Small business owners often find themselves in a rush against time to file their tax returns to the IRS. Filling your business’ tax returns is very important when operating a small business. It shows that your business is tax compliant, which ensures that your business is tax debt-free.
But filing taxes is not always a walk in the park. It involves a lot of technicalities that sometimes may be overwhelming to you as a business owner.
The IRS requires every business, regardless of size, to file its annual returns. Rules and regulations guide how much an enterprise pays depending on its type, the industry it serves, and other policies.
Why Do I Need to File My Taxes?
As stated earlier, filing taxes is a requirement by the government through the Internal Revenue Service. Business entities pay tax on their yearly returns. By filing the tax return for your business, you prevent your business from getting into debt with the IRS. Your business can be declared non-compliant and thus lead to closure.
Also, acquiring funding and business legitimacy becomes problematic as you cannot be issued a clearance certificate by the IRS.
Qualifying for tax relief is another perk of paying your taxes. These are offers by the IRS to the taxpayer to settle existing tax arrears. You should hire a tax attorney to help you with the process of negotiating for your business the best deal.
According to your business structure and tax history, the business may qualify for tax relief. Tax reliefs to businesses come as tax waivers, installment payments which are advantageous as they allow your business to be tax compliant and still not suffer extreme tax penalties.
How Do I Know How Much My Business Has to Pay?
Different tax caps and rates differ from state to state. You should first understand the federal, state, and local tax regulations that apply to your business and its requirements. As a business owner, this will help you file your tax correctly and remit payments promptly.
The tax amount depends on the business structure, and it determines how you pay your business’ taxes. Below are tax schemes that usually apply to small businesses:
● Income Percentages
Income tax calculation basis is based on your business’s net income. These reports are submitted annually to the IRS for confirmation and later payment.
● Gross Sales Percentages
Sales tax is payable on the sale of taxable goods, whether you are making a profit or not. These taxes differ from state to state, with some states charging no tax on sales and others having a rate as high as 10% on taxable goods sales.
● Property Value: Tax Per Dollar
Property tax is billed against the assessed value of the property. In most states, this tax falls on 1% of the value of the property.
● Payroll Taxes
Payroll taxes are collected on a ratio of the wages that your business pays to its employees. Some of these taxes on wages fall into clusters, where some wages amount are not taxable.
Ways to Reduce the Tax Burden on Your Business
The payable returns your business has are determinants of the amount of tax you will remit to the government. This means that you have to declare your income and profits, and they have to match what the IRS has already.
In as much as there is no way around evading tax, which is a crime, you can minimize the tax payable at the end of the financial year. How exactly is that possible?
Investing in the Business
Buying new equipment or a car can reduce the tax payable. Depending on the purchased commodity, accelerated depreciation is put under consideration, and thus, it reduces your annual taxable income for the year of purchase. You reduce the tax amount you pay for your business and also get value from the asset bought.
Introduce a Retirement Plan
You can lower the taxable wages on your returns by including a retirement plan. A retirement plan means that for S-Corps and C-Corps, the tax liability is reduced as the employer matching contribution is deductible from the business.
If you have family members or a spouse working in the business, putting them on the payroll means you can enroll them in a retirement plan. This allows you to have less taxable wages lowering your bill to the taxman. To get the most out of this approach, consult tax relief service professionals who will go through the plans to see the best feasible way. They will make you understand how much you can save and the requirements for each of the approaches. Using professional services ensures that there is no stone unturned to get you more in your pocket.
Get Rid of Stuck Inventory
Having a stock of goods that doesn’t move as fast will have losing value as they sit on the shelves. Putting them for charity auction helps you lower your inventory cost tax. It is also an excellent way to give back to the community.
Modify the Business Structure
Please consult your accountant and tax lawyer to steer the best course regarding the benefits of certain business formations and their application for your business. Changing the tax structure of your business can be done without necessarily having to change its legal structure.
Contributing to a Health Savings Account gives you a direct deduction against your taxable income. The contributions are usable for any medical expenses and are not considered taxable.
Filing Taxes for Your Business
● Stage 1: Get to Know theTax Your Business is Obligated
Arm yourself with tax information that your business is expected to pay. The IRS and the state department for revenue collection can give an insight into what you need to pay and what you may need to file returns for your business.
● Stage 2: Assemble Your Tax Records
Ensure that you have the required documentation and calculate what you owe the taxman.
● Stage 3: Fill in All Required Information
Correctly fill all the information in the tax filing forms by the IRS and the state department. Here you may opt to use tax software if you are filing your taxes online.
● Stage 4: Submit Your Business’ Tax Files
After carefully proofreading the documentation and cross-checking the requirements, submit them to the corresponding tax authorities. If you are not sure if you have filled correctly, engage the services of a tax accountant to help you out. In summary, Your business is required to remit tax returns once per year. Taxes depend on the business structure and the amount of income your business has, among other types of taxes. Your business can save a lot by filing taxes on time and knowing the best practices while filing taxes. There are ways in which you can lower your tax payables legally. To fully understand which applies to you and optimize them, consult a tax attorney and a certified business accountant to sediment your knowledge.