Did you know that the IRS estimates that overall, small business owners pay an estimated 30% more in taxes by missing out on deductions? That’s crazy, right! Here are some tax deduction for boutique owners.
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Ladies, let’s bond together this year and make a commitment to being organized for the 2019 tax season, and prepared.
Aside from the fact that your kitchen table is likely piled high with the 2018 tax records and your family is eating meals while sitting on the floor – this statistic should be enough to energize us for positive change in 2019.
Here are some smart tips for being organized and prepared all year long:
ACCOUNTING: Time block 2-hours every week to maintain an up-to-date and accurate accounting system, such as QuickBooks Online. You will have a pulse on your business, allowing you to plan your cash flow, and it will make tax time seamless.
DOCUMENT ORGANIZATION: Create a document organization system that mirrors your accounting system chart of accounts. You should be able to keep your filing current during your 2-hour accounting time block. Keep all of your receipts. If audited, you will need to substantiate your deduction.
BANK RECONCILIATIONS: Be sure to reconcile your bank, credit card and loan accounts. Also reconcile your income in your accounting system to the income reported in your point of sale system. Your reconciliations assure you have not doubled up on income and have recorded all of your expenses. They are your only checks-n-balance.
TRACKING INVENTORY: Not tracking inventory properly on your financial statements will result in errors in your taxation. It will also result in inaccurate financial statements. When tracking your inventory purchases, you will want to post them as an asset until sold. Once sold, they will be the cost of goods sold expense. For tax purposes, you will need to know your 12/31 prior year inventory value and your current year inventory value. I recommend that you reconcile your inventory asset on your balance sheet at the end of each month to the inventory value in your point of sale system.
FINANCIAL STATEMENTS: Gain a full understanding of your financial statements. What are the numbers telling you? How can you improve the performance of your business? How are the numbers going to affect your year-end tax liability?
PARTNER WITH AN EXPERT: Find experts that understand your industry and commit to checkpoint meetings. A good business advisor and accountant will be able to help you navigate critical business performance issues, as well as tax laws. Don’t underestimate their value. It is typical that an expert business advisor or coach can save 10x their cost.
TAX PLANNING: Tax planning should be part of your overall financial strategy. Plan to meet with your tax advisor in October to ensure you’ve maximized all possible tax reduction strategies.
TAX LIABILITY SAVINGS: Plan for your tax liability. Be sure to allocate at least 20% of your profits for your year-end tax liability or estimated tax payments.
SALES & USE TAXES: State taxing authorities are focusing their audit activities by targeting small businesses. Gain a full understanding of Sales Tax Nexus to assure your compliant. Keep invoices and reports showing your sales tax amounts and tie them out to your filed reports.
1099 VENDORS: Before you pay out funds to a 1099 contractor, be sure to get a completed and signed W-9. The burden falls on you to prove their status, thus I recommend having the W-9 on file, even if you end up paying them less than the $600 threshold. Also, be sure to fully understand the IRS guidelines for 1099 vendors. The most common guideline to consider for the boutique industry is: if you have any control over the individual’s schedule and how they deliver their service, the IRS would classify them as an employee.
MILEAGE RECORDS: Don’t miss out on your mileage deduction. It truly does add up and is worth the time it takes to track it on the simple apps available to us.
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Guest Blog Courtesy of Christyne Gray, Founder| She Profits Now