Taxes can seem like a never-ending burden – especially for SMBs. In fact, according to a survey conducted by the National Small Business Association (NSBA), taxes are one of the topmost concerns for small businesses (SMBs) in the United States. Fear not, though; there are key elements that can make the job a little easier.
SMBs, or small and medium-sized enterprises, are the foundation of the economy. They are essential to economic progress because they create jobs, support the neighborhood, and contribute to society. SMBs, however, nevertheless confront particular difficulties, especially when it comes to taxes. The complexity of tax regulations may prevent SMB owners from affording to hire tax experts to guide them through the system. In this blog, we’ll tackle the six (6) tax challenges that SMBs must overcome and offer some advice on how to do so.
Top 6 Tax Challenges
- Understanding Tax Laws
- Payroll Taxes
- Lack of Management Training
- Meeting Tax Deadlines
If these top tax challenges are not addressed, they can result in fines and interest. Because tax laws are complex, even small business owners may face a variety of tax-related issues. Below is a breakdown of these hurdles to help you determine if you need help with your taxes.
1. Understanding Tax Laws
The rules that govern tax rules are confusing. To make matters worse, new rules are constantly being added. As an SMB owner, you may not realize that tax treatment is different for an employee versus an independent contractor. Taking the time to learn about the complexities of tax laws can be tedious, especially for small business owners who already have a lot on their plate. However, it’s crucial to have a good grasp of it to ensure that you’re filing your taxes correctly and taking advantage of all of the deductions and credits that are available to you.
Upkeeping a well-organized workplace, particularly during tax season, can have a major impact on a company’s success. According to recent studies, only 23% of struggling or failing businesses describe their workplace as organized, compared to a staggering 53% of thriving SMBs. This finding emphasizes the significance of an organization in achieving business success, as well as its relationship to tax management.
A disorganized workplace can lead to a lack of expense and income record-keeping leading to tax filing delays and errors. This, in return, can result in unnecessary penalties and interest charges.
Accurate record-keeping is critical for SMBs. To ensure that you’re filing your taxes correctly, you must keep track of all of your expenses, income, and tax-related information. To overcome this, you can utilize accounting software or hire an accountant to help you. Organizing your receipts, invoices, and other financial records will also make it easier to keep track of everything.
4. Payroll Taxes
Payroll taxes are not the same as income taxes. Payroll taxes are the additional taxes that employees must pay based on their wages, but they also include an employer contribution component. Payroll taxes on an employee’s wages are owed by both the employee and the employer.
Payroll taxes include Social Security and Medicare taxes, as well as federal, state, and unemployment taxes. Payroll tax management can be time-consuming and difficult, but it is critical to understand. By utilizing payroll software or professional help and implementing a system for accurate record-keeping, you can overcome this tax challenge and ensure that your payroll taxes are handled effectively and efficiently.
5. Lack of Management Training
Money management becomes critical when a business starts to make a profit. While some business owners are able to handle taxes on their own, many flounder and make mistakes. As a result, they miss out on possible tax breaks and legitimate write-offs. This is especially important because the complexity of bookkeeping increases with each new client. In fact, a recent survey reported that more than 40% of SMBs have seen a financial advisor to help deal with tax issues and enhance their money management techniques.
6. Meeting Tax Deadlines
To avoid penalties and interest, it is critical for an SMB owner to keep track of all tax deadlines. However, with so many deadlines to keep track of, it’s easy to overlook one. SMBs must meet the following tax deadlines:
- Quarterly estimated taxes
- Sales tax
- Payroll tax
- Income tax
Managing Tax Challenges: Is It Worth The Effort?
Similar to a customer relationship management system (CRM) that enables enterprises to form solid bonds with customers, a tax management system should also have vital features set up. These include keeping track of your earnings and outgoings, handling payroll taxes, adhering to sales tax requirements, and remaining updated on tax legislation. Don’t forget that tax management software or an expert can bring helpful reporting and analytical techniques to help you track your progress and make any adjustments. Here are some signs you need a tax professional for your business. You can manage your small business and take on your tax challenges with confidence by putting these key aspects into practice.