5 Things to Know About Keeping Track of Business Taxes
Running your business is itself hard to leave alone, facing the complexity of filing your taxes yearly. As a business owner, you have a lot of taxes to pay. Therefore, a basic understanding of key tax types and how to track them makes your work easier. The sum of levies that you pay depends on how much you earn, your business structure, and whether you have employees or not.
As a business owner, you should understand five essential things to help you track your business taxes.
Business Taxes You May Have to Pay
When you own a business, it can be a great surprise to keep track of the amount of taxes you are responsible https://essaygroom.com/irs-lawyer/for. Some of the fees to account for as a business owner include the following.
Payroll Tax – if you have staff in your business, you will be liable for paying payroll taxes on their wages.
Sales Tax – clients pay a sales tax on services and goods they purchase. Therefore, as the business owner, you are responsible for collecting and reporting sales taxes to your local and state government.
- Employ a Qualified Accountant
Doing your books is an essential way for your business to save money. However, a qualified accountant does more than just preparing your business financial statements. A good accountant works with you throughout the year to track your business income and spending. The bookkeeper will also truck your business taxes every month, not just on tax months.
- Choose Wisely your Legal Structure
When starting your business, it is crucial to know about the distinct legal structures that exist because each structure has different tax implications. For example, limited liability companies, sole proprietorships, C corporation, and S corporations are all different legitimate structures with diverse tax requirements.
As a sole proprietor, it is easy to set up and manage since you are the only owner. However, it can be risky at times since you individually undertake all legal and financial responsibilities. Nevertheless, sole proprietorship taxes are straightforward since you can report your business losses and income on your tax return.
- Use Tax Deduction to Minimize your Tax Bill
Every business comes with various expenses. Such expenditures may include wages, contract labor, business travel, vehicle expenses, equipment, rent, supplies, and depreciation of assets. However, as a business owner, you can lower your business taxes by writing off such operational costs when filing your tax returns.
Tax preparation software like QuickBooks self-employed tax bundle with intuit TurboTax tracks your expenses automatically to reduce your tax burden. This lets you claim your deductions spontaneously.
- Pay your Taxes Quarterly
According to the IRS Levy Release Service, every business owner, especially sole proprietors, S corporation shareholders, or partners have to submit their quarterly estimated tax payments. As a business owner, you can figure out your estimated tax payment using Form 1040-ES. Besides, it may be useful to use your previous year’s income, tax credits, and deductions as a beginning point. Also, you can use your last year’s state tax return as a guide.
After figuring out the number and e-file, you can pay the IRS in various methods. Such ways include IRS Pay by Card that permits you to pay online using your debit or credit card. You can also opt to use IRS Direct Pay, which takes money owned out of your checking or savings account.
A self-employed and sole-proprietor business holder almost always have to pay estimated quarterly levies except when their business loses money. You should remit quarterly estimated tax payments for each year every April 15, June 15, September 15, and January 15 of the subsequent tax year. You will be subjected to severe penalties if you fail to submit at least 90 percent of the taxes owed to your business. Therefore, it is crucial to work with a tax expert to help you double-check if the sum owed is correct.
Conclusion
As a business owner having a credible tax system help you in offsetting the potentially high cost for self-employed expert while filing your taxes. You can also limit your tax deductions relative to your business gains by writing off your startup and operating costs to maximize your tax deductions. Besides, working with a tax expert benefits by avoiding common drawbacks such as underreporting your business expenditures or overlooking critical tax forms that can save you money.