Understanding the world of business tax deadlines, filings, and obligations can be overwhelming for business owners.
During the inaugural installment of CO—Strategy Studio, Jeanette Mulvey, Vice President and Editor-in-Chief, interviewed a tax expert and small business leader who shared their perspectives and advice on best practices for navigating taxes. Whether you own a new startup or a growing enterprise, here are some of their tips for navigating this tax season and beyond.
Set up payroll taxes immediately — especially when you make new hires
According to Joy Shaw, Director of Tax for Intuit, business owners must set up payroll taxes for their employees. In fact, that is one of the first steps they should take when hiring a new employee.
“It's really important when you get a new employee that you set up their address, you have their job titles [and] their occupational codes, so that new hire reporting is done correctly and your quarterly unemployment wages are paid accurately, too,” Shaw said.
She added that most states and localities require you to register with specific agencies before you can deposit your payroll taxes. However, there has been an increase in state-run paid family medical leave. While there’s always been a federal one, the state-run programs are run by different agencies.
“You have to register with these agencies and actually pay to a different agency than what you're used to with your payroll taxes,” she said. “Currently, about 11 states and DC have these plans, and 25 more states have this in the proposed legislation.”
Startup owners should be aware of each registration and agency they must work with when setting up their businesses.
[Read more: Tax Season Planning You Should Be Doing Now]
Use your accountant as your strategic partner so that they can help you. That can only happen if you have good books and records for them to review on a regular basis.
Al-Nesha Jones, Founder, ASE Group
Stay on top of taxes all year round
For business owners, tax season prep is happening year-round — not just January to April.
“I cannot stress how important it is to stay on top of your bookkeeping,” said Al-Nesha Jones, Founder of ASE Group. “Bookkeeping is not a pre-tax-prep process. Bookkeeping is a regular process for tax planning for growing a strong and sustainable business.”
First, Jones recommends keeping up with your books and records. Second, business owners should speak to their accountants and or bookkeepers regularly.
“They're not mind readers, and they need to know what your plans are,” Jones said. “Tax planning … requires that they are aligned with your goals and what you're thinking of for the next six months and even six years.”
Jones recommended having these conversations regularly so you can air out any concerns or discuss struggles you’re facing. For instance, she said, if you’re unsure how to set aside money for estimated tax payments or have issues spending that money before making the payments, confide in your accountants/bookkeepers about it so they can help you form a plan.
“Use your accountant as your strategic partner so that they can help you,” Jones said. “That can only happen if you have good books and records for them to review on a regular basis.”
Shaw added that you should simplify your records (especially if you have multiple accounts), automate your payments, and integrate each process.
“Bill paying, invoicing, booking transactions, payroll, sales tax, [and] benefits can all be integrated to combine into reports that can then help during tax time,” Shaw said.
[Read more: What Are Estimated Tax Payments For Businesses?]
Use your taxes to gauge your business’s profits and growth
Jones advised using your tax data as a metric to measure your business’s success.
“I'm in business to make a profit, and profitable businesses pay taxes,” Jones told CO—. “The fact that I'm receiving a tax bill and my tax bill may be a bit higher than the previous year means that I've earned more profit than I earned in the previous year.”
Shifting your perspective on taxes can help you focus on your company’s growth with a positive yet realistic approach.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
