Seven months have gone by of 2018 and now’s the perfect time for business owners to conduct a mid-year review of their business operations and finances. Although it may be a little time-consuming, conducting a mid-year review is essential as it allows you to monitor and measure your business progress through half of the year. Furthermore, by tracking your progress, you can see which aspects of your business needs improving so as to meet your targets by the year-end.
Here are four things to consider while conducting a mid-year tax review of your business:
- Track Your Income and Expenses
Now that you’re halfway through the year, you must have a track record of all the business activities that took place in seven months. Keeping tabs on your income and expenditure is very important for a business as it helps you assess your financial position. Furthermore, actively maintaining business records allows you to explore ways to predict your quarterly tax payments and maximize your deductions. Thus, it would be a wise idea to always hold on to your business receipts until the year-end.
While conventional methods such as spreadsheets are great for keeping track of business transactions, now there are numerous software tools in the market that make the whole process much more convenient and quick.
- Never Mingle Business And Personal Finances
When running a business, it would be a wise idea to make a clear distinction between your personal and business finances. You could make a separate expense account for business while maintaining your personal savings account. This will simplify the entire process of tracking your business income and expenses. You would never run the risk of mixing personal expenses with business expenses.
- Quarterly Estimated Tax Payments (QETP)
Every business owner has to pay QETP four times in a year. The upcoming due date for QETP is September 15, 2018. While many of you might take it as an unwelcome norm, making tax payments on a quarterly basis allows you to steer clear of huge tax bills during the tax filing. Moreover, if you fail to pay your taxes correctly throughout the year, the IRS could impose a heavy fine on you. And you sure wouldn’t want that, would you? You can be adequately prepared for your next QETP by running an estimate of the taxable income, deductions, and credits for the present year based on last year’s tax return.
- Take A Closer Look At Your Finances
Many small and medium-sized businesses fail during their first year itself primarily because of financial challenges and cash flow constraints. Thus, to ensure a healthy functioning of your business, it is extremely important to keep your finances in check. Track and monitor financial indicators such as business/personal taxes, high-level financial targets, employee performance contributions, and outstanding loans (if any). Once you’re done reviewing your finances and cash flow, you have to chalk out investment strategies for your business. It could be purchasing new equipment for business operations, it could be purchasing a software, or it could be expanding your marketing and advertising channels. Such costs can be claimed as deductions while filing tax returns and this, in turn, could lower your taxable income to a certain extent.
Considering these four things while conducting a mid-year tax review would not only help you save money but it will also allow you to scale up your business in many ways.
For more tax and business advice, contact our tax experts at MyTaxFiler at email@example.com and we’ll be more than happy to serve you!