If you’re like most small business owners, you’re probably not excited for tax season. It can be a stressful and overwhelming time, especially if you haven’t prepared throughout the year or don’t know where to start.
But by prioritizing education and organization, this essential task doesn’t have to stress you out.
To discuss the critical tax tips small business owners need to know, we sat down with local accountant Martha Tovar. Martha is the owner and lead accountant at Ratio Tax & Accounting with 12+ years of experience. She’s passionate about the whole business picture when it comes to bookkeeping and tax services, and has worked with various small business owners and professionals to prepare their taxes and educate them on best practices.
Whether you’re planning on hiring a professional or filing taxes yourself, here are Martha’s six key tips small business owners need to know about.
The Post: What is your background and experience as an accountant?
Martha Tovar: I’ve been in the tax world for about 12 years now. I worked at an accounting firm for about 10 years and then was crazy enough to think I could do it on my own and started my business in 2022.
I see a need to help people prepare their taxes but also help them understand it as well. A lot of people in the field don’t want to teach, but I enjoy it. I love it when a client walks out of my office with not only their taxes but having learned something new. That’s where my passion comes from.
Sometimes teaching means you lose a client, but that’s okay—they walk away better prepared and knowing what to do next year, and that’s a win-win.
What sense do you get from your clients about taxes?
I think many people feel a sense of dread about something. For me, it’s the dentist—I never want to go!
But others approach their taxes in that way—they don’t want to deal with it and they don’t want to feel dumb. My former boss, who is a CPA, used to say, “There’s no such thing as stupid questions,” and I think that holds true in my line of work. I’d rather someone ask me a question, even if they think it’s unimportant or stupid because it could be very important! It’s important to share knowledge so people are more confident in this area.
What are your top tips for small business owners?
1. Maintain accurate records
This is the first thing that small business owners can do to make tax time easier. It’s important to maintain your records throughout the year so you don’t feel as overwhelmed at year-end when dealing with your accountant or doing your own taxes.
Maintaining accurate records looks different for everyone, but could include:
- Keeping and tracking your receipts.
- Maintaining a ledger in Excel.
- Using professional accounting software.
Whatever system you use, keeping accurate records will save a lot of time and stress going into tax season.
2. Separate personal and business finances
I’ve worked with a lot of small business owners and they tend to combine their finances. They might not have the business debit card handy so they use their personal account or vice versa.
It’s a bad habit that can become a problem in the long run—you don’t want to run into issues over an $11.00 charge at Circle K. Commit to keeping things separate and using distinct cards and accounts.
3. Understand deductions
Deductions are different for every type of business, so it’s important to know what’s relevant to you. Your best bet is to consult with a professional who understands your business, but you can also gain information in a few ways:
- Workshops: Many state and federal government workshops offer valuable information through workshops, as do accountants and finance professionals.
- IRS: It might seem daunting, but the irs.gov website has a lot of great information that helps you understand deductions that apply to your line of business.
Deductions can be really impactful for small businesses. Many don’t have extra funds to hire someone to do their taxes and find these benefits, so you may need to put in the extra work to find resources and information that will help you. There is a lot of excellent information available if you seek it out.
4. Stay informed about tax laws
Tax laws change regularly, so small businesses need to stay informed. In this case, working with a professional can probably save you some time but if you are working independently, you can simply do some research through the IRS and get some answers.
Even if the IRS publications are complex to understand, the last thing you want is to move forward with outdated information and end up in a bad spot.
5. Educate yourself
Learn a lot, go to workshops, read articles. YouTube is a great source of knowledge now, which has changed from when I was younger. Today there are some excellent, reliable channels that you can learn a lot from.
It’s so important to learn your business better than someone else. Flying blind is not a great way to move forward—you need to know where your money is going and what your business is doing.
I always tell my clients that I don’t know everything, but I will always work to find out for them. I have to draw on other resources or bounce ideas off other accountants, CPAs, and professionals, too. Continually learning and gaining knowledge is key to success in a complex area like business finances and taxes.
6. Plan ahead for tax season
This falls in line with educating yourself and maintaining accurate records, but planning ahead keeps you from being anxious and stressed.
If you haven’t maintained documents throughout the year or planned for tax season, it can create a lot of stress and anxiety. And it’s real anxiety. It’s money, it’s dealing with the government—it’s not always a walk in the park to deal with these things. Being prepared helps you relieve that stress.
A good way to do this is to create a checklist of things you need to get prepared for your taxes. You can refer to what you did last year as a starting point for things you need to collect again.
If you work with a professional, we can provide a checklist for you as well. You can call me up in December, for example, and I can get you a task list of things to get organized.
If you want to lighten the load this tax season, reach out to Martha and her team for professional help. You can reach her at 520-395-7951 or info@ratiotaxaccounting.com. You can also check their services out online at Ratio Tax & Accounting. Note that Martha is fully bilingual and offers services in Spanish as well.
And if you’re looking for a professional workspace for your small business, you’ll find it at The Post. Book a tour today to see what we’re all about.