Tax season is here, and the deadline to file returns is fast approaching. As an independent community pharmacist and business owner, this probably isn’t your favorite time of year. In fact, 40 percent of small business owners say that taxes are the worst part of owning a business.
Fortunately, there are things you can do right now to ease the burden of tax season.
Even if you hire a professional to file your taxes, it’s important for you to understand the process, and to have a clear idea of what you need to do to stay compliant. Here are some tips to help you ensure that your tax season is successful.
1. Keep clear, complete records
The better records you keep, the easier it will be to prepare your returns. Track your business expenses, store and organize your receipts, and keep them all in one place. It’s preferable to do this electronically and there are numerous apps and software programs that can help you. That being said, you must back up your records.
Make sure your business expenses are kept completely separate from your personal expenses, too. When you’re preparing your returns, you don’t want to have to sort through every transaction.
Having clear and complete records can also protect you in the event of an audit. You’ll be able to quickly find the purpose for a particular expense or substantiate the deductions you’ve claimed.
2. Know your tax requirements
Know which tax bracket you fall into, your filing requirements and the forms you’ll file. Make sure you’re familiar with your state and local tax requirements, too. This way, you can avoid any surprises.
Also, be aware of red flags that could get your pharmacy selected for an IRS audit. Disregarding limits for deductions, excessive charitable contributions and not checking your returns for errors could all draw the attention of the IRS.
3. Know what to deduct
Don’t miss any opportunities to save money. Deducting certain business expenses reduces your taxable income, so the more deductions you can make, the better. And, you can probably deduct more than you expect. For example, you can deduct the costs of marketing, the fees you pay your accountant and the costs of inventory used in your latest giveaways. You can also deduct the costs of continuing education courses or conferences you attend.
While your accountant can identify these deductions when preparing your returns, being aware of them yourself can help you better maintain your records, manage your expenses and plan for promotional campaigns. And being aware of soon-to-expire tax breaks can help you plan investments in new equipment or store upgrades.
4. Start preparing for next year
You should already be thinking about your 2015 returns. Make next year a breeze by preparing now. Stay up-to-date with your records, identify transactions that are tax-deductible throughout the year and reflect on this year’s difficulties so that you can adjust your process. Your accountant can help you identify areas where you can improve.
Check out the IRS website for more information on filing taxes for small businesses.
Filing your taxes might not be fun, but with a little preparation, it doesn’t have to be a headache. Use these tips—and advice from a professional—to survive tax season this year.
