Sarah is a staff writer at Keeper and has her Enrolled Agent license with the IRS. Her work has been featured in Business Insider and Money Under 30. She has nearly a decade of public accounting experience, and has worked with clients in a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce. Sarah has extensive experience offering strategic tax planning at the state and federal level. During her time in industry, she handled tax returns for C Corps, S corps, partnerships, nonprofits, and sole proprietorships. Sarah is a member of the National Association of Enrolled Agents (NAEA) and maintains her continuing education requirements by completing over 30 hours of tax training every year. In her spare time, she is a devoted cat mom and enjoys hiking, baking, and overwatering her houseplants. Show
Here's how I recommend saving for small business taxes! How to Save for Small Business Taxes"How much should I set aside for taxes?"The amount you should set aside for taxes varies depending on your state and the kind of business you own. A good rule of thumb is to set aside 15-30% of your profits. Remember: that's 15-30% of your profit, not revenue. By the time you actually file your taxes and report your expenses, you'll probably owe less than this amount, but it's always better to have a small buffer than to owe more than you saved. "How do I start a tax savings account?"You technically don't have to keep your tax savings in a separate account as long as you keep track of them. For me, though, it's much easier to keep my hands off those savings if they're in a designated account. Contact your bank and open a new business savings account. Then, move 15-30% of every profit each week or month into that account, and don't touch it. Some banks will help you create a 'rule' that automatically moves that percentage into your savings account. If yours doesn't, you can manually transfer those funds once a week or once a month depending on when you review your business finances. "When should I start saving for small business taxes?"The short answer: NOW! As a small business owner, you should always be setting aside money for taxes. If you haven't started saving but are already making money, you should go back through this year's finances and put aside as much as you can. Like I said before, it's always better to save more than you'll need! "When do I pay small business taxes?"If you anticipate owing at least $1000 in taxes for the year (which most small business owners do), you need to estimate and pay quarterly. Here's how that's broken down:
Luckily, if you use an accounting software like Quickbooks, it's easy to pay these quarterly taxes. Click here to learn how. "What if I save too much money for taxes?"So what happens if the quarter ends, you pay your estimated taxes, and there's still cash sitting in your tax savings account? First, pat yourself on the back! I've said it before, and I'll say it again: it's better to save too much than too little. Next, you have a few options:
A word of warning, though. If you save 30% of your profit and have plenty left over after paying this quarter's taxes, that doesn't mean you should save less next quarter. Keep setting aside that 30% just in case. You never know what might happen! Need help preparing for tax time?Managing your business finances isn't easy. (If it were, I'd be out of a job!) Whether you're a brand new business owner or a seasoned entrepreneur, it's never a bad idea to invest in professional financial help. I'm happy to support you in creating your financial plan, saving for taxes, managing your books, or whatever you need. Head over to my services page and let's chat!
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