If you run a business in any Economic Nexus State, you should know that completing sales tax registration, calculating business income taxes, and keeping track of all tax obligations is a complicated process.
This article takes the guesswork out of these tasks so you can focus on running your business to success!
#1 Determine your business filing status
Once you have determined your business type, there is a corresponding tax form that you can use to file your taxes with the state. This form will determine how much money is owed per year and any deadlines or estimated payments that need to be completed.
The three most common types of businesses are sole proprietorships, partnerships, and corporations.
Sole proprietorships are non-incorporated businesses that can be run as an individual, partnerships, or through a trust. They don’t need to register with the state but should report all income and expenses on their personal tax return by March 15 of each year.
For incorporated businesses, you will need to pay corporate taxes in addition to your personal income taxes. Corporations have to register with the state and pay a fee as well as submit annual reports. The first report includes incorporation information, names of shareholders, capital contributions, and other statements that help determine if there should be any tax liability or if the business is exempt from paying corporate taxes.
Before you open a corporation, make sure to consult a legal professional for advice.
Partnerships have to file an annual informational return with the state, but no tax is owed as long as there are no profits. This means that if you made any money as a partnership during the year but didn’t, your filing requirements would be minimal.
#2 Calculate your business income and expenses
Once you have determined your filing status, calculate the amount that is owed to the state. If you are a sole proprietor or partner and had zero income, then no taxes need to be paid.
If you’re a corporation, tax for this year as well as any other applicable charges such as franchise fees and other corporate taxes must be paid.
#3 Find out if you need to file a return
Once you have calculated the amount of taxes owed, find out if any tax returns need to be filed with the state. The rules are different for each business type and filing status.
If your business is an LLC, which means it has multiple owners but is not incorporated as a separate entity, you will also need to submit a business tax return as well as any partners.
If you are opening a new business, you will need to register your business with the state. This will require the payment of a fee as well as submitting information about your business, including any partners or members that help run it. You will also need to submit an annual report that includes how you were taxed this year and what returns needs to be filed.
You will also need to keep track of all income your business received during the year and how much money was outlaid on expenses. Once you have all these numbers, you can use them to calculate how much money is owed for taxes.
#4 Determine if your business needs to register for sales tax
If your business has sold any products or services during the year and made a profit, then you should register with the state for collecting and paying sales tax. Sales taxes can be paid quarterly on the revenue you’ve made, but this is only necessary if your business is making more than $12,000 per year or has an annual gross income of over $35,000.
#5 Know the deadlines for filing and paying taxes
Each state has different deadlines for filing and paying their business taxes. Be sure to check with your state’s treasury department on when these deadlines are. You can file an extension if you are not able to meet the original deadline, but you will have to pay a fine if the extension is not granted.
It is important to file and pay your business taxes on time so that you don’t incur any penalties. The fines can be costly and add up over time, so it’s best to avoid them altogether by being organized and aware of the filing deadlines.
#6 Keep track of how much money you owe
If your business is required to file a return, then there may also be tax credits that can be applied to reduce the amount owed for this year and/or future taxes. This article has several different tax credits that can be taken advantage of, including unemployment insurance payments made on behalf of employees.
You can deduct any expenses incurred in your business for this year and in the following 2 years. This includes advertising, utilities, research and development costs, promotional materials, office supplies, travel expenses (including gasoline), trade shows and conventions.
The disadvantage of not filing taxes is that you may incur fines or penalties over time. All states have different deadlines for filing and paying their business taxes; if you miss these deadlines then you will not qualify for any tax credits.
#7 File quarterly estimated payments with the IRS when necessary to avoid penalties and interest on underpayments
Once you have calculated how much money your business is owed for this year, estimate whether any payments are necessary for the following year. Using the previous example, if your business brought in more than $35,000 this year then you’ll have to make quarterly estimated payments. This means that you will have to send in small installments of what will be owed on April 15th, June 15th, September 15th, and January 15th. These are due to the IRS by the 15th of each month, and if they are missed then interest will be charged from the original due date.
Conclusion
Business taxes can be a daunting task, but with the right information, it can be less stressful. Be sure to consult with an accountant or legal professional to make sure you are compliant with your state’s rules and regulations.
The post 7 Tips For Filing Business Taxes And Staying Compliant appeared first on Tweak Your Biz.
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