The responsibilities of owning and running a business are never-ending. Tax prep and filing is usually much more complicated for business owners, and this time of year can be rather stressful and take away valuable energy and time from you. If you wish to run your own business, try to understand what’s expected of you in regard to paying taxes—or at least hire someone who does! Some say that tax filing is not terrible as you only have to do it once a year, but entrepreneurs know better. In fact, there is a lot that goes into preparing and filing your taxes.
If you are a first-time business owner, you may have an even harder time. There are a number of things you’ll need to know about before you even begin, like which specific forms you need to fill out.
Before filing anything, know what kind of business you run. A bit of preparation in regard to tax planning can help you from the very beginning when you first structure your business. You can also refer to bookkeeping services in Philadelphia for proper guidance, but be sure to keep your books out of untrustworthy hands. For a comprehensive business taxes guide, keep reading.
Types Of Business Taxes
1- Federal Taxes: The filing of your federal income taxes is usually done by the end of the financial year, or in the first fifteen days of April. In the US, you need to pay the tax to the IRS (Internal Revenue Service).
2- State and Local Taxes: You have to file your state and local taxes based on your respective area. Knowing the tax laws in your location and/or consulting your state or local tax agencies is highly recommended. They will help you with your tax obligations, as the rules and regulations differ based on location.
3- Employment Tax: These are the taxes that you deduct from your employee’s paycheck. This is also known as payroll tax.
4- Excise Tax and Income Tax: Excise taxes are specific taxes you pay when your business deals with particular goods or services, such as logistics, trucks and tractors, fuel, etc. Income tax is the tax you pay on the annual revenue of your business.
5- Sales Tax: Sales tax is added onto most everyday items that aren’t considered living essentials. If you sell products and services in your business, you have to maintain the annual sales report by calculating and collecting the tax data.
6- Property Tax: This is property-based and completely depends on the type of property you own. This doesn’t just relate to commercial property, but includes real estate and land. These taxes are regulated by the state or local system.
Advantages Of Timely Tax Filing
It has been noted that many people don’t pay taxes and write off nearly any tax that comes their way. Tax is not something that you pay out of context, and it is your right and responsibility to pay tax on time. When you pay taxes, the government collects the funds and uses them as a source for building new enterprises or expanding existing ones. A tax is a boomerang that eventually comes back to you with benefits. In this way, every individual contributes to developing their country’s economy and stability. Below are some other advantages of timely tax filing:
1- Refund of excess taxes paid
2- Convenience in loan approval
3- Peace of mind for you and your family
4- Interest benefits and deductions in penalties
Disadvantages of Not Filing Taxes Before Their Due Date
It’s not rocket science—if you do not pay your taxes, then you will be punished. It may not lead to instant regret, but negative and costly consequences will develop. Some of the repercussions that you may face when you default on your taxes can include:
1- Interest added to the tax amount
2- If you lapse on timely tax payments, then you will not get any interest on your returns
3- Restrictions imposed on your future income
4- Fixed penalty charge for those who do not file their income tax return (this varies based on location)
5- Penalties and restrictions for hiding your income
6- Jail time
7- Note the documents you’ll need to file
If you are salaried, Form 16 will do the trick. However, you may also require some additional documents to maximize the accuracy of deductions.
- Bank statements or interest certificate: This is to record all your earned interests from bank accounts, FDs, RDs, etc.
- TDS certificates: This stands for tax deducted at source, and it includes all the taxes paid to the IT department.
- Donation receipts: These are needed to prove any donations for tax deductions.
- Loan certificates: They ensure loaners of your stability and ensure the availability of future loans for your business needs.
- Bank account information: This is important in order for refunds to be dispensed to you.
Even if you end up not being qualified for a given tax deduction under the current arrangements, it is savvy to document every expense and profit in order to be on the right half of the tax laws. Enlistment of properties in many states requires filling out the government forms of the most recent three years. Having a reliable record of returns makes such enrollment much simpler.
It doesn’t matter how your company is constituted, whether you are a sole proprietor, partner, AOI, LLP, or any other form—you must pay your tax on time and before the due date if you want to secure the future of your business. Filing timely returns assists with a financial safety net.
Where Should You File Your Business Taxes?
Filing tax returns doesn’t have to be on your mind constantly. It is your decision whether you prefer to file once a year or once per quarter. Understanding a bit more about how taxes work will make the whole process a bit easier.
As per the IRS business forms, you can generally file your tax in two different ways, by mail or electronically. Filing online is usually much easier in this day and age, especially when you use the IRS e-file system. If you opt for filing through mail, then make sure you are following qualified guidance. All your information needs to be exact to avoid problems.
Ultimately, there’s a lot that goes into preparing for tax season. That’s why we are here to help you maximize your deductions and minimize your stress. At A+ Tax Experts, we take taxes off your hands. In fact, if you work with us taxes will hardly ever take up your valuable time and energy again. This way, you can focus on doing what you do best and growing your business.
If you run a small business and can’t be bothered with learning how it all works with taxes, contact us today. A Philadelphia taxes expert will have the best tips through which you can easily demystify the process, maximize your deductions and returns, and make your life easier.