Getting Straight to Business: Accounting and Taxes

Most entrepreneurs love what they do.  Otherwise, why would they choose to go through or deal with all the hard work it takes to work for themselves? Many see it fit and are completely satisfied with filling out an application and clocking in and out to receive a paycheck in exchange for their time or service. Today’s topic is about one of those tasks all entrepreneurs must learn to do, but most do not enjoy. Accounting and taxes. 

Wouldn’t it be great if you could just work at your passion never account for the money you are making, or be required to pay Uncle Sam?  Maybe… but that’s not reality at least as a business here in the United States of America.  We know that as citizens it is our sometimes-dreaded duty to have accurate books and give the government its cut to keep this nation going. 

Hopefully today we can shed some light and get to the straight to business on this unpopular topic so we can all get back to doing what we love most in our businesses.  Since it is tax season, we will just jump straight in.

What is accounting?

The basis of all your tax concerns will be simplified if you take the time to do one thing well.  This one thing is accounting.  Accounting is the act of recording all your business transactions, from money spent on behalf of building your business, assets gained in hopes to make more money, sales made, money paid to employees etc.  Each of these things are important and need to be kept and tracked for accounting purposes.  When you have this information organized and easily accessible it makes a world of difference when tax season arrives.

What are taxes? And who are they paid to? When?

Everyone should know tax season is that time when the government is looking forward to getting accounting information on its citizens to determine what is owed to Uncle Sam, also known as the U.S government.  However, the feds are not the organization looking to collect.  There are also state taxes and local city/county taxes depending on where you live such as Sales Tax.

If you’re an employee and do not own a business you can look forward to paying taxes once a year, unless you’re in a bracket that receives enough credits to offset what’s been taken throughout the year from your paycheck. Based on your income you could actually receive money back from the government.  This is usually done starting roughly around February 15 and runs through April 15. However, there are sometimes changes and extensions to be certain you can check at https://www.irs.gov/.

However, if you are a business owner the standard is to pay taxes quarterly, four times per year.  The truth is depending on where your business is located, what tax filing status you’ve chosen for your business, and what industry you’re in the taxes can range from simple to pretty complex.  You can find more information through your State Comptrollers website on what’s required of your specific business. In Texas, you may follow this link: https://comptroller.texas.gov/

Suggestions and Consequences

Due to this range of complexity, many businesses are encouraged and elect to seek out a tax professional to assist them with doing things right.  As an inexperienced entrepreneur you may or may not have budgeted for this expense or thought you would just handle it when the time comes, and this is okay, but do yourself the best favor and track your financials so when the time comes you won’t be guessing, stuck with a headache and extra anxiety from all the negative consequences that could occur. Some of these include extra fees for late payments, liens, and more seriously wage garnishments, asset seizure, embarrassment, and jail time.

Tracking Your Financials

Keeping track of your accounting continuously and accurately is a best practice for several reasons.  Not only do you eliminate the headache come tax season, but you also gain:

-              An accurate picture of the financial health of your business, and insight on where to make needed adjustments

-              Better funding, and loan positioning

-              Tax right offs and other federal benefits for businesses

Your accounting could be done in a few ways, such as keeping spreadsheets and records of transactions, receipts, etc., but most commonly business owners are using accounting software.  Some of the most common are QuickBooks, Quicken, and Fresh Books. They can range in price depending on the features your business requires, you may also receive discounted rates by completing their training courses, or by working with their specific and recommended tax professionals.

Choosing A Tax Professional

When it comes to dealing with tax professionals and filing your taxes, they are many options.  Do your research! A CPA (also known as a Certified Public Accountant) is going to offer you the most security when it comes to legality and IRS concerns like audits, however they are also more costly.  These accounting professionals bear the responsibility to file accurately and like attorneys may represent you before the IRS if there are concerns. 

Other tax professionals may or may not have credentials but can come with many years of experience at a lower cost.  You just must do a little research or ask around. Some tax professionals offer free online resources on their websites or YouTube, and even free or low-cost consultations just to point you in the right direction to help earn your business and help their job flow smoother towards tax season. If you need to get going on some basic information about how to choose a tax professional, you can start at the IRS website or with videos such as this one.  https://www.youtube.com/watch?v=qP5c-ZOMct4

Now get your taxes done if you haven’t already, so you can get back to business!