Tax season is well underway, kicking off one of the most stressful times of the year for small business owners and tax professionals alike. Particularly for new business owners or entrepreneurs, this time of year can feel overwhelming and downright scary. The good news? We’re here to help! We reached out to more than a dozen small business owners, tax professionals, attorneys, and writers, and asked them to share their most practical advice for navigating tax season. We’ve compiled seventeen of the best tips here, so you can breathe a little easier and tackle tax filing season with a new sense of purpose and confidence. These tips are evergreen, so feel free to print or save this guide and use it as you prepare for the 2020 tax season and beyond.

Tip #1: Don’t procrastinate.

Tax time is often so scary for new business owners because they don't feel like they know what they are doing. Human nature in these cases? Procrastination. It's so important to not put it off because it's not going to get any better, and honestly, if you get your taxes done early, it's a great opportunity to make sure you're set up for an easier year next time around. 

-Katie Thomas, CPA, Diamond J Accounting

Tip #2: Utilize tax software.

One of the first purchases you should make as a small business owner is some type of tax software. Using software ensures accuracy and maximum refund guarantees.  

-Eytan Bensoussan, NorthOne

Tip #3: Identify your employees vs. independent contractors.

An employee is someone who works part-time or full-time under a contract of employment, whether oral or written, express or implied, and has recognized rights and duties. An independent contractor is self-employed. They may carry out duties and tasks for your business, but you are ultimately not in control of them. 

-Stephanie Glanville, Content Writer, SPAN Enterprises

Tip #4: File by March 15 to avoid potential penalties.

Many new business owners don’t realize that corporations have their own tax deadlines. Instead of April 15, corporate taxes are due by March 15 each year. If you don’t file on time and you owe money to the IRS, you could be hit with a late filing penalty of up to 5% of your total tax bill for up to five months.  

-Wade Schlosser, Founder and CEO of Solvable.com

Tip #5: Keep all receipts and documents clearly labeled in the same place.

When tax season comes you can refer to them when needed.

-Sarah Franklin, Co-Founder of Blue Tree AI

Tip #6: Never neglect the power of deductions.

Look into things such as home office deductions, transportation, equipment, and supplies to ensure you have all bases covered when preparing tax documentation. 

-Jared Weitz, CEO/Founder of United Capital Source Inc.

Tip #7: The value of hiring a tax professional goes far beyond filing taxes.

Turbo tax will do that for you, but hiring a professional gives you the guidance need, helps make sure you're maximizing your deductions and gives you the peace of mind that you’ve minimized your tax liability.  

-Katie Thomas, CPA, Diamond J Accounting

Tip #8: Ensure Compliance with Internal Revenue Code Section 199A.

Congress passed Section 199A as part of the Tax Cuts & Jobs Act of 2017.

This rule allows qualified non-corporate business owners the ability to deduct up to 20% of their current year profits.

While there are income thresholds and other detailed eligibility requirements, this deduction is a huge tax benefit for any business that qualifies. 

-Logan Allec, a CPA, personal finance expert, and owner of personal finance blog Money Done Right

Tip #9: Make sure you’re filing correctly.

Sole proprietors, small business owners, and freelancers must pay a self-employment tax of 15.3% on top of other federal and state taxes they might owe. That’s because they don’t have an employer taking out money for social security and Medicare.

If your company is big enough, it might be worthwhile to file as an S-corp. In spite of the higher tax rate, you might pay less by eliminating the self-employment tax.

-Wade Schlosser, Founder and CEO of Solvable.com

Tip #10: Set up a separate business bank account.

Treating the business separately from any personal activity at all times is a wonderful way to keep your records clean and organized. Once a month, complete a business expense report with receipts and explanations, so you can reimburse any owner-related personal expenses tax-free.

-Randy Tarpey, CPA, Sickler Tarpey & Associates

Tip #11: Buy a good starter book on basic business deductions.

This even applies if you have a trusted CPA or tax preparer. Knowing which tax deductions are available and how deductions work makes you a smarter business owner and saves you when it comes to paying Uncle Sam.  

-Bishop L. Toups, P.A., Daily & Toups Elder Law, Estate Law, and Tax Planning

Tip #12: Research the State Apportionment rules.

Many business owners do not understand that they might owe taxes in multiple states.

If your company has sales, property, or payroll in several states, your business might have to allocate taxable profits to each of those jurisdictions.

Each state has its own “nexus” rule. The general practice is that if your business has “nexus” with a state, your company probably also has a tax filing requirement in that state.

-Logan Allec, a CPA, personal finance expert, and owner of personal finance blog Money Done Right

Tip #13: Work from home? Don’t be afraid to take that deduction.

As long as you have a separate space that is exclusively and regularly used for your place of business, you can qualify for this deduction. This can make your utility expenses deductible, as well as other home operating costs.

-Russell, Michelson, Smith & Eulo Law Firm

Tip #14: Keep proper documentation, especially for travel expenses.

Travel is the most audited expense category, according to Sandy Botkins, a former IRS Auditor. 

-Jacob Dayan, CEO and co-founder of Community Tax

Tip #15: Follow the “Magical 30” rule.

Save 30% of everything you make in a separate bank account for taxes. Many new business owners don't realize how much they’ll need to set aside for quarterly tax expenses. This 30% helps make sure you have cash on hand to cover your tax liabilities. Save this is a high interest online savings account preferably.

-Atiya S Brown CPA, CA CFEI, The Savvy Accountant

Tip #16: Digitally document receipts by scanning them into your work computer or using your phone's camera.

That way you always have a version of them on hand. It's far too easy to lose them otherwise.  

-Jesse Silkoff, Co-Founder and President, MyRoofingPal

Tip #17: Book time each week to get your documents in order before it's time to file your taxes.

If your records are in several places, break your time down into chunks to collect your accounts receivable and payable, your payroll, and your other financial documents. Hopefully, you've been recording these documents all year with expense management software like Quickbooks or The Neat Company and blocking out time to clean your files up. But if you haven't, it's better to do this sooner rather than later. 

-Rochelle Burnside, a business and finance writer for BestCompany.com

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