department. But it is better to collaborate with seasoned tax planning advisors sooner than later to avoid penalties and missed deadlines. The outsourcing model fits into your wallet and keeps you safe from tax troubles.
Staying informed keeps you safe from tax issues and IRS fines. Moreover, you may even end up saving on bills due to deductions and credits. You can check reliable online resources to do your homework. Seeking advice from your tax advisor is an even better idea. For example, they can suggest the right type of entity for your startup, as it can help you lower your bills. Also, stay ahead of the ongoing changes in federal and state-specific rules to prevent unpleasant surprises down the road.
Startup entrepreneurs need to go the extra mile with tax awareness because they lack information and knowledge. Planning for the next year always helps, as you feel more confident and stress-free. Know your key filing dates, including the deadlines for quarterly estimated taxes. You can invest in a reliable expense-tracking and reporting system to keep your records in place. The more proactive you are, the sooner you learn the ropes.
Although tax planning sounds scary for a startup owner, it is easier than you imagine. Diligence and consistency give you an advantage, and an expert advisor keeps your business ahead of penalties.