Tax season is stressful enough as it is. For business owners, tax time gets even messier as we try to navigate tax forms, fees, and filing dates for both our household and our company. And we do all of this while struggling to maintaining that elusive balance between work and life.
Part of the struggle for business owners is that Tax Day isn’t only on that one familiar date in April. Tax “season” comprises a yearlong calendar of important fees and filing dates. It also means multiple entities wanting their piece of the pie.
With so much to keep track of, it’s no wonder so many business owners I know—and I include myself in this—have at one point (or more) forgotten important tax deadlines, missed payments, or learned too late about a tax rule that directly affected their business.
As for myself, I’ve certainly made my share of tax-related mistakes in the businesses I’ve owned. And it’s always an ongoing learning process. Below is a list of the standout lessons I’ve learned—and in ome cases the biggest stressors I continue to face—when it comes to my business’s taxes.
- Keep Track of Startup Costs
When I started my first business, I knew how important it was to do things like create marketing materials, advertise my business, meet with consultants, and begin a customer acquisition strategy. All of these activities required that I spend money—before my business officially opened its doors, and well before I saw any profits.
Spending money is always a concern as a business works to become profitable. I had an even bigger problem in that I mistakenly believed I couldn’t write off any expenses incurred before my company was officially open for business. As a result, when doing my business’s taxes, I never attempted to deduct my startup costs with the rest of my expenses.
I’ve since learned my lesson and changed my mindset: the costs associated with getting my business ready to operate are no different than the costs associated with running my business once its doors opened. Had I realized that earlier, I’d have learned that some startup costs can be written off, and I would have struggled a lot less within that first year or so of starting my company.
- Separate Personal and Business Expenses
Another lesson learned came when I operated as a solopreneur, using my own name as that of my company. I didn’t immediately open a separate bank account for my business, and this was a task I continued to put off as time went by. Initially I didn’t think much of it. I’m a pretty organized person, and keeping everything separated seemed like it should be straightforward. It wouldn’t take a ton of effort to record an occasional run to the office supply store, or to consult Google Maps to track how many miles I’d travelled to meet a client.
Turns out, the hard part wasn’t the act of recording and categorizing all my business expenses correctly. Rather, the hard part was making sure to record and categorize my expenses in a timely manner. This was the key in keeping things easy and organized for tax time.
Too often, I found myself setting a business receipt aside to deal with later, and promptly forgetting about it—or worse, losing it. Too often, after scrambling to finish my taxes on time, I found myself scouring my bank records to clear up a discrepancy with my invoices.
I was intermingling my personal expenses and my business expenses, and if I didn’t keep meticulous and timely records of everything, it was all too easy to fall behind. And more often than I’d like to admit, some things got lost in the shuffle.
It doesn’t matter how organized and conscientious I am as a person. As a business owner, I know it’s never a “good time” to organize my receipts. It’s never convenient to stop what I’m doing and make sure something is filed away properly, right in the moment it happens.
But I’ve learned just how important it is to set aside time each week—or each day, whatever works best—no matter what else is going on, to make sure everything is properly logged, filed, and accounted for. And this is true even now, as I keep my business and my personal expenses separate. The extra time and effort spent on bookkeeping each week is more than made up for when the stress of doing my taxes is minimized.
- Know All Your Tax Obligations
When I think of taxes, the IRS always comes to mind first. But they’re not the only player in the game. After I started my business, and especially when I began hiring employees, I quickly learned about all my other tax obligations.
When money started going to things like payroll, property taxes, unemployment taxes, and plenty more, the state of my business seemed to change drastically. And it’s not just about what I was paying in taxes. All of a sudden I found myself swamped with new forms, filing dates, and records to maintain. More so than the money itself, keeping on top of all my tax obligations cost me a lot of my time and energy.
There are also other implications of having so many tax obligations. Paying self-employment taxes—often a vastly different number each time I file—reminds me just how many unknowns come along with running my business. Paying local taxes for my home-based business reminds me how easy it can be to let work stress bleed into my home life—and vice versa.
And paying unemployment taxes reminds me of the time I worked my butt off for a new company for over a year, only to be laid off with all non-executive-level staff when our investors pulled our funding, just before what could have been our big break. I can’t help but wonder—and worry—whether I’ll ever have to be the person who breaks that kind of news to a roomful of people who put their lives on hold to make my company into something great.
Ironically, the stress that comes along with all my tax obligations has little to do with the money itself.
- Hire an Accountant
By outsourcing my accounting to a CPA firm, I’d hoped to get some peace of mind, and a hefty burden off my shoulders. Hiring a professional to do my accounting meant I no longer had to worry about forgetting important filing dates, confusion about my tax obligations, or missed opportunities to lower my payments.
That doesn’t sound so bad. So what’s the problem? This is another instance where money spent isn’t the source of stress. Rather, hiring an accountant made me realize I wasn’t completely ready to delegate. Even though I wanted the stress of tax season off my shoulders, I wasn’t completely ready for the loss of control it would cause me to feel.
One of the best things about being a business owner is the amount of control I have: setting my own schedule, choosing which projects to take on, and deciding how my business makes and spends its money. Though the responsibility comes with its own stresses, being in control of all these things is also liberating.
In this case, bringing someone else on meant taking some of the control away from myself. Logically, I know it’s a good thing to have a professional handle my taxes. But there’s another part of me that felt anxious about giving up some of that precious control, about sharing such an intimate detail of my business—its finances—with an outsider. That same part of me felt frustrated about having to work around someone else’s schedule in order to get things done.
But really, is that so unusual from every other aspect of running a business? Oftentimes I’ll work different hours than I’d like to in order to catch up with a client or meet a tough deadline. I’ve taken on many projects not because I wanted to, but because I felt I should. And there are plenty of times when I spent my business’s money in a way I didn’t necessarily want to, for the betterment of my company, my employees, my family, or my own sanity. It’s just something we have to do sometimes.
It’s great to have control over so many aspects of my company. But more often than I’d like to admit, that control is just an illusion. And knowing when to give it up—when to delegate—is a large part of running a successful business.
- The Most Costly Mistake
There’s a lot that goes into registering your business for taxes at all levels. As such, there are many opportunities to make mistakes. The biggest lesson I’ve learned in all of it is the danger of dwelling on those mistakes.
All of my past missteps have been costly to some extent, but the most expensive mistakes are the ones I failed to move forward from. They’re the ones I failed to reflect—rather than dwell—on, in order to glean lessons learned and discover opportunities hidden in the rubble.
As business owners, we simply can’t afford to dwell on our mistakes, no matter how large or small they may be—because just like paying taxes, mistakes are a constant in every successful entrepreneur’s career. Learning from mine and others’ missteps and misfortunes is a good place to start. Getting out there and making your own mistakes is the best next step.