Benjamin Franklin once said that “in this world, nothing is certain except death and taxes.”
Although the founding father originally made that statement about the then-new constitution’s validity and durability, it just so happens that it is mostly applicable nowadays. In the case of taxes, in particular, dealing with the IRS has become even more certain because of how every business is implored to pay their dues and comply with increasingly-stricter regulations.
As a business owner or self-employed professional making a living in the USA, you’re probably familiar with the process of filing, dealing with, and paying for taxes. By this time, however, there’s one rather shocking truth that you probably haven’t realized by now: you’re not filing and paying your IRS tax liabilities as well as you should.
“How to pay tax” made much better
Like any other kind of practice or process that your business follows, paying for IRS tax liabilities is something that you can be better at if you start applying the right approaches and tips.
While correctly paying for taxes year after year is already a significant feat in itself, managing to do so in a much more effective and potentially-profitable way possible will convince you to take things up a notch. With the tax season right around the corner, however, you won’t have to wait a few years down the line to be smarter with paying the IRS and filing returns because you can start using these best practices ASAP:
Best practice #1: Don’t wait until the last minute to record your transactions
The biggest reason most business owners give themselves a much harder time than they should when paying their IRS tax liabilities is that they cram their recording and reconciliations.
It may not seem like much, but putting your recording by as little as a few days or an entire week can lead to a domino effect of sorts wherein you have a much more difficult time with every day of delay. Thankfully, you won’t need to worry about cramming your reports or returns come tax season again because taking half an hour at most per business day to jot down your receipts and figures will help you pay your taxes better!
Best practice #2: Learn to separate your business expenses from your personal payments
Each year, business owners, self-employed professionals, and freelancers end up overpaying a significant amount of money to the IRS because of one mistake: they don’t separate their business and personal expenses.
Although you might think that you’d easily decipher what expense is linked to your business and what is linked to your concerns, the truth can prove to be the exact opposite once all the numbers pile up. Unfortunately, a simple slip-up can snowball into a much bigger tracking and recording issue that will significantly hurt your returns once it’s time to compute and pay for tax!
If you want to ensure that you don’t end up experiencing the same issue to the point where you lose thousands to hundreds of thousands each tax season with overpayments, you can separate both expenses by:
- Getting a separate bank account for your business
- Individually classifying expenses through the use of a sheet (if you can’t get a separate account just yet)
- Keeping receipts for every single business expense, cash inflow, and related transactions to correctly calculate your final taxable amount
Best practice #3: Invest in the right accounting tools
With the help of technology, paying for taxes (or dealing with finances, generally) no longer has to be the same arduous task it used to be because accounting software now exists to make the experience a lot easier.
Compared to the olden days of paper ledger sheets, filing cabinets, and copious amounts of number crunching, today’s tax preparation and payment experiences are now much smoother thanks to the use of technology. Using dependable pieces of software (such as those developed by our partner Xero or Quickbooks) will allow you to prepare statements, attain accurate figures, and quickly calculate in no more than a few minutes!
Best practice #4: Outsource help
The biggest misconception that decision-makers make nowadays when they learn how to pay tax is that they think they need to do it themselves—especially when you consider that there are professionals around to help.
If you want to have a much faster, more convenient, and more effective time when you pay for your taxes, there’s no better way to achieve some results than to let an expert that’s trained to do so take over your finances. Using a service such as DoubleRule’s starter, standard, premium, or enterprise accounting, for instance, will allow you to not only have an easier time with filing and payment but also yield various advantages—such as:
- Raking in more profit by capitalizing on available tax incentives
- Reducing unnecessary costs or return items that may only lead to unnecessarily-high tax payments
- Saving more time on compiling and recording information
Having a dependable service provider like DoubleRule by your side is one of the best ways to improve the way you pay for your IRS tax liabilities. Regardless if you’re a small business owner, start-up manager, or service bookkeeper, we’re here to help—so schedule a free discovery call with us today!