Maybe you’re a new business or you’re established but have had some recent changes that might alter your usual tax procedures.
You’re definitely not alone. In fact, 45% of small business owners say that they worry about taxes.
Read on for a quick recap on taxes for small business and tips in case you find yourself in tax debt!
1. Your Business Structure
How you register your business can play a large part in the way your business will be taxed. For example, LLCs, S corps, partnerships, and sole proprietors are taxed as pass-through entities.
The business itself is not taxed, but the owners are taxed on the income that is passed through to them, complete with self-employment taxes.
On the other hand, businesses that are structured as corporations will pay corporate tax.
2. Business Expenses
Reducing your taxable income is one way to decrease the amount of taxes you will pay from your business each year.
The IRS allows you to deduct business expenses on your tax returns.
These deductions include expenses like equipment purchases, marketing, advertising, mileage, payroll, and more.
3. Paying Employees, Contractors, and Freelancers
Have you hired people at your company?
Do you know if you need to set up small business payroll taxes?
If you have employees on payroll, they’ll need to fill out form W4 and you’ll take payroll taxes into account each pay period.
If you’re working with independent contractors or freelancers, the process is simpler. They will fill out form W9 and you’ll issue form 1099 at the end of the year with the amount that you paid them.
It’s important to note that if you’ve paid an independent contractor, you’re required by law fill out a 1099 for the IRS.
4. Keeping Organized
Because many businesses will have cash flowing in and out each month, keeping a detailed record of invoices, expenses, receipts, and other financial documents is crucial for tax preparation.
Regardless of how a business is structured, most will pay quarterly taxes using form 1040ES.
Doing so will usually help you avoid big tax bills in April.
5. Debt or No Debt?
After learning a bit more about taxes for small business, you might be feeling uneasy.
Maybe you haven’t been withholding enough or paying quarterly taxes. A situation like that can create significant tax debt at the end of the year.
If you’re unsure about your tax situation, it’s important to seek professional advice. A local CPA is a good place to start.
For example, Austin & Larson Tax Resolution specializes in mitigating audits and tax debt for their clients in Michigan.
Taxes For Small Business Don’t Have To Be Comp
Keep these 5 things in mind as you manage your company finances throughout the year and you’ll be in the clear with taxes!
Still have questions about taxes for small business? Our accounting and finance blog may have the answers!
Feeling like you’re in a bind with tax debt?
When in doubt, don’t let yourself become overwhelmed. As mentioned above, the best bet is to always seek advice from a tax professional!