Commonly overlooked accounting issues small businesses owners must address

As a small business owner, you have a lot on your plate. You're likely to be busy managing, marketing, and filling a half dozen roles simultaneously if you run a small business. As a result, it's easy to forget about simple accounting issues until it's too late.

Taxes on self-employment

Self-employment tax may apply if you are self-employed. This tax is around 15.3% and adds to your other federal and state taxes. This tax is not automatically deducted from your income. Therefore, you can save money for the upcoming bill by setting aside some of your income. Generally, you should set aside 30% of your income for taxes and accounting expenses.

Self-employed people can set up their businesses to be exempted from self-employment taxes. However, restructuring your business or using another structure than a sole proprietorship, LLC or partnership can have additional costs. It's best to speak with a tax professional to reduce this expense.

Add yourself to your payroll

Many LLC owners and sole proprietors pay themselves directly from their business' earnings. There are financial benefits to adding yourself as an employee to your payroll. Based on the amount of payroll they pay, some business structures may be eligible for a tax deduction. These payroll deductions are unavailable if you pay via check or funds transfer.

A tax professional can help determine if being a W-2 employee in your company will provide a significant tax benefit.

Timely payment of your estimated taxes

Small businesses should pay estimated taxes each quarter. These payments are based on your projected earnings for the calendar year, what taxes you paid last year, and what deductions you will make.

Your business could face severe tax penalties if it fails to pay your estimated tax payment on time or is missed entirely. As a result, you can manage your cash flow better and avoid a huge tax bill next year by paying on time.

Keep track of receipts and expenses

Auditing is something no one likes to think about, but if that day comes, keeping detailed and organized records of your expenses will be much easier. In addition, you can relax knowing that you are prepared for an audit if you have a system to track your expenses and save receipts.

Small businesses can use a variety of tools to keep track of both their virtual and physical receipts. It is a good idea to request a virtual receipt whenever you can. All virtual receipts can be emailed to your employees' email addresses for easy tracking and organization. Photo-capturing receipt software allows employees to take a picture, upload it and send it to their email account. Many paid and free apps can capture information from receipts and upload it to your accounting software.

A complicated audit or expensive tax bill is not what you want when running a small business. It is essential to manage your accounting correctly from the beginning. This will ensure your business' continued health, efficiency, and growth. While you can manage many accounting tasks yourself, hiring tax and accounting professionals is a brilliant idea to help you reach your peak performance.