Small Business Checklist For Tax-time Technology – As a small business owner, you have a lot on your plate. From hiring the right staff to overseeing the day-to-day operations of your company, it can be difficult to find time to maintain your books.
This issue can create a lot of problems when tax season rolls around. We’ve put together the basic steps you need to follow to simplify the process of preparing and filing your small business taxes.
Small Business Checklist For Tax-time Technology
In this step-by-step guide, we break down the basics of small business tax filing. Read our full post and check out our downloadable checklist to stay on top of your small business tax preparation needs.
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Income tax is based on the income earned by the business and is paid at both the federal and state levels. Depending on the type of business entity your business is classified as (also known as your business structure), your small business tax liability varies.
For C corporations, taxes are paid based on the net income of the business. The current federal income tax rate is 21% for C corporations.
In contrast, all other types of businesses, such as sole proprietorships, partnerships, and S corporations, pay income tax at the individual level. This means that business owners of these types of entities are responsible for reporting business income on their personal tax returns. After that, income tax is paid based on the tax bracket you fall into.
However, state business income taxes vary from state to state and may vary from city to city. Depending on where your business operates, you will need to check the local tax rate that applies to you based on your income.
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Estimated taxes are payments that businesses must make on a quarterly basis. Estimated taxes are due on April 15, June 15, September 15, and January 15, or the next business day if that day falls on a holiday or weekend. For C corporations, estimated taxes must be paid if you plan to owe more than $500 in taxes. For all other businesses, you must pay taxes if there is a possibility that you owe more than $1,000.
As a business owner, you are often considered an employee of your own company. If you have more than $400 in personal income from your business, you must report it as income and pay your self-employment tax rate. The current self-employment tax rate is 15.3%. This is 12.4% for Social Security and 2.9% for Medicare, since the employer is not responsible for paying these benefits on your behalf.
If you have employees, you have certain employment tax obligations, also known as payroll taxes. Examples of employment taxes include:
There is no common tax form for businesses. Depending on your business structure, you may need special tax forms – Form 1099-MISC, Form 1120, etc. – To report gains, losses, deductions, and credits to the IRS. Some of the more common IRS forms used for small business tax reporting include:
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With everything else at your disposal as a small business owner, it’s understandable that tax deadlines may not be the most important. However, it is important to keep track of when payments are due and when taxes are due. Unfortunately, the IRS does not take late or no payments lightly.
To help you avoid penalties and serious penalties that can disrupt the flow of your business, it is best to create a tax calendar. In 2021, your tax calendar should include the following important small business tax dates:
Please note that if any of these dates fall on a weekend or holiday, refunds and payments must be made on the next business day. If you can’t meet the filing or payment deadline, you can file an extension with the IRS. Use Form 7004 to file for an automatic 6-month extension.
Filing taxes for your small business involves mountains of paperwork, and figuring out which forms to fill out and which documents to send can be overwhelming.
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Use our small business tax preparation checklist below to gather everything you need, whether you’re doing your own business taxes or hiring a professional tax preparer.
Running a business can be stressful. Filing taxes for your small business is optional. Don’t waste valuable time navigating complicated state, sales, and employment tax issues. You can find all the documents you need in one place for the process. Smoother tax preparation.
Tax credits and deductions are great opportunities to lower your small business tax bill. This is possible because certain expenses, such as health insurance and investments, can be deducted from the income tax or the final account, reducing the amount you owe. Researching deductions and credits that may apply to your business is an important step in your small business tax preparation list, so do your due diligence.
You can use it to help you save on taxes. You can set it up so that all your business expenses are automatically classified in real time. That way, when it comes tax time, you have a starting point.
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However, in 2021 and beyond, you can use Form 7004 to file an extension to file your business income tax return. This will give you an automatic 6 month extension to file your taxes accordingly. In the meantime, use the small business tax preparation checklist to make sure you can file before the extended deadline.
Although the file extension applies to submitting your tax form, it does not give you an extension to pay. Make sure you stay on top of your estimated payments during this period. Otherwise, you could face severe fines or worse. If you can’t pay your taxes, contact the IRS to see if you can arrange a payment plan – the sooner the better.
Like other taxpayers, the IRS is committed to collecting taxes, so they are often willing to work with small business owners to find solutions.
Now that you’ve gone through the entire small business tax preparation checklist, you’re ready to file. Navigating your tax returns and payments has never been easy, but with the right tools, like this checklist, and the help of a tax professional, it’s a lot easier. Enjoy the peace of mind that comes with proper tax preparation and compliance by using these resources in 2021 and beyond.
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Intuit, , QB, TurboTax, ProConnect and Mint are registered trademarks of Intuit Inc. Terms and conditions, features, support, pricing and service options are subject to change without notice. Taxes are the number one financial concern for small businesses in the NFIB’s annual Challenges and Priorities report – ranking fourth among the top 10 concerns. Federal business income taxes and state business income taxes rank high. By maintaining all available deductions for business expenses, small businesses can ensure that it takes full advantage and reduce its tax burden by ensuring that its tax reporting is consistent, especially in terms of new tax deductions and changes introduced by tax cuts and. Employment Law. The Tax Cuts and Jobs Act, which was signed into law in December 2017, can be quite confusing. The changes add new deductions, such as a provision that allows small businesses to deduct up to 20% of qualified business income from their federal income taxes; Partial deduction ratios have been changed; and completely remove certain deductions.
Taxes depend on how they are structured. Most small businesses are so-called “through” organizations. They, like C-corps, do not pay corporate taxes. Instead, they “pass through” the business’s income (its profits or losses) to the owner, and that money is taxed at the owner’s personal income tax rate on the owner’s tax return.
Tax deductions reduce the amount of taxable business income. The business owner will subtract all of the deductions from the business income (or gross income) to determine the taxable income before calculating the tax amount.
Each legal business structure has its advantages and disadvantages. A sole proprietorship, owned and operated by one person, is the simplest and most common structure chosen to start a business. It is a relatively simple and inexpensive business structure to set up with minimal reporting requirements, no corporate business tax and operating as a pass-through entity. However, it also means unlimited personal liability, difficulty in obtaining business finance and lack of permanent stability.
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Partnerships are similar in structure to sole proprietorships, but two or more people share ownership. From a tax perspective, it is also an end-to-end entity with no corporate tax and a simple, low-cost business structure to set up. However, disadvantages also include unlimited personal liability (depending on partnership classification) and lack of permanent existence. It also requires the creation of a formal cooperation agreement.
The limited liability company (LLC) structure has advantages such as limited liability, flexible management structure, no corporate tax on the business and the ability to choose the tax structure. However, disadvantages include the fact that LLCs are not recognized outside the United States and do not exist permanently. LLCs are also not recognized by the federal government. Most likely, its recognition is determined by state statutes.
A C corporation has many advantages in that it has limited liability, continuity, and an unlimited number of shareholders. these
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