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How to Stay Compliant With Tax Laws as a Small Business Owner

Feb 15, 2023

As a small business owner, staying compliant with tax laws is vital to success. Not only is it a legal requirement, but compliance also helps keep your business running smoothly and maximize your profits. Knowing the ins and outs of the tax laws can be tricky, but with the proper knowledge and resources, you can ensure you're on the right side of the law. By understanding the basics of taxation, staying up to date with changes in the law, and using the right tools, you can ensure that you comply with all the necessary regulations. With the proper planning and preparation, you can ensure that you remain compliant with the tax laws and that your business remains profitable.


Why Is Tax Compliance Important?

All businesses must comply with tax laws. These laws are designed to collect revenue for the government and to keep businesses on the right side of the law. They are not intended to punish or prevent people from operating their businesses. Compliance is essential for several reasons. First and foremost, you may be fined or penalized if you don't comply with the tax laws, you may be fined or penalized. Penalties and fines can be costly and can even result in criminal charges. Failing to comply with tax laws also puts you at risk of audit. An audit examines your books and records by a tax authority to determine if you are operating your business correctly and if you owe any money. This can be a severe risk to your business and damage your reputation.


Tax Compliance Basics

To comply with tax laws, you must know and understand your business. This will enable you to determine what taxes you owe and what deductions you are allowed to take. You'll also need to know about tax laws and regulations that have changed since you filed your last tax return. You need to keep track of any changes that may impact your business. You can't comply with the tax laws if you don't have a good handle on your finances. Taxes are just one part of running a business. You must also track expenses, manage cash flow, and plan for growth. 


Tax Laws Are Constantly Changing

Over time, new tax laws are often added, old laws are amended, or existing laws are changed. Most of these changes are made to align the tax laws with the current tax administration environment. It’s essential to stay informed. You can find information about the latest tax changes in government publications, online tax resources, and by consulting tax professionals. Your account should also be knowledgeable about any changes.

A person working on a laptop

Understanding the Different Types of Taxes

When discussing taxes, it's helpful to think of them by the different categories they fall under. This categorization can help you better understand the different types of taxes and keep track of what you are paying. 



  • Income taxes: 
  • Businesses pay these taxes on their profit or earnings. You'll need to pay income taxes on your profit even if you don't take the money out of your business. 
  • Self-employment taxes: 
  • These taxes are paid by self-employed individuals like consultants, independent contractors, and others who make money based on their skills or expertise. You'll need to pay self-employment taxes even if you only work for yourself. These taxes are paid quarterly and are collected by the government. 
  • Sales taxes:
  •  Retailers and other sellers collect these taxes on the sale of goods and services. These taxes are sometimes referred to as "use taxes". You don't pay these taxes if you don't purchase anything subject to these taxes.


Using the Right Tools to Stay Compliant

When it comes to taxes, it can be helpful to use a software tool to stay compliant with the law. The software will allow you to track your finances and expenses more easily. You can also use a compliant tax tool to help you stay informed about tax laws and changes in the law. These tools can help you comply with the tax laws and keep your business running smoothly and efficiently. 


  • Audit tracking: 
  • An audit tracking program will help you stay compliant with the tax laws and make sure that your books and records are up-to-date. 
  • Tax tracking: 
  • A good tax tracking program will help you stay compliant with the tax laws by keeping you informed about tax laws, regulations, and changes in the law. The program should also have audit tracking features so that you can stay compliant with an audit. 
  • Expense tracking: 
  • A compliant expense tracking program will help you stay compliant with tax laws and track your expenses. It should also have a cash flow calculator that can help you stay on track with your cash flow. 
  • Budgeting: 
  • A compliant budgeting program will help you stay on track with your finances and keep track of your expenses. You should also use the budget program to help you comply with tax laws.


Setting Up a Tax-Compliant Accounting System

A compliant accounting system is a foundation for ensuring that you comply with the tax laws. A compliant accounting system will help you track your finances, expenses, and taxes. It will also help you stay on track with your cash flow and budget. A compliant accounting system should include a precise bookkeeping system. A quality bookkeeping system will allow you to track your finances and make sure that your books and records are up-to-date. This bookkeeping system should include an accounting system with the necessary tax-tracking features. You can use a quality bookkeeping system to help you comply with the tax laws.

Wendy Needham of N.E.W. Accounting presenting to a client

Tax Filing Deadlines

There are deadlines for filing taxes for most businesses. Failing to file your taxes by the deadline can result in penalties, late-filing fees, and interest. Missing deadlines can be costly and harm your credit rating. When it comes time to file your taxes, you must meet the filing requirements. These requirements vary depending on the type of business that you operate. Each company must file a federal income tax return if it has a gross income of $500,000 or more. The federal income tax return is also known as a 1040-ES tax form. The 1040-ES tax form must be filed with the IRS. 


Work With N.E.W. Accounting

Above all else, staying tax compliant as a small business owner comes down to the strength of your accounting and bookkeeping. Our team at N.E.W. Accounting is ready to handle all of your accounting and bookkeeping needs – and we are experienced in working with small to medium-sized businesses. Let’s work together!

Embracing Change: The Impact of Technology on Small Business Accounting

09 May, 2024
Technological advancements have revolutionized traditional accounting processes, from cloud-based software solutions to automation tools, offering efficiency, accuracy, and accessibility like never before. In this blog post, we'll explore the profound impact of technology on small business accounting, highlighting key trends and innovations shaping the industry. The Rise of Cloud-Based Accounting Software Gone are the days of cumbersome spreadsheets and desktop software installations. Cloud-based accounting software has emerged as a game-changer for small businesses, providing access to financial data anytime, anywhere. Platforms like QuickBooks Online, Xero, and FreshBooks offer real-time collaboration, automated updates, and seamless integration with other business tools, streamlining accounting workflows and enhancing productivity. Automation and AI-Powered Solutions Automation is another significant trend revolutionizing small business accounting. Tasks that were once manual and time-consuming, such as data entry, invoice processing, and reconciliation, can now be automated with the help of AI-powered software. Machine learning algorithms can categorize expenses, detect anomalies, and even generate financial reports, freeing up valuable time for accountants to focus on strategic analysis and advisory services.

Financial Lessons to Learn From Successful Small Businesses

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When business owners and mentors give advice, they usually look at multi-million or billion-dollar companies and their leadership for business lessons. While the world's most successful conglomerates can teach us much, they're not the only places to draw inspiration. Successful small business owners can teach any organization tips for running and growing their business, which are often more tangible than those of large companies. What financial steps do well-run small businesses take? Let's look at some of the lessons we can learn from successful small businesses. Budgeting and Forecasting Budgeting and forecasting serve as the foundation of financial planning for small businesses. By creating a detailed budget and regularly updating financial forecasts, companies can gain insights into their cash flow, allocate resources efficiently, and anticipate future expenses. A well-thought-out budget enables businesses to set realistic financial goals and track their progress toward achieving them. Moreover, forecasting helps identify potential challenges and opportunities, allowing companies to adapt and strategize accordingly. Investing in Technology In today's digital age, investing in the right technology is crucial for small businesses to stay competitive and efficient. Whether it's accounting software, customer relationship management (CRM) systems, or marketing automation tools, technology can streamline operations, improve productivity, and reduce costs. By embracing technology, businesses can automate repetitive tasks, streamline workflows, and enhance customer experiences, ultimately driving growth and profitability. Cost Control Controlling costs is essential for maintaining profitability and sustainability. Small businesses should regularly evaluate their expenses and identify areas to achieve cost savings. This evaluation might involve negotiating better supplier contracts, optimizing inventory levels, or reducing unnecessary expenses. By implementing cost-control measures, businesses can improve their bottom line and strengthen their financial position in the long run.

A Small Business Owner's Guide to Payroll

07 Mar, 2024
Running a small business comes with challenges, and managing payroll is undoubtedly one of them. As a small business owner, you must understand payroll and the necessary steps to ensure your employees are paid accurately and on time. Whether you're just starting or looking to improve your payroll knowledge, let's explore the essential information you need to streamline your payroll process and keep your employees happy. The Importance of Payroll for Small Businesses Payroll is calculating and distributing employee wages, benefits, and deductions. It plays a crucial role in the smooth functioning of any business, regardless of its size. Here are some key reasons why payroll is vital for small businesses: Compliance with Employment Laws : Payroll ensures your business complies with local, state, and federal employment laws. By accurately calculating and withholding taxes, you avoid penalties and legal issues. Employee Satisfaction : Timely and accurate payment is essential for employee satisfaction. A reliable payroll system helps build trust and fosters a positive work environment. Financial Management : Payroll provides crucial financial information, such as labor costs and tax liabilities. This data helps you make informed budgeting, forecasting, and resource allocation decisions. Tax Obligations : Payroll and tax obligations are closely related. Accurately calculating and reporting payroll taxes ensures you meet your tax obligations and avoid costly penalties. Understanding Payroll Basics Before diving into payroll specifics, it's important to understand some key terms and concepts. Here are a few essential payroll basics: Employee Classification : Understanding the distinction between employees and independent contractors is crucial. Employees are subject to different tax and benefit regulations compared to independent contractors. Pay Periods : Pay periods determine how often you pay your employees. Standard pay periods include weekly, bi-weekly, semi-monthly, and monthly. Choose a pay period that aligns with your business's financial capabilities and employee expectations. Gross vs. Net Pay : Gross pay refers to an employee's total earnings before deductions. Conversely, net pay is the amount an employee takes home after deductions such as taxes, benefits, and retirement contributions. Deductions : Deductions are amounts subtracted from an employee's gross pay. These include federal and state taxes, Social Security and Medicare contributions, health insurance premiums, retirement contributions, and other authorized deductions. Calculating Employee Wages and Deductions Accurately calculating employee wages and deductions is crucial to ensure that your employees receive the correct pay and that you comply with tax regulations. Here are the critical steps involved in calculating employee wages: Determine the Pay Period : Start by determining the length of the pay period; this could be weekly, bi-weekly, semi-monthly, or monthly. Calculate Regular Wages : For hourly employees, multiply the hours worked by the hourly rate. For salaried employees, divide the annual salary by the number of pay periods in a year. Account for Overtime : If employees have worked overtime, calculate the overtime hours and apply the appropriate overtime rate. This rate is typically 1.5 times the regular hourly rate. Include Bonuses and Commissions : If applicable, factor in any bonuses or commissions earned during the pay period. Deduct Taxes and Other Withholdings : Calculate and deduct federal, state, and local taxes based on the employee's filing status and income. Also, deduct Social Security and Medicare contributions, health insurance premiums, retirement contributions, and other authorized deductions.
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