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Top tips for tax season: A guide for startup success

3 minute read

Tax season can be a daunting time for startup founders and small business owners, but with a little bit of planning, you can take advantage of different tax laws to maximize your returns. Kim Girling, an accounting, tax and management instructor at the University of Cincinnati Lindner College of Business, helps small businesses across a variety of industries navigate tax season with confidence. Here are six top tips to ensure you navigate tax season with confidence and take advantage of every opportunity to optimize your tax situation.

Proper entity structure: Set the foundation for tax success

One of the first decisions you'll make as a startup is choosing the right legal structure. Whether it's an LLC, S corporation or partnership, the entity structure you select can have significant tax implications. To reduce the risk of double taxation on profits, business owners may choose to organize as a pass-through tax entity such as a sole proprietorship, partnership or S corporation. It is important to note that the quarterly tax rules for small businesses may vary depending on how your entity is structured.

Utilize accounting software for accuracy

Accurate bookkeeping is the cornerstone of successful tax preparation. According to a report on small business accounting, 60% of small business owners need more confidence in their knowledge of finance and accounting. That is where software comes in. Embrace the power of accounting software to streamline your financial record-keeping. Not only does it save time, but it also reduces the risk of errors. Stay organized, keep track of income and expenses and make tax season a breeze.

Explore tax incentives and credits for startups

Did you know that specific tax incentives and credits are tailored for small businesses and startups? Our experts emphasize the importance of researching and taking advantage of these opportunities. Uncovering these benefits can significantly impact your bottom line, from research and development credits to incentives for hiring in specific industries.

Separate personal and business expenses: Clear documentation is key

Maintaining a clear distinction between personal and business expenses is essential. Create a system for documenting all transactions related to your business. This not only simplifies tax preparation but also ensures compliance with tax regulations. Our experts stress the significance of proper documentation to avoid potential pitfalls during an audit.

Depreciation: Maximize deductions on business assets

Understanding depreciation rules is crucial for maximizing deductions on your business assets. Our experts recommend familiarizing yourself with the different depreciation methods available and applying them strategically. This knowledge can lead to significant savings during tax season.

Navigating complexities with expert advice

In the world of taxes, seeking professional advice is a wise investment. Our tax experts at the University of Cincinnati encourage startup founders and small business owners to consult with tax professionals. They can guide you through the complexities of tax laws, help you make informed decisions, and ensure compliance with regulations. Cincinnati-area businesses can also take advantage of UC’s Center for Entrepreneurship resources to gain personalized management consulting and tailored solutions.

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