Be Resolved to Improve Your 2016 Tax Strategy
The 2015 tax reporting season may be starting to wind down, but small businesses can still take steps to gain efficiency in 2016. Changes implemented early in the current tax year will also carry through to future reporting seasons. So, now is the perfect time to review tax reporting procedures and look for room for improvement. Consider the following tax "resolutions":
Resolve to Increase the Accuracy of Tax Filings
The Trade Preferences Extension Act, passed in 2015, increased the penalties for inaccurate or missing Forms W-2 and other required information returns. To avoid paying penalties, make a resolution to ensure all tax filings are accurate and up-to-date. Accuracy can be improved with an extra layer of management review or with the addition of bookkeeping staff as a company grows. The implementation of a cloud accounting system may also help to improve accuracy by helping automate bookkeeping and tax calculations.
Take the Time to Review the Business Structure
If a new company has not yet formally organized, the beginning of the year is a great time to consider adopting a business structure that provides tax advantages. Often, businesses must trade-off between the administrative costs of maintaining a more complex business structure, like a C-Corp, versus the tax benefits received. This year may be the right time to take another look at organizational options, including Limited Liability Corporations, and investigate the merits of alternative structures.
Organize Monthly Reporting to Make Tax Reporting Easier
Rather than waiting for year-end to fulfill annual tax reporting requirements, try structuring monthly reporting around year-end deliverables. By keeping up with the annual formats each month, companies won't need to prepare specialized reports for tax reporting during the busiest months of the year. Note: This doesn’t necessarily mean it’s a good idea to file monthly. There are agencies that penalize businesses for filing too frequently.
Research Tax Credits
Resolve to research tax credits early in the year. Numerous tax credits are available for small businesses, but certain qualifications must be met. For example, the Small Business Health Care Tax Credit is available to those businesses with fewer than 25 full-time, including full-time equivalent, employees that offer health insurance through the Small Business Health Options Program (SHOP). Other tax credits may require small businesses to comply in other ways, such as providing access to disabled individuals or providing work opportunities to veterans and other targeted groups. Finding out about missed credits when it's too late to take action is a missed opportunity. Do your research now, so you don't miss out on potential tax benefits.
Consider a Cloud Accounting System
Along with these other common-sense strategies, small businesses may also gain efficiency by automating bookkeeping processes with a cloud accounting system. Cloud accounting systems may contain built-in expense reports that can be easily designed to match expense categories. The built-in accounting expertise, data backup, and data security of a cloud accounting system may also help small businesses meet their filing deadlines.