Business taxes can be complicated, and it is not unusual for entrepreneurs to have several questions related to them. After all, there are a number of taxes that must be paid at different times of the year, which complicates a lot of business matters. Since it is important to understand the complicated tax regulations and financial responsibilities, we share some of the common questions entrepreneurs may have about their taxes.
Here are the top 12 questions entrepreneurs have about business taxes.
#1. When Are My Business Taxes Due?
Different types of taxes are due at different times of the year. Certain businesses must file their taxes on the 15th of the third month following the end of the tax year (which ends on September 30th). Moreover, for some of them, income tax is due based on the owner’s tax return on April 15th every year. While most of them use the fiscal year as their tax year, it is common for them to rely on the alternative to the calendar tax year.
For small business owners, it is important to pay taxes on time as failure to do so can result in penalties and fines, which can quickly aggravate. If you are unsure about when yours are due, it is best to get in touch with a tax professional.
#2. How Do I Get a Tax ID for My Business Venture?
Another common question that entrepreneurs can have about business taxes is how to get a business tax ID. The IRS offers a tax ID for free and it is used by the company on almost all important financial documents. You can apply for your business tax ID online through the IRS website. The application process doesn’t require any charge.
#3. Where Do I File?
Once you get your tax ID, you can file for business taxes online and can make payments through the Electronic Federal Tax Payment System (EFTPS).
#4. How Do I Calculate My Tax Rate?
Tax rates for businesses depend upon the structure of the organization. Some of the common business structures include sole proprietorship, limited liability company (LLC), partnership, corporations (S and C), and more. Different types of business structures have to pay different tax rates, which can range anywhere from 10% to 37%.
#5. How Will Changing Laws Impact My Business?
As the laws change, it can have an impact on your business tax. Regardless of the type of your business structure, any changes in the laws will have a favorable or unfavorable impact on your business tax, depending upon how the laws have changed.
#6. Who Will Pay the Estimated Taxes?
Entrepreneurs who expect to owe $1,000 or more as taxes following withholdings and tax credits will be required to calculate and pay estimated quarterly taxes.
#7. How Do I Report Business Income?
Depending upon your type of business, how you have to report your business income will vary. Since calculating, reporting, and filing for business income and taxes is a complicated process, it is best to consult with a seasoned tax professional to ensure that you are filling all your required forms appropriately.
#8. Can I Claim Small Business Deductions?
If you are a small business owner, you can claim several deductions, which can include deductions on employee retirement plans, reimbursement of employee’s travel costs and other expenses, and other benefits passed on to the employees.
However, to claim small business tax deductions, it is important that you maintain your business accounts separate from personal accounts.
#9. Can I Claim a Tax Refund?
Some small business entrepreneurs may be able to get a tax return depending upon whether the business passes its income through to the owner’s account. In that case, the owner and not the business may be able to claim a tax refund.
#10. How Do I Claim a Business Loss?
It is common for many small businesses to make a loss, but not many entrepreneurs know that they can also claim the losses. Different types of businesses, including partnership, sole proprietorship, and members of an LLC or S-corporation, can report the business loss on their personal tax returns, which offsets other sources of income. Moreover, if your loss is more than all reported income, you can also carry the loss back to previous tax years and obtain a refund from the previous years.
#11. What to Do If I Own the IRS or the Government?
Some entrepreneurs end up owing to the government or IRS. In that case, the IRS or the government will determine the tax amount you owe and send you a tax bill so you can pay off your debts as soon as possible before interest and penalties are applied and compounded.
12. Why Do I Need To Work Closely With a Professional Tax Attorney?
Working with a professional tax attorney brings several benefits. It ensures that your taxes are filed correctly. Moreover, since taxation is a complicated domain and there are very frequent changes in the laws, working closely with a professional attorney makes handling business taxes easier for entrepreneurs.
Moreover, they will also help you develop a tax plan so you can enjoy tax savings where applicable using legally approved methods.
Significance of Understanding Business Taxes
There are several rules and tax laws that entrepreneurs need to understand. While different types of businesses have to pay taxes at various times of the year, they are typically not exempt from them. Therefore, it is important for entrepreneurs to work closely with accountants and lawyers, so they are fully aware of when and how to proceed with payments.
Read our tax law blog today for more information on business taxes and other tax-related issues.