Today, we have the pleasure of speaking with Priya Jaiswal, a recognized authority in Banking, Business, and Finance. Priya has extensive experience in market analysis, portfolio management, and international business trends. She’s here to share her insights on the challenges small businesses face when filing taxes for the first time.
Can you recall what your initial fears were when you and your partner had to file your first tax return for your business?
I vividly remember being apprehensive about making mistakes on our tax return. We had grown quickly, from zero to seven employees in our first year, and the thought of organizing all our income streams and expenses while handling day-to-day operations was daunting. I worried that a simple mistake might trigger an audit, adding unnecessary stress to our already busy schedule.
How did you manage to balance gathering and organizing your income streams and expenses while managing day-to-day business tasks during your first year?
It was certainly a challenge, but we prioritized keeping detailed records and staying organized throughout the year. We used accounting software to track our finances in real-time, which made the tax filing process much more manageable. Additionally, we dedicated specific times each month to review our financials and ensure everything was in order.
What advice would you give to first-time entrepreneurs to avoid feeling overwhelmed as tax day approaches?
Start early. Don’t wait until the last minute to gather your documents. Set aside time regularly to keep your records up to date. a. Entrepreneurs should begin organizing their tax documents as soon as the fiscal year starts, not just around tax season. b. Maintaining a routine, incorporating stress-relief activities like exercise or meditation, and possibly consulting a tax professional can help reduce stress during tax season.
What are the chances of a small business being audited by the IRS?
The chances are relatively low, with only about 1.6 percent of businesses getting audited. a. If a business owner receives an audit notice, they should respond promptly, provide the requested records, and remain calm. Audits can be a straightforward process if the records are well-organized.
Can you share an example of a small business audit and how it was handled smoothly?
One example that comes to mind is Rebeca Mojica’s DIY jewelry boutique. She was audited but had meticulously kept her records organized. As a result, the audit process was smooth, and the IRS was able to quickly verify the information without any major issues.
What measures can business owners take to ensure they are prepared if an audit does occur?
Good record-keeping is crucial. a. The term “TurboTax defense” refers to using the software to document that any error was not intentional but rather an honest mistake, which can support a business owner’s case during an audit.
During the early years of a business, how common is it to report losses?
It’s quite common for businesses to report losses initially. a. New businesses often have significant startup costs and may take time to become profitable. Reporting losses is not unusual and can happen in the first few years. b. Maintaining a clear and realistic business plan that outlines the path to profitability can assure the IRS that the business is legitimate and working towards a sustainable future.
What is the importance of understanding allowable deductions for a business?
Knowing allowable deductions can save businesses a significant amount of money. a. Unexpected deductible expenses can include things like home office expenses, certain business meals, and even pet food if the pet guards your business premises. b. A good accountant can help identify legitimate deductions and prevent issues with the IRS by ensuring the business doesn’t claim improper deductions.
Why do you believe so few business owners take advantage of hiring a CPA to file their taxes?
Many perceive it as an unnecessary expense or believe they can manage on their own. a. Hiring an accountant for our first tax filing provided peace of mind and ensured the accuracy of our filing, saving us from potential headaches down the line. b. Business owners should consider the complexity of their finances, their own knowledge and experience, and the potential benefits of having a professional handle their taxes when deciding whether to hire an accountant.
Overall, what key message do you want to convey to entrepreneurs about handling their business taxes?
The key message is not to panic. Stay organized, keep good records, start early, and don’t hesitate to seek professional help if needed. Taxes are a part of doing business, and with the right approach, they don’t have to be a source of stress.
You mentioned that the IRS and entrepreneurs are not so different. Can you explain this perspective further?
Both the IRS and entrepreneurs ultimately want the same thing—to keep the books balanced. The IRS isn’t out to get anyone; they simply want their dues. Understanding this can help demystify the process and reduce anxiety.
How has your experience in Internet marketing and working as a distressed credit analyst influenced your approach to managing business finances and taxes at Dealstruck?
My background in internet marketing taught me the importance of analytics and tracking metrics, which translates well to financial management. As a distressed credit analyst, I learned valuable skills in risk assessment and financial planning, which are crucial for maintaining healthy business finances and ensuring compliance with tax regulations.
