0373: Tax Tips For New Construction Business Owners

This Podcast Is Episode Number 0373, And It's About Tax Tips For New Construction Business Owners The tax deadline is postponed to July 15, 2020. If you just started your construction business last year and haven't filed yours yet, this post would be helpful.    Your tax bill is based on reports produced by your accounting system. Want to avoid paying more than you should come tax time? Or a frantic last-minute search for missing financial records?    New construction business owners have a lot on their plate, and can quickly lose track of an approaching tax deadline or financial data needed to submit their return.   Organization is key when preparing for tax time, as is taking advantage of the many tools and resources out there to support new entrepreneurs.   Set yourself up for success by following these four pillars of painless tax prep.  Commit to clean bookkeeping from day one Year-round, effective bookkeeping is the best way new construction business owners can minimize tax season stress. With the full range of accounting software out there, there's no reason to rely on time-consuming manual methods that leave room for error. All-in-one options like Xero and QuickBooks automate your most important bookkeeping processes, including: Tracking expenses; Tracking sales and income; Creating and sending invoices and Managing inventory. With your financial records all in one place and up-to-date, you're better positioned to maximize your refund, while avoiding penalties associated with incorrect or incomplete tax returns. Capture every business expense Each year, some small business owners claim less than half of their business expenses, primarily because they don't have a reliable system for documenting expenditures while on the go. Without carefully logged receipts, contractors must forfeit valuable tax deductions, sacrificing cash they could be funneling back into their business. Cash in on claimable expenses by using a mobile app to record receipt data, track mileage, and generate expense reports. As a bonus, many of these tools sync with your all-in-one accounting software. Separate business from personal Right from day one, small business owners should divide their personal and business expenses. Differentiating between the two will make it much easier to claim deductions on your tax return – and support those claims in case of an audit.  Recommended steps to separate your business and personal finances include: Create a separate bank account for your business, and designate a credit card solely for business purposes (this will help you track expenditures while building up your credit and borrowing power); Never combine business and personal expenses (for example, if you buy printer ink for your home and your business at the same time, ask for two separate receipts); Pay yourself a set salary from your business checking account each month (this will help you determine how your income and the company will be taxed). Always consult with an accountant Not sure exactly what you can claim as a business expense? Wondering which accounting software to use or how to interpret local tax regulations? Consult with a construction accounting professional to put your mind at ease – well before the filing deadline! In addition to managing the nuts and bolts of tax preparation, regular meetings with an accountant will help you continuously improve bookkeeping practices and better understand the financial workings of your construction business. Final thoughts Putting receipts inside QuickBooks is easy! Putting them in the right account, so the reports are accurate, the business owner can trust them, and when the taxes are filed, you will pay the least amount possible - that is where the professional bookkeeper earns their money. These organizational strategies you commit to will promote positive relations with your local tax authorities – and the long-term financial health of your construction company. You work hard for your money, don't let somebody else waste it. If you're having trouble in preparing your financials, we may be able to help you. Fill out the form on the right or send me an email: [email protected].   About The Author: Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or [email protected]