As a responsible business owner, your top priority is always going to be the company’s bottom line. You want to ensure that the business continues to make the most of its investments and profit margins. Part of that financial responsibility, though, includes filing the proper tax documents every year.
Of course, there are a lot of the ins and outs to navigate when it comes to filing business taxes. It’s time to dive into some research so that you know what to expect when it comes time to file.
The good news is that you’ve come to the right place! Detailed below is everything you need to know about filing taxes for your business, no matter how large it is.
Plus, learn about some of the ways you can save taxes as a business. Keep reading to optimize your business’s tax information and maximize your overall profits.
Start by Gathering All of Your Business’s Financial Materials Together
Of course, the first and most important thing to remember when it comes to business taxes is documentation. Throughout your business’s fiscal year, you should be keeping track of all financial transactions. Take the time to account for all income and expenses for your business this past year.
Doing so will go a long way in helping you and the Internal Revenue Service (IRS) know how much you’re going to owe. If you see gaps or mistakes in your business’s accounting, fill in the blanks sooner rather than later. For more detailed guidance, check out this article on how to find out what you owe the IRS.
In fact, it’s in your best interest to work with reliable accounting software to track all of those transactions — research what kind of accounting software might make the most sense for your business. Quickbooks is prevalent amongst small businesses for just that reason.
When You Started Your Business, You Established a Tax Identification Number (TIN)
Registering your business is an exciting time for everyone involved. You’re starting on a brand new adventure, and you’ve just made the name official with your local state department. At the same time, you were assigned a TIN to determine tax requirements throughout the business’s existence.
In some cases, though, a TIN was not assigned. That’s because these businesses are operating under sole proprietorship.
If you are the only one who owns and operates your small business, your TIN is simple. It’s your social security number! Have either your business’s assigned TIN or your personal social security number on hand when you’re ready to start preparing taxes.
Make Sure You Research Local and Federal Regulations
Perhaps one of the most essential things to consider when it comes to filing business taxes is what kind of documentation you’re going to need. That’s because different geographic locations have different tax expectations for the business.
In particular, tax laws can vary from state to state. Plus, there’s federal tax law that applies to all American companies for you to consider.
If your business isn’t compliant with either local or federal regulations, the consequences can be dramatic. You don’t want to cause the IRS any kind of alarm when it comes to your business’s legal and financial standing.
It’s an unfortunate truth that the IRS, in the single year of 2015, reported 4.8 million suspicious tax returns. You don’t want to be on that list any year.
Tax fraud investigations can be expensive and time-consuming. That’s why it’s so crucial that you follow tax law and regulations to the letter.
It’s fortunate, then, that there are a variety of online resources that can help you navigate your business’s taxes. One example is found on the website of the United States Small Business Administration. Take a look at it for the specifics on your state’s business tax requirements.
Businesses of Sole Proprietors
As mentioned above, sole proprietorships use a personal social security number of the owner to file taxes. These models of business are, for the most part, less expensive than actual corporations. The filing of taxes is different, too.
For one thing, you’ll be filling out a Schedule C tax form to turn into the IRS if you’re entirely self-employed. For that reason, the IRS is going to want to know all about your personal financial situation. They want to know how it is engaged with your actual business model.
Plus, note that as a single proprietor, you’re going to need to pay quarterly taxes throughout the year. That’s yet another reason why proper accounting software can be so useful. By tracking all of your business’s transactions for you, it can help you determine what you’ll owe the IRS each quarter.
Self-employed business owners aren’t the only people who fill out a Schedule C form, by the way. If you’re the single owner of an LLC, you’ll be filling out the same form for your business’s taxes, too.
Businesses that are turning in a Schedule C tax document have until April 15th every year to do so.
Limited Liability Company (LLC) Tax Requirements
Perhaps you’ve invested in registering your business as an official LLC. This can be of particular advantage if your business runs the risk of ever being liable for an accident while on the job.
Examples of businesses that should operate as an LLC include those that involve manual labor.
As an LLC, you, as the business owner, are protected in the case of an accident. At the same time, LLC business models tend to be more expensive than sole proprietorships.
This is true, in particular, when it comes time to file taxes every year.
For an LLC with multiple owners, you will be filling out a Form 1065 for the business itself. Also, you and each owner of the company will be filling out a Schedule K-1 for individual income tax purposes.
Partnerships and multi-owner LLC business models have an earlier deadline to turn in their yearly tax documentation. You’ll need to be prepared to turn both your Form 1065 and any Schedule K-1 forms by March 15th.
Taxes for S Corporations
If you set up your business model as a proper S corporation, you’re going to be using a different tax form, too.
That form is called the Form 1120. It, like a Schedule C form, needs to be turned in by April 15th every year.
S corporations allow every owner of the organization to be responsible for his or her taxation. They will need to report their own gains and losses as individuals instead of as the company itself.
Remember this about S corporations to stay in tax compliance. If you expect to pay $500 or more every year for your business’s taxes, you’re going to need to pay them quarterly.
If Needed, Take Advantage of Extensions and Payment Arrangements
Perhaps your business is struggling to get its financial records and documentation in order. It seems as though you’re not going to make your tax forms deadline this year, whether it’s March or April 15th.
That’s why the IRS does offer extensions of those deadlines. Payment arrangements are available if the taxes owed are too cumbersome, too. Take the time to do your research and see if your business could benefit from one of these extensions or payment arrangements.
Be Intentional About Seeking Tax Deductions
Running a business is no easy feat in the first place. If you want to optimize your business’s profits when it comes time to prepare your taxes, you should consider what kinds of deductions you qualify for. At this point, it’s smart to do as much research as possible.
One example of an awesome tax deduction is that of using an energy-efficient commercial building. If your office building qualifies for energy efficiency, you can save a lot of money come tax time.
Other examples of business tax deductions include various supplies and equipment financing. The thing is, the requirements for tax deductions continue to change over the years. For that reason, it’s your responsibility to stay up-to-date on those regulations.
Work with a professional tax preparer regarding other deductions for which you might qualify. After all, there’s no need to overpay on your business’s yearly taxes if there’s another option. He or she will have a deeper understanding of the current deduction requirements and can help you in that way.
It Might Be Wise to Hire a Lawyer for Your Tax Preparation
Sometimes, the IRS finds an issue with tax documentation that we simply can’t foresee. Perhaps, through no fault of your own, your business has been accused of fraudulent activity.
As a result, the IRS is likely going to conduct a full-blown investigation into your business’s financial history and standing. This is yet another reason it’s so crucial your business keeps track of every expense and profit over the year. If you can prove that the IRS is mistaken quickly, a lot of energy and resources would be saved for both parties.
Being accused of tax fraud is a serious situation. If this has happened to your business, seek professional tax fraud consultation as soon as you can.
Hiring a lawyer to stand up for your rights as a business could save you time, money, and a serious headache. Reach out to a qualified one today if you’re concerned about your business’s legal standing.
Plus, having a reliable lawyer on hand is good for business even when it doesn’t come to a tax fraud investigation. Maintain this beneficial relationship throughout the future in case another legal issue comes up.
Maintain Records of Your Tax Documents for Every Year
As mentioned above, it’s wise for your business to invest in proper accounting software. That way, throughout the fiscal year, all of your income and expenses will be tracked. When it comes time to start preparing your taxes, it will be only too easy to generate a report of your financial standing.
In addition to maintaining records of all of your business’s transactions, make sure you keep your yearly tax documents, too. For one thing, you might want access to your tax documents throughout the year for various reasons.
Plus, you never know when the IRS is going to conduct a thorough audit of your business’s finances. In such a case, it’s going to be much easier if you have proper documentation of everything over the past few years.
If you hire someone to prepare your taxes on your behalf, they will likely maintain those records for you, too. This is true, in particular, if you continue to use their tax preparation services over the years.
Consider the following statistic regarding tax preparation services throughout the United States. It indicates that in 2019, the industry generated $11 billion.
Maintain a long-term relationship with your professional tax preparation service. Doing so is in your best interest in the long run. That way, someone who understands the industry can navigate it with your business’s best interests in mind.
Hire Someone for Filing Business Taxes on Your Behalf
At this point in the article, you have a thorough understanding of what filing business taxes would require. You need to do everything you can to help your business’s financial situation. Doing so will go a long way in helping you stay ahead of any market competitors.
After all, you deserve the peace of mind that comes from knowing your business is operating legally and profitably.
That’s why filing the right taxes can be so essential. Of course, it’s likely in your best interest to work with professionals on the matter.
That’s where we can come into play. We prioritize creating a customized tax solution for each of our clients like you. Our expertise has helped countless businesses grow and continue to thrive.
For that reason, we encourage you to browse through the rest of our website to see how our services can be of help to you. On our blog, you’ll find today’s latest and greatest trends in tax preparation for business. To start, check out more information about our professional tax consulting services today.