Avoid the Madness: Why Your Business Should Prep Way Before the Tax Deadline
Most individual taxpayers dread the tax season. But for businesses, it's even more daunting.
If you miss your tax filing deadline, you'll be assessed a 5% per month penalty by the IRS until you file your return. If you neglect to pay your business taxes, expect 6% interest and a late penalty of .5% for each month after the April 15th deadline.
In a worst-case scenario, you can be charged with criminal offenses for not paying taxes. But more often, you just pay hefty fines.
You can request a filing extension from the IRS. But it's better to prepare your taxes far in advance of tax season to avoid any mistakes or late payments. Here's everything you need to know about filing business taxes before your tax deadline.
What is the Tax Filing Deadline for Businesses?
The due dates for your tax returns depend on the type of business you have. Here's a detailed list of deadlines for 2019 based on business type:
Sole Proprietorships and Single-member LLCs
In the United States, the last day to pay taxes in 2019 is Monday, April 15th for individual taxpayers. Although sole proprietorships and single-member LLCs are technically businesses, they share the same deadline as individuals. These types of businesses file returns on Schedule C (Form 1040).
Owners of these business types must file their business taxes with their own tax return if they are separate. Many sole proprietors are not required to file separate tax returns for their businesses, however.
Partnerships are businesses formed and owned by two or more partners. Partnerships file returns with Form 1065, with a Schedule K-1 for each partner. The deadline for filing taxes as a partnership is March 15th, 2019.
Multiple-member LLCs are similar to partnerships. They file returns with Form 1065, with a Schedule K-1 for each member. The deadline for filing taxes as a multiple-member LLC is March 15th, 2019.
S corporations are closely held corporations that are taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. They can only be started by U.S. citizens and permanent residents.
S corporations are considered "pass-through" businesses, in that owners report their share of profits on their own individual tax returns.
S corporations file their tax returns using Form 1120 S and the deadline for filing as an S corporation is March 15th, 2019.
C corporations must file returns on Form 1120. Their filing dates depend on their fiscal year. C corporations whose fiscal year ends on December 31st must file by April 15th, 2019, for example.
C corporations must file by the 15th day of the 4th month after the end of their fiscal tax year. The only exceptions are corporations whose fiscal year ends on June 30th. They must file by the 15th day of the 3rd month after the end of their fiscal tax year.
When are Quarterly Taxes Due?
Typically, only self-employed individuals, such as sole proprietors, who expect to owe $1,000 or more in taxes must pay quarterly taxes. However, individuals who receive substantial untaxed income may also be required to pay taxes quarterly. Shareholders of S corporations may also need to pay quarterly.
Quarterly taxes are estimated by the business owner.
According to the IRS, the due dates for quarterly tax payments are the same every year:
April 15th (for payment period January 1st to March 31st)
June 15th (for payment period April 1st to May 31st)
September 15th (for payment period June 1st to August 31st)
January 15th of the following year (for payment period September 1st to December 31st)
How To Prepare Your Business Taxes Before Your Tax Deadline
If everything you read above seems complicated, you're not alone in thinking so. According to a survey by the National Small Business Association (NSBA), 53% of small businesses said administrative burdens were the most significant challenge presented to them by federal taxes.
Small business taxes can be a serious burden on your workforce. However, there are a few steps you can take to prepare for tax season and make it go more smoothly.
You may be able to take deductions on certain business expenses. Some of the most common deductible expenses are:
Maintenance or repair costs
Office supplies and expenses
Continuing education expenses
Employee benefit program expenses
Wages, salaries, and other types of compensation
There are many other types of expenses you may be able to deduct. Be sure to save all your receipts from business expenses so you can claim maximum deductions during tax time. It's best to keep these organized, either by type of expense or chronologically.
Keep Your Accounts Organized
Unless you're a sole proprietor, you should keep your personal and business accounts separate. You should also have a separate account for your estimated tax payments.
You may wish to invest in accounting software if your accounts are too complex to keep track of on a spreadsheet. However, a spreadsheet may be all you need. Be sure to back up your accounting files in case of a disaster.
Pay Taxes as You Go
To avoid nasty surprises during tax season, many businesses choose to pay estimated taxes quarterly. In some situations, you may not need to pay quarterly, but it may be a good idea to do so, anyway.
If you don't pay your estimated taxes, you may not have enough kept away to pay your tax obligation. In some cases, you may face fees for not paying quarterly estimated taxes.
Take Advantage of Tax Credits
In addition to deductions, your business may be eligible for tax credits. Unlike deductions, credits are given to businesses or individuals to encourage certain types of activities that are deemed positive for the public good.
For example, some businesses can receive a tax credit for purchasing energy-efficient equipment.
Here are some of the possible tax credits you should investigate:
The Family Leave Act tax credit
Research and development tax credits
"Green" tax credits
A tax credit for making accommodations for disabled people
The small business healthcare tax credit
The "Alternative Motor Vehicle" tax credit (for electric and hybrid vehicle purchases)
Use a Professional Tax Preparation Service
You should file taxes as soon as you are able to. There is no reason to wait until your tax deadline.
To ensure your taxes are done properly and you claim all eligible credits and deductions, consider using a professional tax preparation service. Business accounting and tax preparation are difficult enough on your own. You don't want to risk being hit with fees or making a mistake that will cost you even more time and money.
If you're ready to reduce the amount of time and money you spend on accounting and taxes, book a free consultation with Srubbed. Our team of accountants, auditors, and tax professionals can provide world-class financial solutions to help your business succeed.