6 Business Tax Law Tips for Colorado Entrepreneurs
Companies of all sizes prefer to hang on to as much of their revenue as possible. For Colorado entrepreneurs running small businesses, doing so can be critical to the financial health of their company. And, while the government certainly isn’t trying to hurt your business by assessing taxes, it’s not going to go out of its way to help your business either. That’s why you need to have a good understanding of business tax law and a process for ensuring you abide by it.
What are Business Taxes?
The Internal Revenue Service (IRS) oversees the collection of five general types of taxes:
- Income Tax – All businesses except partnerships must file an annual income tax return.
- Estimated Taxes – You must pay taxes on income, including self-employment tax, by making regular payments of estimated tax during the year.
- Self-Employment Tax – Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves.
- Employment Taxes – If you have employees there are taxes you must pay and forms you must file.
- Excise Tax – Excise taxes only apply to certain types of businesses based on the products they produce, services they offer, or the equipment, facilities, or products they use.
The Colorado Department of Revenue also collects taxes from certain types of companies. Ultimately, even for the smallest of Denver small businesses, business tax law can be very complex and confusing. Consequently, it is well worth the time and effort to seek advice from a business attorney in Colorado.
How to Stay on the Right Side of Business Tax Law
Follow these tips to ensure that your taxes are easy to complete, accurate, and as low as possible:
Stay organized all year
For most small businesses, one of the worst things about tax time is getting prepared to file a return. Where are the receipts you need? Did you remember to record all your expenses? Did you log your mileage correctly? Rather than scrambling to answer all those questions at the last minute, set aside some time every month to keep your finances in order. And, start the fiscal year by setting up a filing system to make it easy to store and retrieve documents, charge slips, etc.
Keep personal and business finances separate
As a Colorado entrepreneur and small business owner, it may be tempting to let your personal and business finances commingle. However, doing so increases the odds that you will violate some aspect of business tax law and find yourself in trouble with the IRS.
Consider using independent contractors
If you are a Colorado entrepreneur who is just getting a business off the ground, it can be expensive to hire employees. In many cases, it makes more sense to work with independent contractors since you don’t have to pay payroll taxes or provide benefits. Just be sure you know how to correctly classify the people who perform work for you. There are big fines for misclassifying people so while you think you may save money by hiring someone as a contractor, you may have to pay for it in the end!
Use accounting software and a payroll tax system
Manually tracking expenses and handling payroll using spreadsheets is a recipe for disaster. Every year, many business are fined for making mistakes in these areas. Invest in the appropriate software packages and let them do the mental heavy lifting for you to ensure you aren’t breaking any business tax laws. Yes, you should double-check the numbers these systems generate, but generally speaking, if the information you put in was accurate, the information coming out will be accurate.
Take the home office deduction if applicable
If you run your Denver small business out of your home, you may be able to use the home office deduction to claim a portion of expenses, such as your mortgage interest, insurance, and utilities. Both homeowners and renters can claim of this deduction.
File on time
Be sure to file your tax return and pay any taxes due on time. If you fail to do so, not only will you have to pay the taxes owed, you will have to pay a penalty as well. To feel confident that your return has been received, consider filing electronically.
Cross Business Tax Law Off Your List
As a Colorado entrepreneur, you have plenty of things you would rather be focused on than business tax law. By following the tips above, you can ensure that you are in compliance and paying the minimum taxes required of you. Then you can turn your attention to more pressing business-building matters.
If you have questions about the interpretation of business tax law as it affects your company, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: firstname.lastname@example.org
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