It’s everyone’s favorite time of year, tax time! Wait, what’s that? Only CPAs are excited about tax season? I get it. Taxes can be confusing - especially for businesses. To help get you excited and feeling prepared for tax season, follow these six tax tips for retailers:
1. Organize your financial records with accounting software
Automate as much as you can so you can focus on your business. There are great accounting software solutions, like QuickBooks and Xero, available to SMBs to help you organize your finances. The better shape your financials are in, the easier your tax return will be to prepare and will ensure your deductions are maximized.
2. Inventory balance can have a huge impact on your taxes
For retail businesses, whether online or brick-and-mortar, inventory is (almost) everything. Use an inventory management system, like Stitch Labs, to properly manage your inventory levels and make sure you don’t have a huge tax liability and can meet your customer’s needs.
3. Get a professional who understands your business to prepare your taxes
Preparing and filing business taxes is a tedious and time-consuming process. Not to mention that U.S. tax codes are complicated, with many rules and regulations businesses need to follow. Preparing your own taxes can not only be a waste of your time, but it may also cause you unwanted fines, penalties, and audits from any errors you may make or rules you may overlook.
4. Consider S Corporation status if you are profitable
Depending on your type of business, there are tax savings available for entities electing to be taxed as S-Corporations. By filing your federal taxes as an S Corporation instead of a C Corporation, you are essentially passing your corporate profits and losses through your shareholders which can result in lower tax rates. We usually recommend waiting until your business is profitable and then consulting with your professional.
5. Be aware of filing deadlines, the penalties can be steep
As I mentioned above, tax codes are complex and deadlines are strict. If you miss an important tax deadline, you could face steep penalties. The 2015 Tax Year due dates are as follows:
For a more detailed calendar see the IRS website
Several penalties can apply if you fall behind, including failure-to-file, failure-to-pay, late payment, and interest on any amounts owed. Your tax professional may be able to help abate some of these, for further information on penalties see the IRS website
6. If you are drop shipping product or sell in multiple states, consider nexus issues
Nexus, or physical presence, can be a tricky thing when it comes to taxes. Where your company sells, has warehouses, or drop ships from can determine where your company is required to collect sales tax. An experienced professionals can ensure you are in compliance with nexus obligations.
If you have any questions about these tax tips, let us know in the comments below.