Now that tax season is back in full swing, small business owners need to file their taxes accurately, thoroughly, and on-time in order to avoid an audit or other penalties. In this post, we’ll examine how to do so expediently and without unnecessary stress.
Collect All Pertinent Records
Filing small business taxes can be a complicated task, but you can simplify the process by collecting all financial records that pertain to your business and employees. If possible, house your records on your computer through a software program or spreadsheet to ensure accuracy and security, and to make for an easy transfer of information. If you don’t have the proper records compiled before you begin work on your taxes, it will be impossible for you to complete them accurately.
Determine Which Forms Need to be Completed
Depending on the tax status of your business, you’ll need to complete different forms.
Sole proprietors must complete a Schedule C (Profit or Loss from Business) and a Schedule SE (Self-Employment Tax) along with their standard 1040.
Limited Liability Companies (Partnership):
LLC owners must complete a Form 1065 (U.S. Return of Partnership Income) to report profits and losses.
C corporations are required to file a Form 1120 (U.S. Corporation Income Tax Return). For those business who file calendar-year taxes, taxes must be completed and filed March 15 (or the first business day following March 15). Fiscal-year corporations must file their returns by the 15th day (or the first business day following the 15th day) of the third month following the end of the corporation’s tax year.
S Corporations must file a Form 1120S (U.S. Income Tax Return for an S Corporation). All shareholders must receive a Schedule K-1, and the filing dates are the same as those for C corporations.
Identify Business Exemptions
The IRS allows small businesses to deduct business expenses if they are deemed “ordinary and necessary.” Here are some of the more common business exemptions that your small business might be eligible to claim:
Businesses can deduct the cost of new business equipment up to $25,000.
If your employment requires you or your employees to travel in order to conduct business, these expenses could be deducted if you keep accurate records of the dates traveled, the location of your travel, and the purpose for the business trip.
Common business expenses that could be deducted include benefit programs for your employees, the cost of utilities and telecommunications, and employee wages, among numerous others.
Individuals who use their vehicles to conduct their business are eligible to either deduct business-related expenses or claim the standard mileage rate, which is calculated by multiplying business miles by the standard mileage rate for the tax year. Therefore, it’s imperative that you keep an accurate and detailed log of the miles you travel in your company vehicle, as well as the costs of parking and tollways. Additionally, if you use other property for business such as a computer and related software, be sure to keep track of those transaction records as well.
To receive an exemption for entertainment expenses, all costs must be directly related to your business. For “ordinary and necessary” meals and entertainment, you are eligible to deduct as much as 50% of the overall costs. Again, it’s important to keep adequate and accurate records of all entertainment expenses (date, time, place, business purpose, etc.) if you want to deduct them.
Adhere to IRS and State Deadlines
Depending on how your business is classified, you will need to be aware of several different dates and deadlines. For instance, if you are a sole proprietor and file a Schedule C, there are no separate deadlines, and you must file your returns by April 15. However, if your business is registered as an S Corporation, you are required to file an 1120 S, which you must file by the 15th day of the third month following your tax year.
Additionally, due dates for those businesses that file quarterly taxes fall on the 15th day (or the first business day following the 15th day) of March, June, September, and December. Lastly, companies that receive a six-month extension must file their taxes by October 16, 2017.
Contact S.H. Block Tax Services Today for All Your Tax and Business Finance Needs!
If you are a small business owner dealing with an IRS or state audit or facing any tax penalties such as liens or levies, please contact S.H. Block today by calling (410) 793-1231. Even simpler, you can complete the brief form on this page to receive a free consultation where we can discuss your tax issues and suggest a course of action. We also service clients looking for assistance with bookkeeping, payroll, business and personal tax preparation, and all other tax needs, so feel free to reach out for assistance even if you are compliant and current with your taxes.
We have assisted thousands of Maryland residents with their tax problems, and we would love the chance to speak with you to determine the source of your tax liabilities and help get them resolved in a timely fashion. However, the IRS and the State of Maryland impose strict deadlines when pursuing collection efforts, so it’s important that you contact us right away so that we can begin assisting you with your tax issues. Remember, it’s always better to be proactive rather than reactive!
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