6 Tips for Small Business Tax Readiness

Written by Jenn Dobransky, Midcoast Region Microenterprise Specialist

Desk with plants, a notepad, and cell phone

 

Are you self-employed? If you are thinking about doing your own taxes this year, here are six tips that can help you feel prepared:

  • Open a separate business banking account to make record keeping easy. This can be a DBA, doing business as, account. It is important to separate your business finances from your personal finances. This will make tax time much easier for you.
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  • Understand your expense categories. Check out the Schedule C, otherwise known as the Profit or Loss from Business. Section II of this IRS form lists some common expense categories.
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  • Keep a mileage log. Many of us use our personal vehicle for business purposes. Keep a small datebook or notebook in your vehicle. Log mileage driven over the course of the year for your business. In 2017, the IRS mileage rate was 53.5 cents/mile. In 2018, that rate jumped a penny to 54.5 cents/mile.
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  • Set aside up to 30% of your income for taxes in a separate savings account. Often, entrepreneurs ask, “How much should I set aside for taxes?” 30% is a good estimate. Place that amount in a separate savings account so that you can pay your quarterly taxes.
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  • Keep all your receipts and save them for 7 years. This is a standard IRS rule. Scanned receipts are OK. But if you keep them electronically, make sure you have back up electronic files as well.
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  • Set financial goals for your business. What percentage of your household budget does your business support? Do you need that number to increase this year and beyond? The only way to reach those goals is to verbalize them and write them down so those goals become real for you.

Need help? Make an appointment with a NVME Microenterprise Specialist
 
Register for our upcoming NVME business planning and tax readiness class.