For business owners everywhere, the end of the year means that it is time to get ready to file their businesses’ tax returns. Rather than wait until the last possible minute, you can get ready now for tax filing season with some common sense advance planning. These strategies could help you maximize your deductions, lower your taxable income, and possibly increase the amount of your tax refund.
CHOOSE AN APPROPRIATE BUSINESS STRUCTURE
If you have not already, you need to choose the best business structure for your company. Depending on your business, you can choose from one of four structures. These are:
S or C corporation
Limited liability company or LLC
All of these business structures carry different implications for your company’s tax returns. For example, a sole proprietorship is generally reserved for people who are business novices or just learning how to run their own company.
If you are not sure of what structure to choose for your company, you should consult with a tax professional who can help you identify the best one to use for your business’s tax filing purposes.
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OBTAIN AN EIN
Another important tip that you need to take care of as early as possible involves getting an Employee Identification Number or EIN. An EIN takes the place on your tax returns of your Social Security number.
According to tax experts, it also reduces the likelihood of you becoming a victim of identity theft since your Social Security number will not be used on your business’s tax return. Moreover, an EIN is required for all business structures except for sole proprietorships that have no employees.
LOOK OVER YOUR BOOKS
One of the costliest and most troublesome mistakes that business owners make is forgetting to keep up their books throughout the year. As the end of the year approaches, you might need to scramble to get your books in order and find receipts to back up any deductions you plan to take on your taxes next year.
You can avoid this dilemma by using a high-quality and reliable bookkeeping program or outsourcing your bookkeeping to an accountant or CPA. You should also periodically review your books so you know how much income you are bringing in, what your expenditures are, and how much you might need to pay when you file your business’s tax returns.
This tip can be especially vital when you consider that the IRS tends to audit small business owners more often than private taxpayers. Failing to keep good records could trigger an IRS investigation of your business. Rather than scramble to find receipts and account for deductions, you can get ready to file your taxes and prepare for a possible audit by reviewing and updating your books now.
MAKE QUARTERLY TAX PAYMENTS
The IRS will require you to pay your taxes on a quarterly basis if you structure your business as a sole proprietorship, partnership, or S-corporation and you expect to make more than $1000 in income. If you are not sure of how much you should pay this quarter as the end of the year approaches, you are advised to review your company’s last year’s income, deductions, and tax credits. This information could help you figure out how much you need to pay for your quarterly taxes.
It is important that you pay at least 90 percent of what you owe this quarter if you want to avoid expensive IRS tax penalties. If you are not sure of how much you should pay or you do not know how to figure out your quarterly taxes, you should consult with a tax professional before filing your return.
PAY YOUR SELF-EMPLOYMENT TAXES
When you own your own company, you do not have the luxury of having an employer withhold your taxes for you. Instead, the IRS expects you to withhold and pay self-employment taxes for Medicare, Social Security, and other federal taxes.
When you file your business’s tax return, you should make sure you include these self-employment taxes before submitting it to the IRS. Failing to pay these taxes could result in you being audited and heavily penalized.
GET TAX RELIEF HELP TODAY
If you think that you may need help filing your 2018/2019 tax return or past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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