Complying with complicated tax regulations is difficult enough for new businesses without having to learn about the latest in tax reform. Without knowing for sure how new laws will affect them, entrepreneurs are often left guessing about how to file for their company. And if they don’t have an accounting professional advising them, the average small business owner may not be confident in what they owe come April 15.
QuickBooks Payroll recently published a survey revealing that the majority of SMBs feel taxes are one of the most challenging aspects of owning a business, which could explain why about a quarter of respondents also said they procrastinate their taxes.
Get a jump on taxes with help from a pro
But facing those tax season fears might be more rewarding in the end. Small business owners are more likely to get a refund than owe taxes at the end of the year. Indeed, 67 percent of QuickBooks survey respondents said they usually receive a refund, while 19 percent said they owe money. While not perfect, the remaining 14 percent that breaks even and the majority who receive refunds could inspire other small business owners who are procrastinating on their taxes this year.
Knowledge is power. So even if your business is already prepared (or has already filed), there’s no better time than the present to start thinking about how you can best prepare yourself for tax season.
“You need to plan ahead for your taxes and think about when things are going to be due,” David Williams, Intuit’s Chief Tax Officer, said in a recent webinar. He suggested using an accountant or tax pro to help get a plan in place for the season.
Eighty-five percent of small business owners who use an accountant or tax professional said doing so makes the season less stressful, helps them plan ahead and allows them to stay compliant. Additionally, an accountant can help you find all of those little deductions and credits you might have otherwise missed, making it more likely that you will get a return on your taxes.
3 ways to make the most of your tax refund
Once you file your taxes, then comes the rewarding part. Boost the financial health of your business by weighing several options on how to reinvest your tax refund.
To make the most of your refund:
- Save for the future: Putting money aside for a rainy day is the top way to reinvest tax refunds, according to the QuickBooks survey.
- Pay off debt: Coming in at a close second, paying off debt is another way many businesses use their refunds.
- Reward employees: If you crunch the numbers and decide you can afford to give employees a boost around tax season, you aren’t alone. Thirty-five percent said they channel their extra money into raises and bonuses for their teams. This could be a great option for companies that are working on pay and benefits packages for retention and want to boost employee morale.
While most startups look forward to a tax return this time of year, without proper planning, you won’t know what to expect. There’s not always an easy answer when it comes to taxes, but a talented accountant or tax professional can take a lot of the guessing out of the game and help you make better decisions during tax season.