Business Taxes Leaving You Frazzled? How to Combat Tax Anxiety
Tax anxiety is real. Learn how to spot the signs of tax anxiety and get ahead of procrastination with these tips to help you avoid tax dread and stay in control of your business finances.
Old wisdom says there are only two certainties in life: death and taxes — and both are known to induce the jitters (to say the least). When you’re a small business owner, just receiving a reminder that it’s “time to file taxes” can be enough to strike fear into your entrepreneurial soul. On top of running the day-to-day operations of your business, there’s the maddening process of balancing the books, budgeting for estimated quarterly payments, and submitting all the right tax forms, on-time. Who doesn’t feel a little stressed out at tax time?
All of those extra back-office hours put lots of small business owners in a time crunch. According to the NFIB’s 2021 Tax Survey, nearly 77% of small business owners reported that federal business income taxes were very or moderately burdensome, adding to the pain of their overall tax challenges.
While most business owners share a collective dread ahead of tax season, some people are so fearful of filing that they can experience panic attacks or become physically ill — leading them to put off filing or avoid paying their tax bill altogether. There’s actually a name for the *unofficially* recognized condition: forosophobia, or fear of the IRS.
The best way to combat tax anxiety is to get in control of your business finances long before your bill is due. Let’s take a look at why business owners experience tax stress, review tips to help you prepare and file your taxes, and learn how to avoid the pitfalls of procrastination so your business doesn’t fall prey to expensive tax penalties.
Why are taxes so stressful?
If you’re losing sleep over paying business tax, you’re not alone. A survey from TaxSlayer, a tax filing software company, estimated that 61% of U.S. adults find the tax-filing process stressful, and roughly a quarter would rather spend time at the DMV to renew their license than file their taxes.
It’s not hard to understand why. Between sweeping tax changes, confusing tax jargon, the struggle of managing cash flow, and prevailing tax myths — like having an innocent tax error show up in a background check (not true, by the way) — business tax can feel overwhelming.
It all comes down to time, money, and uncertainty. The top tax-anxiety inducing fears for small business owners include:
- Failing to understand how to manage business finances
- Finding the extra hours to file tax paperwork
- Submitting the wrong information or making a mistake
- Owing more money than what’s in your pocket (i.e. debt)
- Triggering an IRS audit
In fact, one survey from Credit Karma found roughly a quarter of respondents worried about going to jail for messing up their business taxes! Let us put some of these fears at ease. Out of more than 30 million small businesses in the United States, just 2.5% are flagged for an IRS audit. So, your chances of catching Uncle Sam’s attention are relatively low, especially if you’re following tax rules.
Still, it’s critical to confront your tax fears early on, so you don’t risk tax errors later on down the line.
Tips to calm your tax fears
Benjamin Franklin said it best: “By failing to prepare, you are preparing to fail.” That couldn’t be more true when it comes to filing business tax. Luckily, there are several steps you can take to get ahead of tax time.
Take stock of your finances — and emotions.
The first step to conquering your tax fears is to identify your feelings about filing tax returns and to put a financial plan into action. If you’re worried about doing the math, for instance, take the time to review your books and track your cash flow so you know exactly where your finances stand. It’s also important to educate yourself on your various tax responsibilities. For example, if you are a solopreneur, you’re on the hook for paying self-employment tax or if you’re running an eCommerce business, you’ll be required to pay sales tax and so on. Knowledge is power in the tax game.
Know your tax landscape
Paying business tax means more than marking your calendar for April 15. Most small business owners and entrepreneurs are also required to pay estimated quarterly tax or end-of-month taxes, depending on their business entity and tax status. It’s critical to know where you stand as your form of business will determine which income tax return form you’ll need to file. For example, if you are a sole proprietor, you’ll be on the hook for paying income tax, self-employment tax, estimated tax, and Social Security and Medicare taxes. You may also be required to file an Information Return. Keeping track of your tax responsibilities can get confusing, so it’s helpful to use a business tax tool to track your key deadlines and receive alerts when a tax bill comes due.
Don’t put off opening letters from the IRS
...or any tax authority, state, or municipality that sends you one. One of the unhealthiest behaviors related to filing is tax avoidance. While it’s natural to be nervous about receiving bad news or facing a potentially high balance, it is absolutely critical to open those letters and stay on top of tax deadlines to maintain the integrity of your business. Procrastination is driven by fear, so it’s helpful to stay prepared. Avoid late tax filing by organizing your tax documents, such as bank statements, 1099s, and other business records to alleviate tax stress.
Break down back-office duties into smaller chunks.
Many small business owners feel rushed around tax time. Instead of waiting to sit down to review your books each quarter or waiting until the federal tax holiday, spend an hour or two each week to reconcile your books. You’ll want to ensure all of your income and expenses match the dough in your bank account each month so you’re not hit with unpleasant surprises. We’ve seen clients who’ve avoided paying a $25 Secretary of State fee because of tax procrastination and incur more than $200 in fees as a result. Giving yourself plenty of time also allows you to follow up on any missing forms and catch any tax errors before it’s too late.
Tap into tax prep tools.
These days you don’t have to go at taxes alone. There are plenty of tax & accounting software programs to help you avoid old-school ledgers and spreadsheets. These tools offer a simple way to sync your business’s financial data across your accounts and often come with features to view detailed insights, track your business deductions and streamline your bookkeeping. Plus, with accounting software, you won’t waste hours of time manually updating cells when you need to make a change.
Forget the palm sweats, track your filing deadlines
Tax stress amounts to more than just sweaty palms. Procrastinating on your taxes can have dire consequences. Small business owners who fall into the trap of late filing or tax avoidance end up paying thousands of dollars in tax penalties, harming the future of their businesses.
If you’re feeling overwhelmed by business tax, take a moment to acknowledge your anxieties and tackle your financial fears. In addition to educating yourself about changing tax laws, it’s important to get a handle on your business tax responsibilities.
At ComplYant, we’re empowering small business owners to take control of business tax with our easy-to-use tax tools. We’ll help you track your deadlines, estimate your tax payments, and help you save time by taking the guesswork out of tax budgeting. In fact, we’ve helped our partners avoid millions of dollars in tax penalties over time.
By channeling tax-time stress into an actionable plan with the tips above, you’ll be prepared to handle anything that comes your way.