This corporate tax preparation fundamental breakdown offers seventeen straightforward tips on handling your business taxes while remaining in compliance with the rules or regulations from the IRS, state and local tax authorities.
1. Mark your calendar for various tax-related actions
• If your small business is set up as an S corporation or a partnership, your tax return is generally due on March 15.
• Small businesses that are sole proprietorships, single-member limited liability companies, or C corporations have their tax deadline on April 15 , usually the same as individual tax returns.
2. Retrieve all tax-related forms relevant to your corporate structure
• Sole proprietorships use Form 1040, especially Schedule C, to report business income and expenses.
• C corporations file their taxes on Form 1120.
• S corporations use a special Form 1120-S from the IRS.
• Partnerships must complete Form 1065 and then provide individual partner information on Schedule K-1.
3. Gather all income-related business records for the relevant tax year
Some records may include:
• Gross receipts from sales of goods or services.
• Returns, or refund invoices
• Documentation regarding any interest or investment income accrued by the company
4. Collect documentation for business-related expenditures including:
• Receipts for insurance, overhead costs, supplies, utilities, and professional fees
• Documentation regarding home office deduction, transportation, meals, entertainment, and business health insurance expenses.
5. Send out any required information returns, and ensure you receive the ones you need
• Form W-2 for employees or Form 1099-MISC for independent contractors are required to be sent out by a specific deadline
• paying interest on loans, rent on rental property, or fees for services provided by outside professionals may also need to be distributed, requested, or recorded
6. File any extensions before the due date to avoid interests and penalties.
• Business set up as sole proprietors, single-member LLCs, and C corporations can receive extensions for up to six month through Oct. 15.• Extensions for partnerships and S corporations are up through Sept. 15.
• State and federal tax rules differ, so both agencies should be consulted for clarification
7. Compare the previous years’ taxes with the current year to determine if you are reaching your company’s tax planning goals
• Avoid overpaying taxes as your company can accrue debt later from the lack of liquidity
• Avoid underpaying as that can result in unnecessary interest payments and penalties fees
Deductions to Completely Avoid or That May Not Be Counted as Deductible
8. The small business loan can’t be deducted, but the purchases can be.
9. Clothing that is worn outside of the scope of work
10. Contributing your time to charity
11. Membership Dues
12. Accreditation Fees
13. Federal Tax Payments
14. Life and Disability Insurance Premiums
16. Restitutions or Court Fees
17. Your salary
Every business requires a high-level look at its tax picture to create the supporting schedules and attachments required to remain in compliance with state and federal tax regulations.
To discuss your business’s complex set of tax preparation or planning needs contact Jeffrey Levine, Tax Planner today for a consultation.