Tax season is here, but merchants should consider the ramifications of the IRS with every business choice they make. While most choices can benefit your business, many come with strings attached, which can leave you in a mess with the IRS if you are not prepared.
First off, do not get a bank loan for an start-up business. Not only do you have to pay taxes and submit many forms when paying your taxes, but they are also a bad idea due to their set-up. Bank loans are not offered up to every business. High-risk businesses hardly ever qualify. Interest rates are also high, and many banks prefer to access your merchant account in order to take out their lump payments once a month. These payments start typically within 1-2 months of obtaining the loan, and the huge payments can hurt a struggling business even further. Instead, you need to look for a start up cash advance, like the one offered by FAM. With this program, you do not pay huge lump payments every month, but instead pay small payments every week. Interest is also low, and you do not file paperwork with the IRS, as it is not a loan.
Be sure to write off your driving expenses. Keep a record (a Steno pad in the glove box helps with this) of everywhere you drive for business, your upkeep costs, and gasoline, diesel, or electric costs. Even if you drive five minutes to see a client, it is still a business trip, and it needs to be addressed during tax season.
Also, while the IRS gets a lot of heat and press, do not forget about state and local taxes, self-employment taxes, payroll taxes, excise taxes, and property taxes, among other things. These taxes can be overlooked if you are rushing to file your federal taxes, and by failing to pay any of the aforementioned taxes, you can end up with hefty fines. You also need to make sure that you keep your personal and business expenses separate, i.e., do not use the company debit card for your groceries. This is risky, and if you file the wrong expense and the IRS for state government catches it, you will be in a lot of trouble.
You need to make sure that your business is prepared for quarterly tax payments. While many things are great for tax write-offs, small business loans are not.
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