Taxes. The most dreaded part of being an entrepreneur or owning a small business. Just when you thought that your finances and budgeting couldn’t get any more difficult, you have to add taxes into the mix. If you find yourself dreading tax season every year, it is time to take a new approach. Here are a few ideas that will help you to simplify your tax situation as an entrepreneur.
Use Apps to Track Expenses
One approach that can be helpful is to use different apps to track your business expenses. When you’re working as an entrepreneur, there are a lot of business expenses that can actually qualify as tax write-offs, which will reduce the amount of taxes that you have to pay at the end of the season.
For this reason, it is very important to track your expenses accurately. Make sure that you’re using apps or software that will facilitate this tracking and make it quick and easy for you. Here are some of the most popular tax and business expense tracking apps of 2022 that you can try out.
Create an LLC
Another helpful approach to your small business taxes is to create an LLC. This means that you’ll be setting up your business legally rather than simply doing freelance work on the side. LLCs require minimal compliance compared to other business structures. An LLC will have you choose a business name and set up information to receive official documents about your business.
You’ll also be expected to fill out LLC paperwork and pay the necessary filing fees to set yourself up as an LLC business in your state. This setup can help your taxes in a few ways. Depending on your situation, you might be able to avoid paying taxes on business income, and you’ll be able to avoid double taxation.
Lower Your Taxable Income
Finally, as an entrepreneur, you can lower your taxable income which will lower your taxes due as a result. One way to do this is to use a tax-deferred account when you’re saving up for retirement. This could be a traditional IRA account or a 401(k). With the help of these accounts, you can deduct thousands of dollars from your taxable income. You can also reduce your taxable income in other ways, such as filing for a home office deduction if you work from home. Even some of your health insurance expenses can end up counting as tax deductibles.
So, if you’re stressed about the upcoming tax season and are tired of paying thousands of dollars to the federal government in taxes, remember this article. You can simplify your tax situation and lower the amount of taxes that you’ll have to pay by using apps to track your expenses, creating an LLC, and lowering your taxable income. This will help you to stay more financially stable as you set up your entrepreneurial endeavors.
Did you enjoy this article? Here’s more to read: Pros and Cons of Starting a Business