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3 Things Small Businesses Should Know about Taxes

by Ian Wallace

Getting a small business off the ground involves a lot of different components. There are certain things that can end up taking up most of a small business owner's time, including the goods or services that the business produces, scheduling, and dealing with payroll. With all of this work, it's easy for taxes to fall by the wayside. However, doing this can be disastrous for a business and lead to auditing and fines. Here are three things small businesses should know about taxes.

When the Tax Year Starts

The first step toward keeping businesses taxes in line is figuring out when the tax year starts. For small business owners, there are a few different options when it comes to the tax year. The calendar tax year starts on January 1st and ends on December 31st. Any business can adopt this for their tax year, but it is required if a small business doesn't keep books or records, doesn't have an annual accounting period, or if the present tax year does not qualify as a fiscal year. A short tax year is an option for small business that have been in business for less than one year. The third option is a fiscal tax year, which is any 12-month period that ends on the last day of any month. This tax year is commonly used by small businesses that operate seasonally.

State and Local Taxes

It's also not enough to figure out how business taxation works at the federal level; state and local taxes also apply for small business. Tax obligations can vary greatly state by state. Small business may also be on the hook for things like unemployment insurance, disability insurance, and much more. Navigating these tax responsibilities can take time and a great deal of effort.

How an Accountant Can Help

Hiring an accountant, whether it's for advice or regular bookkeeping, can be a big help for small businesses. Accountants can help a small business figure which tax year works the best for them, select a business structure, and determine which deductions they can take. Accountants typically charge somewhere between $150 and $400 per hour. Just a few hours of consultation with an account can actually save a small business time and money in the long run.

Business taxes can be tricky for a small business to navigate. Small business should know that there is more than one option to choose from when it comes to the tax year. State and local taxes can also be important and vary from state to state. Small businesses should also consider hiring an accountant. Just a few hours with an accountant can get a small business on the right track when it comes to business taxation.