Today, most of the small business owners leave legal write-offs on the table during tax season.s. Sometimes keeping track of your receipts and expenses will help aid in the preparation of your tax return. .
That said, thorough preparation of business taxes requires finding the underlying cause of all the answers. Once you figure out the fundamental questions, the journey to file taxes becomes much more comfortable.
As per the Tax Cuts and Jobs Act, business taxes can have variant additions and deductions that can favor the business over a lifetime. Here are twelve (9) essential questions that you should figure out before filing taxes to save money.
- What Is The Required Data You Need To File Your Business Tax Return?
When it comes to tax filing, all business structures need to calculate their net income. A profit & loss statement and balance sheet should be provided to your tax professional. . Similarly, you are required to maintain proper records of all the deductions and purchases, such as vehicles and equipment and other related expenses. It is imperative to understand that the requirements of information ultimately depend on your business structure and strong record keeping.
- What Form Should You Use To File Business Taxes?
You will need to use a different form to file your taxes as per your business structure. For instance, sole proprietorship-based businesses need to prepare and file their tax return on Schedule C and also file Schedule SE (Self-Employment tax). Additionally; if you run a partnership business, you will have to file Form 1065 along with Schedule K-1 for every partner of the company.
S corporations, on the other hand, need to prepare and file tax returns on Form 1120S. .
- What Is The Right Method To File Your Tax Return?
You have two options to file your tax returns. You can file your tax return online electronically (e-filing), or the old method of a paper return.. The e-filing method is the most expeditious way to file and will help speed up any refund due.
- What Is The Deadline For Your Business Tax Return?
Your business can, however, seek an extension to file tax returns. However, an extension is only permission to file later, your taxes are still due by April 15th–interest and penalties will accrue if you do not pay your tax balance by then. The 2019 tax filing deadlines for corporations and partnerships are as follows:
C corporation taxes are due three months after the end of the fiscal year. Currently, the due date for S corporations and partnerships isset on March 15th , and the deadline for personal tax returns is April 15.
- What Happens If You Fail To Pay Your Tax Amount?
It is advisable to pay your taxes before the deadlines.. It should not come as a surprise that failure to pay taxes on time results in interest and penalties. The IRS offers various late payment options for taxpayers, but that will not stop penalties and interest from accruing.
You can, for example, receive a short-term extension of 120 days. However, you still will have to pay added interest and penalties. If need be, you can request an installment agreement to make payments.
- Which Business Expenses Can You Deduct?
You can deduct ordinary and necessary business expenses.. Several business owners often hesitate to write-off mileage they used. The best way is to keep and maintain a record. You can create a rough amount by noting the regularity of your business routes. It is an efficient way to make a legal record and make relevant deductions. That said, do not confuse your auto expenses with travel expenses..
- What about Cell Phone Expenses
Several business owners are unaware of the IRS ruling, where you can write-off 100% of your mobile expenses. The writeoff is available to business owners that have one more home phone line.
- What Are The Most Common Deductions ?
Whether you run a small business or a corporation, the frequency to purchase supplies and update computers, change office furniture, and upgrade digital equipment to boost productivity is quite common. Small business owners, for instance, can deduct most of the above items. In short, so long as it serves a business purpose, you can write it off.
Moreover, small businesses can deduct dining expenses, which happen to be one of the most under-utilized expenses. However, do not generalize it. Instead, make sure that the nature of dining relates to business sales.
Ideally, your business will be able to write-off a multitude of meals as you do more business. It is better to take some time and view all your meals of the year with clients and partners to deduct the right amount.
- What Is The Ideal Way To Pay Self-Employment Taxes?
Whether you operate as a sole proprietor, partner, or an LLC member, you should factor in self-employment taxes, which consists of your Social Security and Medicare taxes. The calculation of self-employment taxes depends on your business structure as some entities require you to pay self-employment taxes and some do not.