21 Small Business Tax Questions (& Answers)

Doing taxes is like going to the dentist. No person desires to do it, but it surely’s essential to the well being of your corporation.

Taxes will be complicated for small enterprise house owners. You take care of extra than simply earnings tax, and there are dozens of deductibles, credit, and packages you would possibly qualify for. Many enterprise house owners will even rent a tax accountant to reply questions in order that they file their taxes appropriately.

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When you’re like me and may’t provide you with good questions on the spot, right here’s a listing of one of the best inquiries to ask your tax accountant for small enterprise house owners.

Inquiries to Ask Your Tax Accountant for Small Enterprise

Listed below are 21 inquiries to ask your tax accountant. In the event that they’re stumped, we’ve included the solutions too, so you’ll be able to hold your books cleaner for tax season.

1. When are my taxes due?

It’s vital to pay your taxes on time. When you don’t, the IRS can cost you a “Failure-to-pay penalty” of 0.5% for every month you don’t pay. They will add a most of 25% extra to your taxes in case you don’t pay them.

Reply:

The small business tax deadline is April fifteenth. The IRS units the deadline as “the fifteenth day of the fourth month following the tip of the tax yr” – an advanced method of claiming April fifteenth.

When you can’t file your taxes earlier than this deadline, it is best to file for an extension as an alternative. Extensions help you file your taxes within the fall, supplying you with extra time to finish them.

2. What taxes do I’ve to pay?

The kind of taxes you pay depends upon your corporation and the services or products you promote. You need to make sure you pay the appropriate taxes and don’t overpay the IRS. It’s more cash in your pocket and fewer headache to take care of later.

Reply:

There are just a few various kinds of enterprise taxes that you may pay. What it’s a must to pay depends upon the construction of your organization. Right here’s a bit bit extra about every kind of enterprise tax:

Revenue Tax: All companies (besides partnerships) are topic to earnings tax. You pay these taxes primarily based in your income.

Estimated Tax: Estimated tax is a fee that companies make all year long. Sole proprietors, companions, and S firms usually pay estimated tax.
Self-Employment Tax: Self-employment tax (SE) is a tax you pay for Social Safety and Medicare. These funds go towards retirement, incapacity, and medical advantages.
Employment Taxes: If in case you have staff, you will need to pay further taxes. These embody Social Safety and Medicare, federal earnings tax withholding, and federal unemployment tax.
Excise Tax: Excise taxes are industry-specific taxes. You pay these primarily based on the services or products that you simply promote.
State Taxes: Every state has its personal tax legal guidelines for small companies. You could find your state’s legal guidelines here.
Native Taxes: Native taxes are charges you pay to your metropolis or county. These can embody property taxes, allow charges, and so forth.

3. What kind of enterprise am I?

Your small business construction determines the kind of taxes that you simply pay. It’s a great query to ask, even when you already know your corporation kind. Your tax skilled could prevent cash by submitting your corporation beneath a unique enterprise construction.

Reply:

Listed below are the various kinds of companies you’ll be able to file your taxes for:

Sole Proprietorships: You personal the enterprise and don’t share it with anybody else.
Partnerships: You share possession with different individuals.
C Corporations: You have got shareholders that make investments their cash and property in alternate for inventory in your organization.
S Corporations: You have got shareholders that handle company earnings, losses, deductions, and credit for federal tax functions.
Limited Liability Company (LLC): You share possession of this enterprise with different “members.” Members will be individuals, firms, different LLCs, and so forth.

4. What paperwork do I must file my taxes?

Taxes are plenty of paperwork. When you’re going to work with a tax accountant, it is best to guarantee you will have the appropriate paperwork and kinds ready. Your tax skilled can reply this query beforehand so that you don’t spend your assembly digging by way of your storage system.

Reply:

First, you will need to decide your corporation kind and the taxes you will need to pay. Upon getting that sorted, go to the IRS website. It could possibly inform which kinds you want primarily based on the taxes it’s a must to pay. For instance, this page breaks down the kinds you would possibly want for excise taxes. You too can order tax kinds on-line here.

5. Do I file my private taxes and enterprise taxes individually?

Taxes are tough when beginning a enterprise, and this can be a widespread query enterprise house owners have the primary time they do their taxes. As soon as once more, the reply depends upon your corporation kind.

Reply:

You need to file your taxes individually in case you personal a company or a partnership. You possibly can file your corporation taxes as an attachment to your private return in case you are a sole proprietor or the only proprietor of an LLC.

6. Do I want a tax accountant?

Some enterprise house owners desire to not work with a tax accountant. Hiring one prices cash, and small enterprise house owners all the time need to save. When you’re an skilled enterprise proprietor who has filed the identical kinds for years, you may not want an professional to assist.

Reply:

No. You possibly can file your taxes by sending your kinds on to the IRS. The advantage of working with a tax skilled is that they will reply questions and doubtlessly prevent cash in your tax return.

7. How do I file my taxes with out a tax accountant?

Tax accountants take the freedom of sending your return to the IRS. However, in case you don’t have an accountant, you may not know the place to ship your taxes.

Reply:

You have got two choices. You should use tax software program like TurboTax or H&R Block – these merchandise usually cost a charge. Or, you’ll be able to ship your return on to the IRS. There’s an digital fee system on their web site here.

8. What’s one of the best tax software program to make use of?

When you’re going to file your taxes with out an accountant, you would possibly think about using enterprise tax software program. These instruments assist full kinds and supply AI assistants that reply questions on your taxes. Discovering one that gives the appropriate providers and doesn’t overcharge your corporation is vital. Beneath is a brief checklist of among the finest enterprise tax software program.

Reply:

Listed below are among the finest tax options for small enterprise house owners:

9. How does my state or authorities have an effect on my taxes?

Relating to small companies, there are federal taxes, state taxes, and native taxes. Every state could have completely different tax legal guidelines relying on the place you’re employed.

Reply:

One of the best ways to seek out state tax legal guidelines is thru this page on the IRS web site. It lists each U.S. state and gives hyperlinks to completely different tax assets. For native taxes, try the treasury part of your city or metropolis’s web site.

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10. How a lot cash ought to I put apart for taxes?

It’s vital to plan for taxes all year long. Monetary consultants suggest placing apart a separate fund so you’ll be able to all the time pay your taxes whatever the efficiency of your corporation.

Reply:

Most consultants suggest setting apart a 3rd of your income for taxes annually. Because of this utilizing good payment software and preserving clear information is vital. You possibly can estimate what you owe and put aside an acceptable quantity.

11. What enterprise bills can I write off?

Right here’s a query that may prevent cash. Writing off expenses means you’re eradicating purchases out of your taxable earnings. An organization automobile is an efficient instance. Some companies can deduct the automobile and its upkeep funds from their taxes. Your tax skilled can verify whether or not sure purchases are deductible or not.

Reply:

There are dozens of bills that you may write off for your corporation. For my part, it’s price checking with a tax professional to substantiate you’re utilizing as many as attainable.

The IRS breaks down deductions into 4 classes:

Dwelling Workplace: When you use your own home for enterprise, you’ll be able to deduct bills like telephones, provides, and repairs.
Power Effectivity: You possibly can declare a deduction in case you personal an energy-efficient constructing.
Customary Mileage: You possibly can deduct automobile bills in case you use your automobile for work.
Enterprise Curiosity: These bills are for rising your corporation, comparable to loans, bank cards, and mortgages.

Remember that purchases that you simply write off should be mandatory for your corporation. It’s essential to additionally present information of every buy and separate these bills out of your private tax return.

12. What’s a tax credit score, and which of them do I qualify for?

Whereas tax credit differ from tax deductions, each can prevent cash. It’s vital to ask your tax skilled which tax credit you qualify for therefore you’ll be able to reap the benefits of them this season.

Reply:

A tax credit score is a discount that lowers your tax fee. Whereas enterprise bills decrease your complete earnings for the yr, tax credit cut back the quantity it’s a must to pay.

Listed below are just a few various kinds of tax credit that you may qualify for:

Employer-Offered Youngster Care: A credit score for offering childcare on your staff
Work Alternative: A credit score for hiring individuals from deprived backgrounds or circumstances
Clear Car: A credit score for buying an electrical or fuel-cell automobile
Analysis: A credit score for investing in analysis and growth
Rehabilitation: A credit score for rehabilitating historic buildings

To find out which tax credit you qualify for, try this page on the IRS web site.

13. What are quarterly estimated funds?

Most enterprise house owners pay their taxes quarterly. These funds are for “estimated tax,” calculated primarily based on the cash you owe once you file your return. Quarterly estimated funds have particular due dates, so it’s vital to ask your tax skilled in case you should make them and when these deadlines are.

Reply:

Quarterly estimated funds are 4 tax funds that you simply make all year long. These funds are for “estimated tax,” a mixture of earnings and self-employment tax. Self-employment tax helps pay for issues like Medicare and Social Safety. These funds contribute to these advantages, much like how Medicare and Social Safety tax are factored into most paychecks.

14. When ought to I make a serious buy or funding?

Right here’s an excellent query to ask in case you plan to develop your corporation this yr. Large purchases have an effect on your tax returns, so it’s vital to ask your tax skilled when one of the best time is to purchase one thing to keep away from getting hit with fees and charges on the finish of the yr.

For instance, let’s say I buy a van for my enterprise. Whereas that van could also be a deduction, I can’t write off the total price of this buy this yr. I’ve to contemplate “depreciation.” In different phrases, since I’ll use this automobile for multiple yr, I’ve to unfold out the deduction over the automobile’s anticipated life.

When you’re making related purchases at your corporation, it’s vital to speak to your tax accountant and perceive how this stuff will impression your tax return this yr.

Reply:

The most effective time to buy depends upon your targets, assets, and alternatives. First, decide your aims. Why do you want this merchandise? What is going to it enable you do? Then, you’ll be able to analysis your choices and discover your best option on your firm.

After that, it’s vital to set a timeline on your buy. As an illustration, in case you’re upgrading a bit of apparatus, how lengthy will it take to put in it? Will you expertise any downtime? In that case, how will that have an effect on your money movement? These are crucial components to contemplate when making a giant buy.

how to make a major purchase for small businesses

Lastly, set a price range and attempt to predict how a lot cash you’ll make from this buy. Your income ought to far outweigh the prices. In the event that they don’t, contemplate another choice, or don’t make this buy proper now. Ask your tax skilled these questions, and so they might help you identify when to purchase one thing for your corporation.

15. How can I pay fewer taxes?

No person likes taxes, and one of many greatest questions small enterprise house owners ask is the best way to pay much less annually. There are methods to decrease your taxes, so this can be a nice query to ask an accountant who might help you discover missed deductibles and tax credit you didn’t know you certified for.

Reply:

Listed below are just a few methods to decrease your taxes as a small enterprise proprietor. Remember that not all of those options apply to your organization, and lots of of them have phrases and circumstances for which you will need to qualify. It’s vital to substantiate together with your tax accountant earlier than benefiting from these methods:

Determine missed deductions and tax credit.
Change your corporation kind (LLC, Partnership, and so forth.).
Begin a retirement plan.
Pay for healthcare.
Donate to charity.
Rent distant or freelance staff.

16. How a lot can I make earlier than paying taxes?

When you’re simply beginning your corporation, you would possibly surprise at what level your aspect hustle turns into a full-on firm within the eyes of the IRS. Figuring out how a lot you can also make earlier than paying taxes is vital to keep away from potential fraud and missed funds.

Reply:

In response to the IRS, self-employed people should file an annual return and make quarterly funds in the event that they earn $400 or extra.

17. What’s an Employer Identification Quantity (EIN), and do I want it?

You need to ask this query even in case you don’t handle any staff. Each enterprise has an Employer Identification Quantity or EIN, which is significant throughout tax season. Figuring out yours will prevent time when filling out kinds and serving to staff with their taxes.

Reply:

EIN stands for “Employer Identification Quantity.” The IRS makes use of this quantity to determine your corporation. When you don’t have an EIN, you’ll be able to fill out this form and request one on-line, by mail, or by fax.

You want an EIN even in case you don’t handle staff. The IRS makes use of it to legitimize your corporation and affiliate taxes together with your firm. The excellent news is that EINs don’t expire and are free to use. You will get one shortly, even in case you don’t have it now.

18. How do I handle payroll taxes?

It’s vital to grasp how payroll taxes work in case you manage employees. Payroll taxes are paid primarily based on the variety of staff you rent and the way a lot you pay them. These taxes contribute to packages like Social Safety and Medicare.

Reply:

The payroll tax fee for employers is 7.65%. It applies to all “taxable” wages, and the graphic beneath exhibits how these funds are used.

small business tax questions for tax accountant

Source

The primary two questions it is best to ask your tax accountant are, “What are taxable wages?” and “Which of my staff are taxable?” When you work with impartial contractors, you might not should pay taxes on their wages.

You also needs to analysis which payroll taxes apply to your corporation. This data will enable you calculate how a lot you owe.

19. How can I enhance my bookkeeping?

Taxes will be tedious, unclear, and complicated. It’s arduous to inform what paperwork you want, what kinds it’s a must to full, and what questions your tax accountant will ask you. Whereas working with knowledgeable is nice, it can save you much more time by preserving your books clear and preparing for tax season early.

Reply:

Listed below are three fast ideas for enhancing bookkeeping at your corporation:

Use a bookkeeping software program. These instruments will hold correct and arranged information of each transaction at your corporation.
Separate your funds. Open a checking account for your corporation and use a separate credit card. That can make your purchases simpler to type by way of on the finish of the yr.
Conduct quarterly opinions. Because you in all probability are paying estimated tax, reviewing your funds each few months earlier than making your quarterly fee is a good suggestion.

20. What if I can’t pay my taxes?

Sadly, not each enterprise is profitable — and in some years, taxes would possibly hit your organization tougher than anticipated. Enterprise house owners ought to know what’s at stake if they will’t pay their taxes. Happily, the IRS does supply packages that assist small companies avoid late payments and property seizures.

Reply:

When you don’t pay your taxes, the IRS can seize your organization’s gear or your complete firm. It could possibly additionally put a “tax lien” or levy towards your corporation to make sure fee. A tax lien identifies property at your corporation (gear, autos, and so forth.) and influences your line of credit score. A levy seizes property as fee for overdue taxes.

21. When is one of the best time to start out tax prep?

Except for paying the IRS, taxes are troublesome as a result of they take time to do. You have already got to run a enterprise; now you should be a bookkeeper, too? You should definitely put apart the mandatory time to do your taxes so that you’re not working towards the deadline come tax season.

Reply:

When you make quarterly estimated funds, it is best to put together for taxes all year long. When you don’t, give your self about two weeks to seek out your paperwork, full kinds, and work together with your tax skilled to file your return. When you hold clear information and use bookkeeping software program, compiling the required details about your corporation will take even much less time.

Free Assist for Small Enterprise Tax Questions

Some enterprise house owners all the time search for methods to economize, and taxes are not any exception. Listed below are some assets it is best to ebook in case you’re on the lookout for tax recommendation this season:

Taxes are simply one other a part of proudly owning a small enterprise, like taking out the trash and mopping the flooring. The extra you do them, the simpler they’ll be. Preserve these questions helpful and set your corporation for fulfillment as you propose for tax season.