Filing Taxes for Your Business: Dos and Don’ts

Tax season is a stressful time of year for most American taxpayers. Money earners from every walk of life are required to navigate complex documents, confusing tax laws, and impending deadlines. Worse yet, tax filing errors can lead to dire consequences, ranging from increased penalties and fines to criminal proceedings and, in a handful of circumstances, jail.

For business owners, anxieties surrounding tax season can be even greater. With larger sums of money comes the possibility of larger penalties. Business ownership can also come with a lot of uncommon financial situations. Plus, there may be the added complication of filing and distributing W-2s for each employee. It’s a lot to keep track of!

If you’re facing the challenge of filing taxes for your business and are seeking guidance, read on to learn the most important dos and don’ts for filing business taxes.

Do Keep All Receipts

If you haven’t owned a business before, you’ve probably never thought very much about itemizing your tax deductions.

Tax deductions are costs that taxpayers take on throughout the course of the year that the government sees as for the betterment of society. These include things like charitable donations, costs associated with running your business, mortgage payments, and more. To incentivize taxpayers to take on these expenses, the IRS designates them as tax deductible. That means they can be subtracted dollar for dollar from your taxable income, lowering your overall tax liability.

The IRS recognizes that tracking and recording all deductible transactions is a significant undertaking. As such, they’ve created what’s known as the standard deduction. This is a set amount, based on filing status, that they allow every taxpayer to deduct from their taxable income. As a W-2 employee, you’ve likely taken the standard deduction in your past tax returns.

Now that you’re a business owner, the standard deduction may no longer equal your deductible expenses. Instead of taking the standard deduction, it’s time to start itemizing your deductions. Educate yourself on deductible expenses. Keep every associated receipt and file according to category. A professional tax software can be a huge help for this purpose. Come tax season, you’ll need to list these expenses and be prepared to show receipts in the event that you’re audited by the IRS.

Itemizing your deductions can be painstaking work, but it’s worth every moment.

Don’t Wait Until the Last Minute to File

As a regular taxpayer, you may have been able to get away with filing taxes at the last possible minute. Maybe you found yourself rummaging for months-old tax documents on April 10th. Perhaps you were frantically emailing your employer on the eve of April 15th because you misplaced your W-2. As an employee, taxes are fairly simple, so you can manage with a last-minute filing.

As a business owner, it’s unwise to push it till the last possible day. Taxes for a business are significantly more complex. Rather than a single filing deadline of April 15th, you’ll need to now manage a number of different deadlines. Those include:
  1. January 31: If you have employees, you must distribute hard copies of tax forms to anyone who received payments, including wages, non-employee compensation, royalties, dividends, and income profit-shares. You must also send a copy to the Social Security Administration.
  2. February 28: You must send a copy of the above forms to the IRS.
  3. March 15: If your business is a partnership or an S corp, this is your tax return deadline.
  4. April 15: For all other businesses, this is the federal tax deadline.
  5. April 15, June 15, September 15, December 15: You must pay quarterly estimated income tax to the IRS (more on that later).
  6. April 30, July 30, Oct 29, and January 31 of the next calendar year: You must report your payroll withholdings to the IRS.

Filing Taxes for Your Business: Dos and Don’ts

Do Pay Estimated Quarterly Taxes

Do you know how tax season works? If you’re like the average American taxpayer, you may not.

All American taxpayers are required to pay income taxes throughout the year. Come tax season, taxpayers are required to submit a record of their income, as well as the amount of taxes they’ve paid, to the IRS. The IRS reconciles their paid tax amount with their owed tax amount. If they’ve overpaid their taxes, they’ll receive a tax return. If they’ve underpaid, they’ll owe the IRS.

Most W-2 employees really only think about paying taxes during tax season. That’s because their regular tax payments are automatically withheld from their paychecks by their employers. Employers contribute their portion to those payments and deposit those tax payments to the IRS on a regular basis.

As a business owner, you don’t have an employer to manage your tax payments throughout the year. This certainly doesn’t absolve you of your regular tax payments. Instead, you’re expected to pay estimated tax payments each quarter. You must estimate your tax liability each quarter and pay it to the IRS. Come tax season, you’ll once again reconcile those payments with your actual owed amount. Just like W-2 taxpayers, if you’ve overpaid, you’ll receive a refund; if you’ve underpaid, you’ll owe.

In the event that you don’t make estimated quarterly tax payments, you may be liable for penalties and interest payments to the IRS. If your estimated tax payments are substantial enough, you may find yourself in significant trouble.

Don’t Go at it Alone

Business taxes are exceptionally more complex than personal taxes, and with exceptionally greater consequences. For that reason, it’s important not to tackle filing taxes for your business alone.

Instead of managing tax deadlines, estimated payments, tax form distribution, and other complicated tax necessities alone, enlist the help of a business accountant. A business accountant will know the ins and outs of tax season and can help you navigate these new processes.

Business taxes are significantly more complex than personal taxes. However, if you follow these simple dos and don’ts, you’ll be able to tackle your business taxes head on and remain in good standing with the IRS.

Matt Casadona

Filing Taxes for Your Business: Dos and Don’ts

Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. He is currently a contributing editor for 365 Business Tips. Matt is passionate about marketing and business strategy and enjoys the San Diego life, traveling and music.
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