As business owners, you’ve surely heard this advice: You need to have a tax strategy in place and take care of your taxes all year round, not just during tax season. This advice is given over and over again because it works. Acting before tax season will make managing your taxes much easier. With the right preparation, archiving will be a breeze.
Talk to accountants near me for more help. Hire a tax accountant near me today.
You will need to create a tax strategy to take advantage. As an e-commerce business, your tax strategy will be a little different than other types of business. Here are some elements your e-commerce tax strategy should include to make it successful.
1. Correct inventory tracking
In e-commerce, the cost of goods sold (COGS) is often one of your most important numbers. Inventory management and calculating the correct COGS are key to streamlining tax return preparation. Proper inventory tracking also helps with your overall accounting strategy, not just at tax time. As an e-commerce company, you know that your inventory drives your business. If you can’t produce, you can’t make money. The critical role that COGS plays cannot be overstated – it’s all about making a profit. Avail quality accounting services in Canada.
2. Understand sales tax
Your tax strategy shouldn’t stop at income taxes. Instead, you need to have a good understanding of your sales tax obligations for your business and industry. Sales tax obligations for e-commerce are often outside of normal sales tax requirements and usually vary from state to state. It changes frequently and care must be taken to comply. While sales tax can be confusing, there are tools that can help you keep it straight. Talk to a tax accountant near me.
When it comes to sales tax, it’s important to understand all the ways it can affect you, or use software to handle it for you, so you can improve your overall tax strategy.
3. Knowledge of possible tax deductions
In some cases, tax deductions can save businesses thousands of dollars each year. You should be aware of what deductions are available and what you need to do to take advantage of these deductions. Many deductions require your business to take certain steps or meet certain qualifications. Sometimes you can qualify without doing much, but in many situations claiming the deduction will require some forethought.
For example, you can use 100% bonus depreciation for office equipment or furniture. Knowing about these deductions ahead of time could encourage you to make larger purchases that you might not otherwise be able to make for your e-commerce business. You can also deduct for setting up a retirement plan for you and your employees. Adding this benefit will not only help you with your personal retirement planning, but it can also save you money at tax time.
Knowing what deductions you can use ahead of time will allow you to take the necessary steps to take advantage of those deductions throughout the year. Look up accountants near me for more assistance.
4. Monitor transaction data
Some small or medium-sized e-commerce businesses make the mistake of collecting sales information only in preparation for filing their tax returns. If you keep track of all your transactions throughout the year, you’ll know where all the information is, and completing your taxes will be much easier.
Use tools that gather all this information in one place to make the process even easier.
5. Increased costs and profits over time
Timing is important when it comes to purchases and income as it relates to your tax obligations. By accelerating your spending and deferring your income, you can significantly reduce your tax liability.
Here are some examples of how you can benefit from this strategy:
- Delay sending invoices from the 4th to the 1st quarter of next year
- Make big purchases before the end of the year
- Prepayment fees that you are aware of will be billed at the beginning of the following year
Note that this tip may not work well in some situations. For example, if you know that you will have more income next year even without deferring income, you may not want to delay issuing invoices until the next quarter. In this situation, the delayed income will make the year of high tax obligations even worse.
Of course, keeping track of your expenses and income, in general, is important so that you can create accurate budgets and forecasts. This also relates to your overall accounting strategy. Talk to accountants near me to understand the topic better.
6. Create a payment plan
Creating a payment plan now to meet your tax obligations can save you a lot of stress from making payments after you find out what you owe. While you typically have to pay income tax quarterly, you can also create a savings plan to meet any potential additional obligations you expect beyond those payments. Putting the minimum amount of money aside each month and making the same income tax payment as last year will go a long way toward making your tax payments actually due.
7. Work with an experienced accountant
As a business owner, you often don’t have time to look up tax deductions or track the day-to-day financial aspects of your business. Working with an experienced accountant will take some of that workload off of you, and a good accountant will help you create and implement a viable tax strategy, meet deadlines, and track and locate the data you need. Avail accounting services in Canada.
Talk to a tax accountant near me for more help. Avail top-notch accounting services in Canada from those who understand your business needs. Talk to us.