Business Tax Planning

Top 10 Tax Tips For Virginia Small Business Owners

Top 10 Tax Tips For Virginia Small Business Owners

Running a small business in Virginia -- whether it is a retail store, a restaurant, a daycare, or something else entirely -- is rewarding, but it comes with its share of financial responsibilities. This is especially true in regard to taxes. To help steer you through Virginia's state tax rules, here are some essential tax tips tailored just for small business owners in the Old Dominion State.

1. Understand Virginia's Business Tax Structure

First and foremost, it is essential for small business proprietors in all industries to have a solid grasp of Virginia's state tax structure. The state levies various taxes, including corporate income tax, individual income tax, and the Business Professional and Occupational License (BPOL) tax. The BPOL tax is paid in numerous counties throughout the state, including Fairfax County, which has the largest population in the state with approximately 1.14 million residents. 

Knowing which taxes apply to your business -- and your location -- is the first step toward compliance.

Credit: Ariel Skelley/Getty Images

2. Choose the Right Business Structure

The legal structure of your business can significantly impact your tax liability. Virginia, like most states, offers various options, including sole proprietorships, partnerships, LLCs, and corporations. Each has its own tax implications, so consult with a tax professional to select the structure that best suits your business goals and minimizes your tax burden.

3. Keep Accurate Records

Maintaining meticulous financial records is essential. Track income, expenses, and deductions accurately to ensure your tax returns are error-free. Efficient record-keeping can also help you identify potential tax-saving opportunities.

Your tax professional will appreciate your efforts, as accurate records make their job easier quarter after quarter and year after year.

4. Sales Tax Compliance

If your business sells goods or services, you may need to collect and remit sales tax. Virginia's sales tax rate can vary by locality, so be sure to stay up-to-date with the applicable rates and regulations. Filing sales tax returns on time is crucial to avoid penalties.

Credit: Ariel Skelley/Getty Images

5. Understand Deductions and Credits

Virginia offers various tax deductions and credits that can help lower your tax liability. For instance, you may be eligible for the Small Business Investment Grant Program or the Major Business Facility Job Tax Credit. Familiarize yourself with these opportunities to maximize your savings.

Self-employed individuals can often deduct additional expenses, such as office supplies, materials necessary to perform their job duties, and even some business travel costs.

6. Employee Taxes

If you have employees, you'll need to withhold and remit payroll taxes. This includes federal income tax, Social Security, and Medicare. Virginia also requires state income tax withholding. Staying compliant with payroll tax regulations is essential to avoid penalties.

7. Seek Professional Assistance

Navigating Virginia's tax laws can be complex, especially as they change over time. Working with a Certified Public Accountant (CPA) or a qualified tax preparer with expertise in Virginia's tax code is a smart decision. A knowledgeable tax professional can provide valuable guidance and ensure you're taking full advantage of tax-saving opportunities.

The Commonwealth of Virginia also provides a list of common business tax mistakes that may be helpful to you. These include unintentional errors like filing or paying state unemployment tax with the Virginia Department of Taxation instead of the Virginia Employment Commission (VEC).

Credit: Ariel Skelley/Getty Images

8. Plan for Estimated Taxes

Virginia, like the federal government, may require small business owners to pay estimated taxes quarterly rather than annual taxes. Failing to make these payments on time can result in penalties and interest charges. Work with your tax professional to make sure you set aside the required funds, and that you pay on time.

Working farms, for example, are generally required to pay quarterly estimated taxes and may also qualify for special agriculture deductions and credits.

9. Keep Personal and Business Finances Separate

Mixing personal and business finances can lead to confusion and potential tax problems. Maintain separate bank accounts and credit cards for your business to streamline record-keeping and ensure accurate reporting. 

Making personal purchases with business funds can be problematic and lead to tax issues, even if you don't realize you are doing anything wrong.

10. Stay Informed

Just like the IRS makes annual changes to the United States tax code, state tax codes are also updated on a regular basis. Stay informed about updates and modifications to Virginia's tax code that may affect your business. Subscribing to tax newsletters or consulting with a tax professional can help you stay up-to-date.

Credit: Thomas Barwick/Getty Images

Virginia's small business owners -- like business owners in all states -- have a unique set of tax considerations to navigate. By understanding the state's tax structure, making informed decisions about your business structure, and seeking professional guidance, you can better manage your tax responsibilities and maximize savings. 

Feature Image Credit: Grace Cary/Getty Images

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Frank Jenkins Jr

Frank Jenkins Jr

Frank Jenkins Jr. is the managing partner of Adams, Jenkins & Cheatham, a CPA practice based in Midlothian, VA. Frank specializes in Consulting services, tax planning, accounting, audit & assurances. "I genuinely care about our clients because I have a personal connection with them. This job requires me to multi-task and work under tight deadlines. I get great professional satisfaction from balancing firm and client commitments while building a strong team here at AJC."

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