There are many more strings attached to business taxes compared to the IRS filing requirements of personal taxes for individuals. SMBs should have a solid understanding of the business tax landscape to help them keep more of the hard-earned income generated by their enterprises. 1-800Accountant offers up the following tax tips for SMBs to navigate through the tax code and take advantage of it in the end:
1) Understand your specific business tax structure.
Several types of entities are available on the business buffet line. Each business entity comes with a certain type of tax structure. For instance, simple sole proprietorships and partnerships are considered informal business entities. The business taxes levied on them pass through to their owners’ personal tax returns. The same goes for S corporations and LLCs taxed as S corps. On the other hand, C corporations and LLCs taxed as C corps are taxed directly at the business level.
2) Know your additional filing deadlines.
Handling business taxes is a different animal mainly because of the additional deadlines that are often involved when paying them. For example, March 15th is the corporate tax deadline, while May 15th is an annual filing deadline for owners of nonprofit corporations. In addition, quarterly tax payments are required for business owners who operate both formal and informal business structures. These fall on January 15th, April 15th, June 15th, and September 15th.
3) Take advantage of all eligible business tax deductions and credits.
While corporate taxes are viewed as more complicated by accountants, they do come with far more opportunities to save money via business tax deductions and credits unavailable to individuals. These tax-reducing options include the home office deduction, the vehicle deduction, deducting meals and entertainment, and medical expense write-offs. Certain tax credits are also available to self-employed entrepreneurs, such as credits for hiring specific employees and using energy-efficient items. Remember that many businesses can claim industry-specific deductions and credits, so be sure to know what you can write off in your own line of work.
4) Outsource your tax filings, bookkeeping, and payroll.
Business tax filings, maintaining bookkeeping records, and handling payroll are all very time-consuming processes. There are lots of IRS rules and regulations involved in them as well. So consider outsourcing these required business duties to others if you don’t employ your own bookkeeper or accounting professional on staff. You’ll be able to rest easy, knowing you are staying compliant, standing on solid financial ground with your business, and saving as much money as possible.
5) Maintain proper records of all business transactions.
To claim tax write-offs and credits for which your small business is eligible, you must maintain proper business records. The IRS requires business owners to prove that the expenses they attempt to deduct are for business items and services – and not for personal use. This is why it is critical to keep an organized file of receipts and other relevant documents. It’s also wise to scan these records for security and convenience purposes. Along with receipts, keep copies of your business tax returns handy so that you can compare your income amounts and tax payments from year to year. Doing so can help you find more ways to reduce your taxes in the future and, in turn, increase your bottom line.