Navigating Tax Laws: What Every Business Owner Should Know

Apr 16, 2024By Johnn Osborn
Johnn Osborn

As a business owner, understanding tax laws is essential to ensure compliance and avoid potential penalties. Navigating the complex world of taxes can be daunting, but with the right knowledge and preparation, you can stay on top of your tax obligations. To be clear, I am not a tax attorney and do not give professional tax advice. I advise every client to engage with a competent tax advisor, accountant, or Certified Public Accountant (CPA). Here are some key points every business owner should know:

1. Different Types of Business Entities

The type of business entity you operate (sole proprietorship, partnership, corporation, LLC) doe snot necessarily determine your tax obligations and reporting requirements. What is important to know is how you are classified by the tax authorities. For example, an LLC may tax itself as a corporation. This is why it is important to hire a tax professional early in your business journey.

business entity tax

2. Tax Deductions and Credits

Take advantage of available tax deductions and credits to reduce your taxable income, such as business expenses, employee wages, and small business-specific credits. Again this is why it's important to hire a professional accountant and tax advisor.

3. Quarterly Estimated Taxes

Business owners are typically required to pay quarterly estimated taxes to the IRS and local tax authorities (New Mexico Tax and Revenue Department). Failure to do so can result in penalties and interest charges. Keep track of your income and expenses throughout the year to accurately estimate your tax liability.  Again this is why it's important to hire a professional accountant and tax advisor.

quarterly taxes

4. Other Tax Obligations

Depending on your location and business, you may be required to pay Gross Receipts Tax in New Mexico, or other taxes specific to certain industries, like excise taxes. If you have employees, you might also be required to pay other taxes like wage withholding or workers compensation taxes. Familiarize yourself with the sales tax laws in New Mexico or hire a professional accountant and tax advisor.

5. Recordkeeping and Documentation

Maintaining accurate financial records is crucial for tax purposes. Keep track of income, expenses, receipts, and invoices to support your tax filings. Consider hiring an accountant to assist you or consider using accounting software to streamline the process.

6. Hire a Tax Professional and Accountant

While it's possible to handle your business taxes on your own, hiring a tax professional can provide peace of mind and ensure that you're taking advantage of all available deductions and credits. A qualified accountant can also help you navigate any complex tax situations.

tax professional

7. Tax Deadlines

Mark important tax deadlines on your calendar to avoid missing key filing dates. If you need more time to file your taxes, consider requesting an extension. Keep in mind that an extension to file is not an extension to pay any taxes owed. Again, hire a tax professional who can assist you with tax planning.

8. Tax Planning for the Future

Develop a tax planning strategy to minimize your tax liability and optimize your financial position. Consulting with a tax professional to create a long-term tax plan that aligns with your business goals.

By staying informed about tax laws and regulations, you can effectively manage your business finances and avoid any potential tax pitfalls. Remember to seek guidance from a tax professional when needed and stay proactive in your tax planning efforts.

9. Resources

man writing on paper

Advertising Disclaimer: This communication is for informational purposes only and does not constitute legal advice. Prior results do not guarantee a similar outcome. If you need legal assistance, please consult with an attorney.