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Self-employed, freelancers, and contractors
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Partnerships, corps, trusts and estates, and non-profits
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Ensure your business is benefiting from all the latest tax laws
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These questions will help us determine things such as filing status, the state you are filing under, and forms needed to ensure you get the most on your return.
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Just sign your return and you're set to go. Filing has never been so easy.
Just sign your return and you're set to go. Filing has never been so easy.
All our Pros are local, US-based, CPAs and EAs. If you have any questions or concerns about your return, you can reach out to your Pro at any time via the chat feature.
Becky has been a CPA for over 20 years, and started her career with a Big 6 firm. Becky enjoys being able to work personally with her clients from across the country.
Absolutely not! You will work with one of our licensed professionals so that they can file your business tax return for you. All you need to do is answer a few simple questions to get started and then upload your tax documents.
We can certainly help you get past returns filed with the IRS and any required states. Whether your filing late or simply amending a return, our Tax Pros are happy to help.
Our network of Tax Pros have handled all sorts of business taxes across a wide range of industries, from startups with no revenues, to multi-million dollar ventures across multiple states and nations, we have the right Pro to help.
Our standard delivery time for business taxes is 7 days from submission, but you can have us expedite your taxes by selecting our next day or 2-day options.
Tax season is right around the corner.Are you a business owner? Should you hire a professional? It’s tempting; there are in the U.S. tax code, and it’s impossible for a normal person to know the complex U.S. tax rules.Here’s when you should DIY your small business taxes and when to call a professional.
When to DIY Your Business Taxes
For most business owners, doing your own taxes isn’t as intimidating as you think. But every business owner has different taxes. Here are some ways to know if you can DIY your taxes.
They’re Fairly Simple
Business ownership is common today. From the freelance worker to the solopreneur and to the startup business owner, there are more ways to establish yourself as a business without forming a corporate entity.If this sounds like you, you can file your business taxes with ease.Let’s say you’re a freelancer or a gig economy worker. Your client or gig will supply a 1099-MISC form. These forms are straightforward; just enter the income you earned and deduct any expenses the client paid for your materials and/or services.What if you have multiple clients; i.e. you’re a consultant, a web designer, or any business where you had multiple clients throughout the year? If you kept an updated report of your earnings, you can use this information to file your taxes.
You Have Low Income
Most businesses don’t generate significant revenue in the first few years of starting their business.As a rule of thumb, if your taxes are straightforward and your earnings are below $50,000 for the year, you can file your own taxes easily.Keep in mind, this usually goes for solopreneurs, startup business owners with only a handful of employees, and freelance/gig workers.
Usual or Standard Deductions
Business owners are able to claim a myriad of deductions. However, these are pretty difficult to calculate. You also don’t want to claim too many deductions and risk an audit.What if your business isn’t eligible for many deductions? You may get away with claiming some simple deductions.Some of these deductions include advertising, bank fees, insurance, business car use, and your home office.What about your personal taxes? Let’s say you’re a freelance or gig worker without an established business. You’re not filing a business tax return, only including your income on your personal taxes.You can get away with filing your taxes DIY while claiming the . For personal taxes, the standard deduction is $12,400 for solo filers, $18,650 for heads of households, and $24,800 for married couples filing their taxes together.
You Have Access to Tax Filing Software
Tax filing software is your strongest tool when filing business taxes. Filing software makes tax time less stressful. The software gives you an easy platform to work with. You can easily input your information, your revenue, and your deductions, all in one place.Most tax software will also file your return for you and can track your refund.
Filing Single or Jointly
This advice is for solopreneurs and freelancers who report their income on personal taxes. Taxes can get complex when you’re married but filing separately, divorced, are the head of a household, and claim dependents.If you’re single, married and filing jointly, and are claiming no dependents, then your taxes are easier and you’re faced with fewer liabilities.
When to Hire a Professional
While there are many resources to make tax filing a breeze, some business owners should hire a professional. Here’s when it’s time to hire or outsource an accountant.
Complicated Business Taxes
What if your business taxes aren’t straightforward? For example, you have multiple deductions, several expenses, hire a large staff, and face additional liabilities? It’s best to just hire a professional to ensure you don’t get audited.
Your Business Made A Lot of Money
Whether you’re a small business owner or a solopreneur, you should plan on hiring a professional if you made more than $100,000. Those in a higher income bracket will more than likely get audited than those in a lower income bracket.Even if your taxes are straightforward, a professional will ensure you comply. If you're audited, a professional can inform you of the next best steps.
Abnormal Tax Situations
Businesses can find themselves in abnormal tax situations. For example, maybe you have some unusual tax write-offs. It’s best to hire a professional to see what you can write off and what you can’t.
Were Previously Audited
No one wants to deal with a tax audit. If you were previously audited, this is enough of a reason to hire a professional.Keep in mind, hiring a professional doesn’t automatically serve as a safeguard from an audit. But a professional has extensive knowledge of the U.S. tax code, lowering your risk of an audit. They can also find errors and inconsistencies that you missed if you were doing your own taxes.
Lots of Business Stock Investments and Holdings
When your business starts generating more revenue, it’s smart to invest in securities, holdings, stocks, and other investments. You can increase your firm’s net worth and achieve better business financial security. However, you need to report these investments on your taxes.A professional can navigate these complex taxes, ensuring you report all necessary transactions and the income you generated from your expenses.Too Many Business Expenses and DeductionsWhile some business deductions can be easy to navigate DIY, too many deductions can be difficult to organize and calculate. In addition, a professional knows some deductions that maybe you didn’t know about.
Certain Businesses and Niches
Certain professionals have more tax liabilities because of the scope of their business and their investments.Take property investors as an example. Since you’re investing a lot of money into your property, there are many deductions you can claim.There are also certain liabilities when reporting your income, such as reporting the income you receive based on rent. You also have specific taxes to pay, such as property tax.Keep in mind, it’s best to find a tax preparer with expertise in your exact business niche. This will help protect you from an audit.
How to Choose Tax Filing Software
Did you decide to invest in tax filing software? You have many tax software options. Here’s how to know you’re choosing the best tax software.
The Software Includes State Returns
Does your tax software include state tax returns? You’ll be surprised how many don’t or will file a state return for an extra fee.This doesn’t count for all taxpayers. Many states don’t have an income tax, therefore many taxpayers don’t have to file a return.
Many tax filing platforms promote a free tax filing service. But this is only restricted to taxpayers with easy returns, such as those who have one or two W-2 forms.If you own a business or are only filing for your freelance gigs, your taxes are more complex. You’ll more than likely have to pay for your tax filing software.Create a budget and shop around. Know your tax situation and find software that offers what you need. Compare different software and read reviews.
With small and startup business owners dominating the landscape, more tax software caters to their platform and services to small business owners.If this is your first time filing your taxes, choose this type of software. Business tax software can help you navigate complex business taxes, easing the tax process and ensuring you comply.
Connects You to Tax Professionals
These days, you can get your taxes done professionally without visiting a CPAs office or even hiring one.Specialty softwareconnects you to tax professionals online. All you have to do is answer a few questions, upload your documents, and a tax professional can file a return for you.
Small Business Taxes Are Easy With Our Software
No business owner looks forward to filing small business taxes. But many business owners aren’t sure if they should file their own taxes or seek help from a professional. While simple business returns and freelance returns can be done DIY, most businesses will need help from a tax professional.
Now, there’s another solution for businesses: software can connect you to a CPA. Your CPA will have expertise in your business tax requirements. All you have to do is upload your documents and sign your return. Are you ready to get started?
Whether you’re incorporated or running a sole proprietorship you probably hire an accountant to prepare your income tax return. However, it’s important to know what tax deductions are available so you can save the right receipts and make wise choices. You don’t want to wait until April to find out some of your expenses aren’t deductible after all.
Equally, you don’t want to discover missed deductions at the last minute and scramble to recover lost receipts.
1. Home Office Deduction: While employees are no longer eligible for the home office deduction, self-employed people and small business owners are still eligible. According to the IRS, your home office qualifies as deductible when you meet two requirements:The area is used “exclusively and regularly for your trade or business.” In other words, your office must be dedicated to business and not movie nights or posting on Facebook (unless posting on Facebook is part of doing business)Your home is your principal place of businessWhen you qualify for the home office deduction, you also qualify for deducting a portion of utilities and other household bills. However, be careful with this deduction and verify that your claim is legitimate. If your office doesn’t have walls or some kind of partition, or if you need to walk through your office to get to other areas of the house, it’s better not to claim the home office deduction.
2. Vehicle-related expenses: Small businesses can deduct certain vehicle-related expenses on their tax return including depreciation of the vehicle, lease payments, gas, tires, repairs, insurance premiums, and registration fees.This 58 cents per mile for business purposes, 20 cents per mile for medical or moving purposes, and 14 cents per mile while driving for a charitable organization.
3. Holiday parties and business meals: Entertainment, amusement, and recreation expenses are no longer deductible, but some related deductions are still available. For instance, business meals can be deducted at 50% of the cost as long as the food isn’t considered “lavish or extravagant.” Holiday parties are fully deductible and meals employees buy during business travel are 50% deductible. Until 2025, employers can deduct employee meals if they came from an employer-operated cafeteria.
4. Depreciation: If you’ve been missing the depreciation deduction, it’s back. Qualifying assets are those with an expected lifespan of 20 years or less. This includes machinery, computers, appliances, and furniture.Qualifying assets purchased (and put into service) after September 27, 2017 are eligible for a 100% bonus depreciation deduction. After 2022, the deduction will decrease by 20% until it’s gone.
5. The section 199A deduction (qualified business income deduction):The qualified business income (QBI) deduction is available to some sole proprietors, partnerships, and S corporations along with certain trusts and estates.This deduction is one of many created by the 2017 Tax Cuts and Jobs Act.The qualified business income deduction allows pass-through businesses to deduct the cost of following:Up to 20% of qualified business income20% of qualified real estate investment trust (REIT) dividends20% of qualified publicly traded partnership (PTP) incomeThe IRS FAQ page states that the QBI is subject to limitations that include the type of business, amount of W-2 wages paid by the business, and the unadjusted basis immediately after acquisition of qualified property held by the business. If the taxpayer is a patron of an agricultural or horticultural cooperative, the QBI deduction might also be reduced.S corporations and partnerships don’t qualify for this deduction directly. The shareholders or partners are responsible for claiming their deductions.QBI income thresholdsFor doctors, lawyers, and other professionals to qualify, they must earn $207,500 if single or $415,000 if married and filing jointly.Who is not eligible for the QBI deduction?According to the IRS, income earned through a C corporation or by providing services as an employee is not eligible for the QBI deduction.
6. Employee family and medical leave tax credit: A new tax credit was established to encourage small businesses to help employees with family and medical leave needs. If your business offers paid family or medical leave, you’re entitled to this credit for the 2019 tax year. Your business can deduct about 12.5%of the wages you pay to your employees while they’re on leave. Your credit increases the more you pay your employees but caps off at 25%.How to qualify for this creditTo qualify for the family and medical leave credit, your written paid leave policy must grant full-time workers a minimum of two weeks paid leave each year. Part-time employees must be granted a prorated amount of paid leave. Your paid leave policy must also pay employees no less than half their normal wages.Your paid leave policy must include the above requirements in writing and must have been communicated to your employees before December 31, 2018.Qualified and unqualified employeesQualified employees are workers who have been employed for at least one year. However, you can’t claim the 2019 credit for employees who earned more than a certain amount the previous year.
7. Travel expenses: Your small business can deduct travel expenses when those expenses are necessary for business. However, you can’t deduct lavish or extravagant expenses. For instance, if you chartered a private jet to fly from Miami to New York for $300,000, that would be considered extravagant and not an eligible deduction. Deductible travel expenses include:Plane, train, or bus ticketsFares for a cab or shuttle between the airport and your hotel, to and from your work location, etc.Meals and lodgingLaundry and dry cleaningTips paid to necessary services (like laundry)Anything other necessary costs incurred while doing businessThe IRS says travel expenses for conventions and trade shows within North America are deductible when you can prove your attendance benefits your business.
8. Employee retirement plan contributions: Retirement plans are an employee benefit, but they also benefit your bottom line. Your contributions to employee retirement plans are deductible as a business expense. You might also qualify for a credit of up to $500 for expenses incurred in the process of setting up and maintaining employee retirement plans for the first three years. According to Fidelity.com,simple IRA and SEP IRA retirement plan contributions are deductible business expenses.
9. Education: You can deduct the cost of educational expenses when that education adds value to your business or will increase your expertise. For example, if you’re a tax preparer, these 4 IRS approved tax prep courses are deductible.Education expenses can include classes, seminars, webinars, workshops, conferences, and books.
10. Legal fees: Any legal fees you incur that are necessary to run your business are tax deductible. For example, fees paid to your lawyer, accountant, bookkeeper, and tax preparer are all deductible expenses. Accounting softwar is also a deductible expense.
11. Moving expenses: The Tax Cuts and Jobs Act eliminated moving expense deductions for non-military individuals, however, businesses can still deduct the cost of moving supplies and equipment to a new location. For example, if you moved your office and hired movers to take all your equipment to the new location you can deduct those expenses.
12. Rent paid for your office: If you’re renting an office, your rent is a tax-deductible business expense.
13. Various taxes and licenses: If you qualify, you can deduct certain taxes and licenses related to your business. In addition to state taxes and payroll taxes, you might be able to deduct:Excise taxesBusiness license feesSales taxReal estate taxes paid on your business property
14. Miscellaneous expenses: Whether you work at home or in an office, you can deduct phone and internet expenses. However, you can’t deduct your landline if it’s your only line. You can deduct a second landline, however.Other miscellaneous deductible expenses include advertising expenses, donations to charity, healthcare expenses, child and dependent care (using form 1040).
Keep track of all expenses, even when you don’t think they’re deductible. To reduce your taxable business income as much as possible and maximize your refu, keep accurate records of all expenses and save/print all receipts. Some expenses might unexpectedly fall under a broad category of deductible expenses and if so, you’ll be glad you kept those records.
When running a small business, it’s helpful to form a legal entity. In doing so, you create additional layers of legal protection, as well as distinct tax advantages. And out of all the different types of business classifications, the Limited Liability Company (LLC) is by far one of the simplest, most common options.
What is an LLC?
When first starting out, it’s common for entrepreneurs to operate as sole proprietors. But as soon as the business starts growing, it quickly becomes apparent that this isn’t the best structure. An LLC, which is the most natural choice for small business owners, protects you against lawsuits and other costly legal action. It can also reduce paperwork and make your business seem more credible in the marketplace.
“For most small businesses, a limited liability company offers the right mix of personal asset protection and simplicity,” TRUiC explains. “Unlike sole proprietorships and general partnerships, LLCs can protect your personal assets if your business is subject to legal action. Unlike corporations, LLCs are relatively easy to form and maintain, and are not subject to double taxation.”One of the more unique aspects of an LLC is the fact that you can choose how you want to structure the ownership. There are two basic options:
This option is ideal when you’re the only person in the business and/or you want full control over all operations and decisions. The LLC label simply establishes the business as its own legal entity (independent of you, the owner.)
If there are two or more business owners, a multi-member LLC allows for shared control of the company. You can have an unlimited number of LLC members and clearly outline how profits and losses are distributed among each individual.While a single-member LLC is fairly straightforward, multi-member LLCs must decide how they want to be managed.
The first option is to be member-managed, which means all members actively participate in the work of the business. In this case, the company needs majority approval from members to enter into contracts, secure loans, or make other important decisions.The second option is to be a manager-managed LLC. Under this structure, members elect a manager and give this individual the authority to make decisions about day-to-day operations of the business.
The Tax Benefits of an LLC
While an LLC offers good legal protection for business owners, it’s the tax advantages that are most desirable. Let’s explore this topic in more detail:
Pass-through taxation is the defining characteristic of the LLC. It’s the concept that you’ll hear discussed the most – and rightly so. It describes the way in which LLC earnings can be passed through to the owner(s) without first having to pay any corporate federal income taxes. In other words, LLC businesses don’t pay any taxes themselves.
All earnings are passed on to the owners, who then pay taxes at their individual tax rates.The pass-through feature is one major way the LLC is different than the standard C corporation. Whereas C corp owners are subject to double taxation – once as a business and once as an individual – the LLC owner only pays taxes one time.
Another benefit of the LLC is that the IRS allows business owners to choose the way in which the business is taxed. You can be taxed as a sole proprietor, partnership, C corporation, or S corporation (with a few exceptions). Here’s a breakdown:
LLC as a sole proprietorship
If it’s just you, you can set up your LLC as a sole proprietorship. You simply file a Form 1040 individual tax form and a Schedule C to report the business profit or loss from the LLC. This is the simplest option, but it also puts a cap on your tax benefits.
LLC as a C corporation
This choice is great under certain circumstances. It allows your LLC to be taxed as a C corporation, which means you have to file a Form 1120 corporation tax return. The corporation pays taxes on all profits, while members report the income that’s passed through to them on their individual returns. Taxes don’t need to be paid on income that doesn’t pass through to members
LLC as an S corporation
When you set your LLC up to file as an S corporation, you file a Form 1120S. This means you don’t pay any corporate taxes on the income earned. Instead, shareholders report their portion of the income on their own individual tax returns.
LLC as a partnership
For multi-member LLCs, you can file as a partnership. Under this setup, each LLC owner pays taxes according to the share of profits/losses they’re responsible for.This information is reported on a Form 1040 and Schedule K-1. Don’t let all of these options confuse you. In most cases, there are certain restrictions in place that mean you can only choose from a couple of them anyway. Take your time, do your due diligence, and don’t let it stress you out. Once you wrap your mind around the issue, it’ll all make perfect sense.
How to Lower Your Business Taxes
Forming an LLC is a great way to avoid double taxation and enjoy optimal flexibility. Here are a few other ways your small business can lower taxes and maximize profits:
Make intelligent tax elections
Be smart about how you deduct expenses and investments. While you can sometimes deduct the full cost of an item in the current tax year, it might make more sense to depreciate it over a few years (if you expect your income to be higher in the future).
Use an accountable
If you have employees and you reimburse them for travel costs, lodging, food, etc., you can save on taxes by using something called an accountable plan. Under this type of plan, you’re able to deduct the expenses without having to report the reimbursements as employee income. This saves everyone money.
There are limitations on certain deductions and credits that prevent businesses from using them fully in the current tax year. However, you may be permitted to carry them over into future years and reduce taxable income. Examples include charitable contribution deductions, capital losses, general business credits, and net operating losses. If you use carryovers, make sure you keep a meticulous log so that you don’t forget to use them in future years. (Otherwise, you end up costing your business money.)
Fringe employee benefits plans
Any time you give your employees additional wages, you trigger more employment tax costs for the business. However, if you can turn these wages into fringe benefits, the taxes disappear. Examples of tax-exempt benefits include employer-sponsored health insurance, group life insurance, transportation benefits, and educational assistance.As always, a CPA or tax professional can look at your specific situation and walk you through some of the specific ways you can save money, bolster profits, and avoid paying more to the IRS than necessary.
Let Taxfyle Help You
When you’re a business owner, there are tons of different responsibilities and distractions vying for your attention. Taxes are the last thing on your mind. Yet, if you want to run a profitable business, you have to pay attention to this all-important element of your organization. At Taxfyle, we take care of taxes – from preparation to submission – so that you can focus on all of the other duties that come across your desk. Simply fill out a basic questionnaire and we’ll get you connected with the right tax professional for the job.
When forming a business, one of the most important decisions you have to make – particularly from a tax perspective – is how you’ll classify your company.For the smallest operations, this might be a sole proprietorship, but more often the choice is between forming an LLC and a C Corp, each of which has its own filing norms, tax rules, and regulations. But what about S Corp status? You won’t see this option when forming your business, and that’s because S Corp is a tax filing status, not a type of organization.
S Corp Election Basics
While LLCs and C Corps are standard business forms with tax norms of their own, sometimes those tax structures are less than ideal. That’s when a business might choose to make an S Corp election. The key advantage of making an S Corp election is that it combines the best parts of both the LLC and C Corp taxes, like pass-through taxation, personal asset protection, and reduced self-employment tax liabilities. Unlike an LLC, though, companies with shareholders can also elect S Corp status, as long as the company is a domestic one with fewer than 100 shareholders.
Can I File An S Corp For 2019?
In order to make an S Corp election, you have to act early. In fact, S Corp elections need to be made at the very of the beginning of the year, so file soon if you want to take advantage of this tax filing status for 2020. S Corp paperwork needs to be filed within 75 days of the start of the year, so businesses have a few weeks before the 2020 deadline. Headed into the upcoming filing season, you’ll need to file under whatever your standard classification is.There are a few circumstances when it’s considered acceptable to file for S Corp status late. Specifically, the business needs to be able to show that they intended to file for S Corp status by the deadline and that the business met all other qualifications prior to the deadline. The good news is that the IRS tends to be generous in dealing with deadline issues, as long as the business comes to them within a reasonable time frame.
Making Your Election
If you do choose to file for S Corp status, the first step is to file IRS Form 2553. You cannot do this online. Form 2553 must either be filed by mail or fax, and if you choose to fax your forms, it’s important that you keep the original paperwork. Though they may not be rigid about the election deadline, the IRS is strict about Form 2553 being filed in its original.
Filing Your S Corp Taxes
Unlike making your S Corp election, you can file your actual S Corp taxes online. For larger companies, it may even be required. Overall, the process is quite simple.To file your S Corp taxes, you’ll follow most of the same procedures you would for any other business tax filing. The most important thing is that you have a skilled tax professional on your side. Unlike personal tax returns, filing S Corp taxes requires a degree of expertise that not all accountants will have, and it involves paperwork that they may not file often, even if they’re used to working with LLCs or C Corps.There are a number of important forms you’ll need to file to complete your small business’s S Corp filing. They include the following:
Form 1120S: This form is used by domestic corporations to determine income tax liability. To do so, your tax professional will record any income or gains, losses, deductions, and credits your business is eligible for. To ensure that your tax preparation professional can easily do this, be sure to organize all of your business's informationbefore the preparation process begins.
Schedule K And K-1: S Corps may have multiple owners, and you’ll need to summarize shareholder content on Schedule K and then account for each of them on separate Schedule K-1 forms. Each of these forms should break down the separate owners’ net earnings. For small business owners electing S Corp status, the Schedule K-1 form is the equivalent of an individual 1099 or W-2.
Schedule B: A component of Form 1120S, Schedule B is something of a miscellaneous form. Among the details included on Schedule B is information on stock holdings in other countries and other ownership interests, information about receipts below a given threshold, and other information total assets. Your accountant will be able to use Schedule B to determine whether your company also needs to file Schedules L or M-1, which are only required of companies with assets over a given amount.
Form 940: This is the Federal Unemployment Tax Act (FUTA) form, and all corporations with employees have to submit Form 940 with their taxes. This form ensures that employers pay into the safety net for individuals who become suddenly unemployed. Employees do not pay this tax and it should not be deducted from their income; only employers pay this tax.
Form 941: Similar to Form 940, this form accounts for quarterly income tax payments and FICA taxes. If you’ve ever filed business taxes before, you’ve likely filed both of those forms before and your accountant will have no problem with these.
Form W-2: Though LLCs without any employees may occasionally elect S Corp status, most companies that stand to benefit from this filing status have W-2 employees. Form W-2 records payments to the workers, and you’ll issue W-2s to those workers in advance of the filing period to ensure that they can complete their own taxes.
Form 1099: 1099 employees are independent contractors, and while you don’t pay taxes on these individuals, you do still have to report their work with you, in part to ensure the IRS can appropriately levy taxes on their income.
State-Based S Corp Requirements: Certain states have their own S Corp filing requirements, so consult with your business accountant about any additional paperwork you may be required to file with your state.
Filing – The Technical Side
As noted, you can file your S Corp taxes online, and there are several ways you can do this. You can do this online through the IRS’s free platform; you’ll be directed to the right one depending on your business’s size. You can also have your business’s tax preparation professional file your taxes online through their preferred platform. CPAs are generally well-versed in which platforms are secure and work best for business filings.
When choosing a CPA to handle your S Corp election and filings, it’s important to select a professional with the expertise to manage more complex business taxes, rather than conventional individual or basic LLC filings – and that’s not always easy. That’s why you need Taxfyle.
Taxfyle is different from other tax services because we work with both individual filers and accounting firms looking to diversify and manage their businesses. For businesses looking for filing support, this means that all you have to do is upload your documents and you’ll be paired with an accountant with the appropriate skills to address all of your concerns. It’s simple, transparent, and the best way to complete even complicated returns.
Don’t let your S Corp filing reach the IRS with missing pieces or errors. Learn more about Taxfyletoday and start filing early. As an owner, you already have all the information you need to get to work. A skilled accountant is out there waiting for you – it’s the match you’ve been waiting for all along.
Tax returns can be complicated, long, and overwhelming. This is especially the case if you're a business owner loaded down with a mountain of deadlines and responsibilities.The IRS gets it, and we do too.
If you can't get all of your forms in by the required filing date, you can file for a business tax extension to buy yourself a little more time.Does this sound like a step your company might need to take this year? We've got you covered. Read on to learn all about how business tax extensions work, and how to jumpstart the process today.
How Does a Business Tax Extension Work?
First, we need to be clear on one thing: A business tax extension simply gives you more time to complete your tax return.You still have to pay all of the income taxes and self-employment taxes you owe before the due date. Otherwise, you could risk facing late payment fines from the IRS. To avoid underpayment and late payment penalties, you'll need to pay at least 90% of the amount due.Not sure how much money your business owes?Your tax preparer can reference the estimated tax calculation worksheet on IRS Form 1040-ES to give you a rough estimate. Or, you can also check your previous year's return. Either way, make sure to factor into your calculation the self-employment tax due on your business earnings.Still, don't use this as a way to bide your time and save your dollars. The extension is simply a grace period in which you can assemble needed documents, find receipts, and do any other administrative tasks necessary to file complete and accurate business tax forms. Your business can file for one extension per tax year.Even if you don't owe any money on your business taxes, you might still need to do a little more work on your return. If that's the case, it's best to go ahead and file for an extension anyway.
How Do I File a Business Tax Extension?
The specific IRS form you'll use to file your business tax extension will depend on the kind of business you operate. Let's take a look at two of the most common ones.
IRS Form 4868
Are you at the helm of a sole proprietorship or a single-member limited liability company (SMLLC)? If so, you're used to filing your income taxes on Form 1040, Schedule C, where you include profits from your business into your personal income.
To file a business tax extension, you'll need IRS Form 4868.One workaround? You don't need to file this form at all if you simply pay part or all of your estimated income taxes online using one of the IRS' electronic payment options. You can also pay over the phone.Electric payment options include:
Electronic Federal Tax Payment System (EFTPS)
Credit or debit card
When you make your electronic payment, the IRS will automatically process an extension on your time to file. On the other hand, if you intend to pay your estimated taxes in any other way (including by mail), you'll need to include IRS Form 4868 in your request.
IRS Form 7004
Corporations and partnerships will file for a business tax extension using IRS Form 7004. Other entities that will file this way include:
Multiple-member LLCs filing as partnerships
In most cases, the IRS will automatically approve and process your business tax extension as soon as you pay your taxes and submit Form 7004.Note that the IRS doesn't normally reject requests for business tax extensions, regardless of whether you submit IRS Form 4868 or 7004. When they do, it's often because of an error on your request form, so make sure to double-check all of the data you enter.
Extension Application and Return Due Dates
Knowing which forms to use isn't helpful unless you know when to submit them. Let's take a look at the deadline to submit your extension application, broken down by business type. The first date explains when your extension application is due, and the latter date reveals the deadline to submit your extended return.In most cases, the extension is set for a six-month period. Note that the below list is based on partnerships, S corporations and C corporations that have December 31 year-end.
Sole Proprietor/Single-Member LLC: Application due April 15/Return due October 15
Partnership/Multiple-Member LLC: Application due March 15/Return due September 15
S-Corporation Business: Application due March 15/Return due September 15
Corporation: Application due April 15/Return due October
Can I Extend My State Tax Return?
You might also need more time to file your state tax return.In this case, you'll need to file an extension application with your state. You can check with your state tax agency or department of revenue to learn more about this process. This website includes a link to every state's associated taxing agency for ease of reference.
File Your Business Tax Extension With Us
Now that you know a little more about how the business tax extension process works, are you ready to file one for your organization?Doing so can help you breathe a little easier, take some stress off your shoulders and help make sure all of your information is correct.
The best part? Our professional tax preparers can take care of the entire process for you.oo learn more about our services and how our platform works. Why spend hours filing your taxes when you could do it in a few clicks? Let's connect and take this next step together.