2020 Tax Tips for Small Refinishing Businesses
As we enter 2021 and kick-off a new year, it's time to start thinking about your taxes. As a small business owner, especially if you are a small business owner that operates as an independent refinisher, knowing how to approach your taxes can mean the difference between breaking even and making a profit. The trick is knowing how to prepare your taxes and what to deduct. Many business costs are deductible and because taxes will only count on the amount of revenue you have after deducting expenses, you can keep significant profits if you file accurately.
Of course, filing accurately is one of those things that's easy to say and often hard to do. The following is a look at few key tax tips we recommend as you start to organize your finances for tax season:
Tax Tips for Small Business
If you can afford it, hire an accountant.
Yes, there are some really great tax filing software options out there that make tax filing easy if you feel confident to file on your own. A business that earns a gross income under $72,000 can apply for the IRS Free File program to get access to no-cost filing software. If you go this route, look for software that makes the experience as user-friendly as possible while offering a 24-hour support option. This process can be quite daunting so take advantage of the help these software alternatives have to offer!
With that said, you undoubtedly know as a small business owner that free doesn't mean good. Easy doesn't mean effective. Just as you advise your customers that the best bathroom or kitchen refinishing work means professional prices, the best tax filing likewise requires professional prices under an experienced hand.
In other words, if you can afford it, you should seek out an accountant in your area. If this is your first year as a business or you experienced any significant growth, such as the add-on of ten or more employees, then you absolutely must contact an accountant to ensure your affairs are in order and, if you haven't already, make sure you're following an effective business plan. An experienced small business accountant will go over your plan, your overall finances, and ensure that you are saving the most money possible by accurately and effectively getting you the most deductions possible. Remember, the more deductions you have on your taxes, the lower your tax bracket becomes and therefore the lower your tax obligation and higher your profits.
Finding a Tax Preparer Near You
Sometimes this is the hardest part and the most challenging starting point. The IRS' Directory takes the guesswork out of the equation by finding one near you with the proper credentials.
Paying your business tax obligation is understandably not something to look forward to. This is especially so if you took advantage of the coronavirus-related payroll tax delays last quarter. However, delaying isn't something you want to do. You want to get started at least a month in advance, and this is true whether or not you choose to hire a professional accountant.
If you choose to try to do your taxes yourself or otherwise in-house, then the month will give you extra time to sort things out. If you're missing paperwork of you end up wanting to get a professional accountant to look over your deductions, then you will have plenty of time to do so. Furthermore, if you do wind up hiring a professional accountant, then they do get busy the closer to the filing date it gets. Early hiring and completion of your taxes can help you avoid surcharge fees they may tack on and will ensure they have plenty of time to go over your information in detail with you.
Always Check for Credentials & Audit Info
If you use a professional tax advisor or accountant, then you need to make sure that they are properly equipped to do your taxes and give you the assurance you need that you will be protected in the event that you are asked to undergo an audit.
As many as 75% of Americans forget to ask whether their tax preparer would represent them in an audit. Do not make this mistake. Just as you undoubtedly assure your customers that your workmanship is guaranteed for a set period, you want to hire a tax professional who will assure you that their workmanship and how the papers were filed were accurate. And if there is a problem, if the IRS wants an audit, then your tax preparer should have an agreement in place that they will oversee the event. Avoid any accountant or tax preparer who cannot offer this.
Furthermore, ask about their credentials. Are they certified and licensed? How many years have the provided services to small businesses like yours? To get the best savings in your tax filings, you should look for an accountant and tax preparer who has experience in your niche industry.
Compare Fees and Be Aware of Red Flags
We all want to save money and comparing tax preparer fees may be one of your best options. Many accountant's fees are by the hour and each preparer may charge at a higher or lower rate depending on many factors. Beware of a preparer who claims that their fees will be based on the size of your return or claim!
These are just a few basic tips and strategies that NAPCO recommends based on years working with refinishers who own small businesses. We recommend you use the IRS Tax Information for Businesses page for more information.