3 Tax Return Tips For Small Businesses

For your business to be on the safe side of law, you need to prepare tax returns. As a small business owner you need to understand how to properly prepare the returns. To guide you through, here are some tips that you should follow.

Understand the different types of taxes

There are four main types of taxes that the government requires you to pay by the end of every quarter:

Income tax: all businesses other than partnerships require you to pay this tax. Partnerships need to file informational return.

You should note that income tax is usually paid as your business earns money throughout the year, and not in a single lump sum. As a business owner you should withhold the income taxes from your employees unless they are independent contractors.

Self-employment tax: this is usually paid by the self-employed people. By paying the taxes you get a number of benefits such as: disability, survivor, and hospital insurance.

Employment taxes: these are the taxes that you pay if your business employs other people other than yourself. The taxes cover your employees’ social security among other things.

Excise taxes: these are paid if you produce and sell certain products such as tobacco and gasoline. The taxes are also known as sin taxes.

Defer the payments if your cash flow allows

Deferring tax payments reduces your overall taxable earnings for the current year. Although, it’s advisable that you defer payments, you should not defer payments for the entire year. Experts recommend that you should defer the payments of the week that you are filling the tax return forms.

While the practice aids in reducing the tax load, you should not defer the payments if you are foreseeing changes in your income tax rates. You should also not defer if you have any doubts about the solvency or the future of your clients.

Take advantage of available information

Unlike before when there was little information to help small businesses, the government and private institutions are providing a lot of resources from where small business owners can find any information that they might be interested in.

For example, there are plenty of websites that help business owners understand their tax obligations and the changes that might affect the business owners in future.

To be on the safe side, you should regularly visit these sites and see what they have to offer. You should also be on the lookout for print media that might be of great benefit to you.

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