Tax Season FAQs: What Do Small Business Owners Want to Know?
Your first tax season as a small business owner (or the person in charge of taxes for a small business) can be a stressful one.
Even personal taxes can be a chore. But small business taxes can be a challenging task – even for seasoned professionals, let alone first-time DIYers. The small business tax code is far more complex, you have to keep a lot more documents throughout the year, and you’re simply working with more numbers, which means more chances to make critical errors.
Maybe you’re new to doing a small business’s taxes. Or maybe you just want to know what to expect in preparation of starting your own company. Either way, here, we’ll help you get acclimated by answering some of the most popular questions that novice owners often ask.
#1: Do I need to file taxes for my small business?
Yes. Basically, all business structures except for partnerships must file an annual income tax return. Even then, partnerships still must file an information return.
#2: What are estimated taxes? And do I need to pay them?
Estimated taxes are quarterly payments made to cover income, self-employment and alternative minimum tax. You may need to pay them if you expect to owe $1,000 or more in taxes.
#3: How do I determine the correct business structure for tax purposes?
There’s no “right” business structure as it pertains to taxes, but certain business structures have different tax, legal and other rules. You can read our primer on choosing business structures to determine what’s best for your business, and you can check out more about how small business tax rates differ by structure.
#4: How can I minimize my tax liability as a small business owner?
Here’s one way in which personal and business taxes are similar! Small businesses can set themselves up for eligibility for numerous tax credits.
Also, small companies can deduct a laundry list of various expenses related to growing and maintaining their businesses.
#5: What are common tax deductions available to small businesses?
As mentioned above, small businesses can deduct a number of expenses, including rent, utilities, office supplies, employee salaries, insurance premiums, and travel expenses, among other things.
#6: Do I need to keep any records for tax purposes? (And if so, for how long?)
The IRS recommends you maintain thorough records of income, expenses, receipts, and financial statements for at least three years, and as long as seven years.
#7: How can I ensure I’m complying with tax laws and regulations?
This is one of the most difficult aspects of doing your own small business taxes. You’ll need to brush up on tax deadlines, laws, and regulations, then keep abreast of any changes from year to year. (And, of course, you need to put that information to work.)
#8: What documents do I need to have when I’m preparing my taxes?
To be blunt, you’ll need a lot of them. You’ll want any and all payroll tax forms for the year, withholding and unemployment forms, any documents related to business expenses, year-end business bank and investment account statements, year-end profit-and-loss (P&L) statement and year-end balance sheet statement.
And that’s only a partial list. Which leads us to our last question:
#9: Should I hire a tax professional or do my taxes myself?
In our experience, few business owners have the time or tax knowledge to go the DIY route with their small business taxes.
“But what if I use tax software?” Tax software can be useful, but we tend to think of it as a helping hand – rather than deciding “tax software or tax professional,” you might want to consider “tax software and tax professional.” Because while tax software can help you stay organized throughout the year, a tax professional can help you identify deductions many software programs can’t, stay compliant, and help you in the future by putting together a comprehensive tax plan.
McManamon & Co., for instance, provides a wide variety of tax services for small and midsize businesses, including federal, state and local tax obligations, as well as payroll taxes for both the business and business owners. We also offer compliance services, including preparing tax returns for businesses, individuals, estates and trusts.
Want to know more about how we can help you at tax time? Call McManamon at 440.892.8900 or contact us online today.
Tags: McManamon, small business, small business accounting, small business taxes, taxes | Posted in McManamon & Co., small business, small business taxes