Tax Planning Advice for Small Business Owners

Filing a tax return is an important annual responsibility. Here is some tax planning advice that will help you take control of your business's finances.

Advice, CPA, Finances, SMB owners, Tax planning, Taxes

Filing a tax return is an important annual responsibility. While all individuals in the United States must file a state and a federal tax return if they received income, small business owners can have more challenging tax filing responsibilities than others.

As a solopreneur, you may be looking for some guidance and tax planning advice as the filing deadline nears. Here is some helpful information that will enable you to better understand your tax incidence and take control of your growing business's finances:

Why Pay Taxes?

The obvious answer is that it is the law. Even accidental oversights in your tax filings can result in fines. Intentional failure to pay taxes is a criminal matter, and civil and legal penalties can be very stiff for repeat offenders. The IRS has a broad range of tools at its disposal to enforce tax rules, including the ability to levy—or forcefully remove—money from your bank account. Therefore, it is advisable to be proactive about understanding your tax responsibilities.

Filing on Time

It is also incredibly important to file your tax returns, forms, and fees on time. When a document or payment to the IRS is late, you could be charged a fine. Sometimes extensions can be worked out for tax return due dates, but the extension should be requested before the due date if possible. If you must make a payment to the IRS, whether because of income tax liability, payroll tax, or taxes due from previous years, it may be possible to work out a payment plan. If you do this, be sure to it. Payroll taxes usually must be paid throughout the year, while income and capital gains taxes are usually paid annually. If you need help keeping track of IRS due dates, use a calendar to keep track of them.

Understanding the Tax Calendar

The most active period in the tax calendar is between January and April. During this period, many due dates for income earned and payments made during the previous year occur. For example, by January 31, you must give 1098, 1099, W-2G, and W-2 forms to employees, contractors, and others to whom you made payments during the prior year. It is important to send these forms on time, as the individuals you send forms to will need them to file their tax returns.

Industry-Specific Tax Requirements

Depending on your business type, you may have unique tax forms to file. For example, farmers and fisherman must use Form 1040-ES to pay their estimated taxes for the previous year by January 15. Large food and beverage establishments must file Form 8027 by February 28. By March 15, corporations must file Form 1120 for the calendar year, and a payment for taxes due must be included with that form. Alternatively, an estimated tax payment can be made and an extension requested.

April 15 is the tax return due date for individuals, including small business owners, who must file Forms 1040, 1040A, or 1040EZ. Form 4868 can be filed to request an extension, although estimated taxes must be paid on time. Some taxes, like payroll taxes, have multiple due dates throughout the year. If you need help filling out forms, choose tax software to make filing simpler. While the number of forms, due dates, and information about your annual tax return can be complex and seem overwhelming, by keeping precise records and asking questions when you are unsure, you can file each year with confidence.

This information is only provided for general informational purposes, and should not be considered as offering individualized tax advice. Tax laws are complex; please consult your tax advisor on specific issues related to your tax situation.