1) Ensure that you have all of your ducks in a row. If you need or might want to have a federal tax ID (EIN), make sure you acquire that. If your business is a corporation going to elect s-corp status, make sure Form 2553 is sent within two and half months after the start of the year or after the corporation is formed. Research your state's laws regarding sales tax and if your company is required to withhold sales tax and the frequency your company is required to file returns with your state revenue office.
2) Make sure you have enough cash to pay your estimated quarterly payments and/or your annual income tax liability. If your a sole proprietor or you operate a partnership, LLC, or s corp, don't forget that your business income is not taxed at the entity level and passes through to your individual tax return. Proper tax planning is essential here, especially for growing businesses.
3) Research the rules and requirements regarding accountable plans, if you plan on reimbursing employees for per diem allowances, allowances for meals and incidental expenses, and mileage allowances.
4) Keep personal and business finances separate. Definitely keep separate bank accounts and consider keeping separate credit cards as well. However, it may be a smart idea to use a personal credit card for your small business as individual cards often come with better protections and lower interest rates. Still, don't mix business and personal expenses on any one credit card, whether or not it is issued in the name of the owner or the business.
5) Consider using independent contractors instead of hiring employees. You will save taxes because you won't owe payroll taxes on the money you pay them. However, make sure the working relationship meets the definition of a contractor relationship as a small business can get dinged for treating an employee as a contractor. See IRS: Understanding Employee vs. Contractor Designation for more information.
6) Make sure you take full advantage of the new 2018 limits on section 179 deductions on equipment and property. The limits were increased to $1,000,000 for the 2018 tax year. Basically, you can fully expense these purchases in the year they are purchased instead of depreciating them over the allowed useful life.
7) Use cloud based accounting software to keep track of your revenues and expenses. Using a program like Quickbooks Online will greatly reduce the time the small business owner and/or his accountant spend on preparing the necessary tax returns. Less times equates to less money spent on tax compliance.
8) Establish a simple system of keeping track of receipts and invoices. Quickbooks Online and other accounting systems allow you to attach receipts or invoices to specific accounting entries. Smart phones can easily allow to take pictures of receipts to upload them. The IRS will require original records or copies in the case of an audit.
Bonus) Consider hiring a tax professional to maximize your financial condition with IRS and state tax compliance, decrease your anxiety regarding IRS regulations and potential audits, and allow your to creates efficiencies with your time in doing what you do best in your business. Our firm, Cloonan & Associates, would be happy to speak to your about potentially working together. Feel free to email us or go to our contact page.