If you own a small business, then you may have to file quarterly tax estimates with the IRS.
Making sure that your records are updated and correct is not only important for paying accurate taxes on your income, but it can also help you avoid any penalties from the IRS if they happen to do an audit of your tax returns.
Keeping proper financial records can help you in the long-term for your business, so it is important that they are correct.
Here are several things you can do to make your business taxes less complex.
1. Keep records of the business income and expenses
Make sure that when you engage in any financial transactions for your business, that you keep good records of them. This means anything from making payments to employees or vendors to deducting mileage to travel to various business-related events.
2. Review your payroll taxes for accuracy
Just like when you file your personal income taxes, you will need to pay payroll tax for any employees that you have working for you.
There are several different types of payroll taxes in the United States including FICA, Medicare, and federal unemployment insurance.
3. Track your mileage to deduct it from your taxes
It is important to keep track of all miles driven when working for your business in order to be able to deduct them on your tax return. The IRS requires that you use the standard mileage rate to calculate how much you can deduct for this type of expense.
4. Make sure you know what is considered a tax-deductible expense
There are many business expenses that you may be able to claim as a deduction from your taxes.
While there are many, here are a few examples of some common tax-deductible business expenses: travel costs, advertising costs, and vehicle expenses.
5. Check if you can claim any deductions as an employee or contractor
There are two different types of earning income for your business – being an independent contractor or being an employee.
If you are a contractor, then the income that you receive from your employer must be reported as self-employment income on your tax return. This means that there is a different set of rules and regulations to follow when filing quarterly estimated taxes with the IRS. In addition, some of the deductibles for self-employment income cannot be claimed if you are a contractor.
6. Know when to file quarterly estimated payments with the IRS
If you choose to pay your taxes through an installment agreement, then it is important that you file your quarterly estimated tax payments on time. If you do not make these payments, then the IRS will charge penalties for this type of tax delinquency.
7. Get help from a sales tax expert
Depending on the type of business that you are running, the list of expenses that are considered deductible can be very complicated to follow. In addition, there may also be state income taxes based on where you live that need to be paid in order for your total earnings to remain tax-free.
If this is something you’re not familiar with you may want to consider hiring a sales tax expert to help you.
Conclusion
If your business is not doing well, then you will want to make sure that you are taking advantage of all the deductions available to you in order for you to save as much money as possible. This can help you with meeting your quarterly estimated payments on time and avoid penalties from the IRS.