Business Taxes - Vyde

5 Tips on Getting Financially Fit This Tax Season

Tax season is in full swing and that April 18th deadline is coming quickly. If you missed the boat on setting financial new years resolutions (or maybe you fell off the boat and need to get back on), here are a few ways to revamp and get yourself and your business financially fit during tax season:

Close out the 2015 year. A lot of taxpayers don’t actually know where they stand for the previous year until they get their taxes done. Even though you’ve still got a month left to file, it’s best to get your taxes done as soon as possible so you know your income and expenses for the previous year. Gather up your receipts and invoices and make an appointment with your accountant so you can officially close the books on 2015.
Be smart with your refund. Make a plan for what you’ll do with your refund before it hits your account. It’s too easy to just spend it away if you don’t have a spending/savings plan beforehand. Write down your goal so you’ll stick to it. Here are a few ways to invest your refund back into your business. On the other hand, if you owe taxes to the IRS, get them paid ASAP. You don’t want a looming tax bill all year long, although you can set up a payment plan with the IRS if you need to. Pay as much as you can as soon as you can, and plan to set aside money along the way next year so you’re not hit with a big bill next tax season.
Pay yourself first. As a business owner, it’s easy to take care of everyone else and every other expense and then not have a paycheck at the end of the month. Rather than just keeping what’s left over as your paycheck, set yourself a salary and try to follow it as closely as possible. This also makes tax season a little less of a headache.
Create a plan for the remainder of the year. If you didn’t create a plan in January, now is the time! You’ll know where you stand financially after you get your taxes done, so you can budget accordingly for the rest of the year. You may decide you only want to create your budget a month at a time, which is fine, but be sure to keep the big picture in mind as well. Here are a few tips on creating a simple budget for your small business.
Find ways to save money. Again, now that you know where you stand this tax season, dig a little deeper into your budget and find ways to save money. Cut out unnecessary costs and get your spending on track. The best way to do this is to keep meticulous track of all expenses for a month or two, and adjust accordingly.

How are you getting financially fit this tax season? We’d love to hear in the comment below!

FAQs:

1. Why is it important to close out the 2015 year for taxes?
Closing out the previous year helps you understand your financial standing and prepare accurate tax filings based on income and expenses.
2. What should I do with my tax refund?
Have a plan in place before receiving your refund to avoid impulsive spending. Consider reinvesting it into your business or paying off debts to enhance financial stability.
3. What if I owe taxes to the IRS?
If you owe taxes, prioritize payment to avoid accumulating interest and penalties. Setting up a payment plan with the IRS can help manage the burden.
4. Why is paying myself first important as a business owner?
Prioritizing your salary ensures financial stability and helps streamline tax obligations, making tax season less stressful.
5. How can I create a budget for the remainder of the year?
After assessing your financial status post-tax season, develop a comprehensive budget considering both short-term and long-term goals. Regularly monitor and adjust as needed to stay on track.

The Business of Blogging Part 9: Pay Quarterly Estimated Taxes

Now that you’re making money on your blog, you’ll need to pay quarterly estimated taxes. If you traded in your 9-5 day job for your blog business, you may not have even heard of quarterly estimated taxes. Here’s a quick rundown for you:

If you worked for someone else and received a paycheck, taxes were already withheld and you didn’t have to worry about them. However, if you’re self-employed, you’re still required to pay those taxes. Those come in the form of quarterly estimated taxes. Quarterly estimated taxes cover social security, federal, and state taxes. You’ll need to pay quarterly taxes if you anticipate having a tax bill of $1,000 or more for your blog this tax year.

Here’s how to pay quarterly estimated taxes for your blog business:

Use Form 1040-ES to estimate how much you owe. A good rule of thumb is to take what your projected income is for the year, and divide by four. Take that number and multiply by 15%. This is the amount you’ll owe the IRS for your quarterly taxes. This amount is not exact though, and you’ll need to reference last years’ tax returns and follow the instructions on Form 1040-ES to determine how much you owe.
Quarterly estimated taxes are due on April 18th, June 15th, September 15th, and January 17th 2016. You can pay all four installments by April 18th, or submit your quarterly payment by each of these deadlines. The IRS allows you to pay quarterly estimated taxes online, by phone, or by mail.

Love this post in our Business of Blogging Series? You might also enjoy:

Separating the Blogging Myths from the Blogging Truths

Deciding on a Business Entity for your Blog

Obtaining a Tax ID Number and Proper Licenses to Run Your Blog Business

Start Making Money on Your Blog

Creating and Maintaining an Organized Bookkeeping System for Your Blog

Tracking Blog Expenses the Right Way

How to Create a Budget for Your Blog

Hiring an Expert to Manage Your Blog Finances

Which Tax Forms Do I File as a Small Business Owner?

Depending on your business type, you need to file tax forms that report your business’ income for the year. The IRS requires different paperwork for the different business structures–Sole Proprietors, LLCs, and S Corps. While there are different forms for the varying business structures, taxable income for small businesses is generally calculated in the same way.

Sole Proprietors

Sole Proprietors and Single Owner LLCs, report business income on a Schedule C. A Schedule C form is filled out and attached to a personal tax return (1040.) A Schedule C reports your business’ income and losses. To simplify the process, some small business owners opt to fill out a Schedule C-EZ instead. This simplified version of a Schedule C omits the details and just asks for your business income and expenses. There are some stipulations to using the EZ form, though. You can only fill it out if you operate one sole proprietorship, do not report more than $5,000 in business expenses, are reporting a net profit, don’t hold business inventory during the year, have no employees and are not claiming a deduction for a home-office.

If you file a Schedule C for your business, you’ll likely also need to file a Schedule SE. (Schedule SE stands for “Self-Employment Taxes.”) Being self employed means that you don’t have an employer withholding money from your paycheck to cover Social Security and Medicare Taxes; therefore, you have to pay them yourself. If your sole proprietorship or single member LLC earns more than $400 of net profit, you’ll need to fill out this form in addition to the Schedule C.

Because Schedule C’s are filed with personal returns, the filing deadline is the usual April 15th. (April 18th in 2016.)

LLS and S Corps

LLC and S Corporations report business income on Form 1120. This form is for reporting income, gains, losses, deductions, and credits, and also for figuring your income tax liability for the year. You should file form 1120 separately from your 1040. Form 1120 is more detailed than a Schedule C form.

A Form 1120 must be filed by the 15th day of the third month following the close of the tax year, which for most taxpayers is March 15. You cannot send this form to the IRS with your personal income tax return.

Still have questions about which forms you need to file for your small business? Send us a quick message and we’ll help you out.

10 Reasons to File Your Taxes Early This Year

In case you needed a little extra motivation to get your taxes done before the rapidly approaching April 18th deadline, here are a few reasons to get you moving.

Here is Vyde’s top ten list of reasons to file your taxes early this year:

You can actually file your taxes now and not pay your tax bill until the due date. So offload the stress and save up to pay your tax bill, and you’re good to go!
Get your refund on it’s way. If you’re receiving a tax refund this year, filing early will get you your money sooner.
Prevent identity theft. Criminals can use your name and Social Security number to file a false return and get your big whopper of a return in their pocket instead of yours. Obviously, this can’t be done if your taxes have already been filed so getting it done early helps protect you.
Reduce errors. Take your time and don’t feel pressured by the April 18th deadline. Instead, set an earlier deadline for yourself and work through your taxes as efficiently as possible.
Help your college-aspiring student apply for FAFSA. If your child or dependent is applying for financial aid for college, they’ll likely need your income tax return.
Get organized with your business and reflect on last year’s numbers. If you didn’t take the time at the end of last year to reflect on your income and expenses, now is a great time to see how the last year ended financially. Make projections for this year, adjust your budget where necessary, and make a plan to stay organized in the future.
Gives you time to set up a tax payment plan with the IRS. If you can’t meet your tax obligation right away, you can set up a plan with the IRS to make monthly payments until you’re all paid up.
More one-on-one access with your accountant. By mid-March of the 2015 tax season, 74 million people had already filed their income taxes. That left the remaining 57 million just one month to file theirs by the deadline. Filing early gives your accountant more time to field your questions and catch any deductions you may have missed.
Early filers receive larger refunds. According to statistics from the IRS, taxpayers who file by mid-February get significantly larger refunds than those who file later—almost $450 on average.
Reduce your stress. The IRS tax deadline isn’t flexible, so filing taxes is not a task you can put off for long. File early and get on your way to a beach vacation–or at least get back to fulfilling the needs of your business.

Need help filing your taxes this year? Give us a call and we can take care of it for you.

Frequently Asked Questions:

1. Why should I file my taxes early?
  Filing early allows you to offload stress, receive your refund sooner, prevent identity theft, and reduce errors by giving yourself more time.

1. Can I file my taxes now and delay payment?
  Yes! You can file your taxes now and pay any owed taxes by the April 18th deadline, allowing you to manage your finances more effectively.

1. How does filing early help with FAFSA?
  If your child is applying for financial aid, they’ll need your income tax return. Filing early ensures you have this document ready for their FAFSA application.

1. Will I get a larger refund if I file early?
  Yes! Statistics show that taxpayers who file by mid-February receive significantly larger refunds, averaging almost $450 more than those who file later.

1. What are the benefits of having more time with my accountant?
  Filing early provides your accountant with more time to answer your questions and identify potential deductions you might have missed, optimizing your tax return.

Do I Still Have To Pay Personal Income Taxes As A Small Business Owner?

Unfortunately, owning a small business does not exempt you from paying personal income taxes. Many business owners pay themselves a set salary from their business profits, which is considered taxable income. Other business owners (normally smaller businesses) just invest what is necessary to keep the business running and then keep the remainder of the profits as their pay. The type of business entity you chose when you formed your company determines exactly how your money is taxed. If your company is growing rapidly, you may want to reevaluate your business structure and change it if necessary. Here’s a quick overview of business structures and the tax implications of each one:

Sole Proprietors: A sole proprietor owns and operates a business on their own, which means they are personally responsible for all profits, losses, and debts for the company. Even if you haven’t established a formal business structure yet, if you’re making money working for yourself, you’ve got a sole proprietorship on your hands. Sole proprietors file their income taxes as individuals with a 1040, and use an additional Schedule C form to report their income and deductions. Sole proprietors are accountable for withholding and paying taxes, including self-employment and estimated quarterly taxes.

LLC: An LLC offers additional liability protection that a Sole Proprietorship does not. If your business is sued or runs into financial trouble, the business will be responsible (and not you personally). In addition, forming a corporation or LLC may lower your tax bill. For a single owned LLC, taxes are filed just like a sole proprietor (aka an individual). An LLC with multiple members would file a Form 1065 to establish a partnership.

S. Corporation: An S Corp is similar to an LLC in that it is treated as its own entity separate from the individual. Members of an S Corporation are paid just like employees and must file personal income taxes on the wages they receive. An S Corporation files a tax return but the profit or loss passes through a Schedule K-1 to the individual income tax return. Each shareholder who receives a K-1 must factor in the profit or loss in determining the amount of estimated tax payments to be paid.

C Corp: A C Corp is taxed on its income rather than a pass through entity. Profits are taxed when earned and taxed again when distributed, often called “double taxation.” Owners must pay estimated tax payments based on the profit. Using this structure, the entity files a standalone tax return and pays taxes at the corporate level.

Top 4 Quick & Easy Ways to Pay Your Tax Bill

Tax season doesn’t equate to a refund for everybody. If you owe a tax bill this year, the IRS offers methods of quick and easy payment. No matter how you deliver your payment–online, on your smartphone, or delivery by horseback, make sure your tax bill is paid by April 18th.

DirectPay. The quickest and easiest method of payment, this can be used to pay your individual tax bill, or your estimated quarterly taxes. No need to register, you’ll receive instant confirmation upon payment.
IRS2Go App. Download the free app to your smartphone and pay your tax bill by credit or debit card quickly and on-time. The app can be downloaded from the Apple App store, Google Play, or Amazon and is available for all devices.
Credit or Debit Card. These standard service providers are safe and secure, but come with a small processing fee. Most fees are around $2.50.
Pay when you E-file. If you file your tax return electronically, you can pay your tax bill right then and there, or even schedule it for a later date. Fund are taken directly from the bank account information you enter. Many tax return softwares like Turbotax also allow you to pay your tax bill when you e-file.

Can’t pay your full tax bill right now? You can set up a payment plan with the IRS to pay your tax bill over time. Learn how to do that here.

Weren’t able to talk to a virtual bookkeeper and a little behind on last year’s taxes? Learn how to pay last year’s tax bill here.

How Do I File Last Year’s Taxes Online?

It’s never too late to file overdue tax returns. Of course, filing all of your taxes by the April 15th (April 18 for 2016) deadline is always the best way to keep yourself out of hot water with the IRS. But, if you still haven’t filed a previous year’s tax returns, you still can and should to take care of it as soon as possible.

Here are a few quick steps to file last year’s taxes online:

Gather your documents. Same process as any other year, you’ll need all of your documentation before you can file last year’s taxes online. Gather W-2s, 1099s, and any other tax paperwork you received for the year you missed. If you have deductions you plan to claim, you’ll also need your receipts and documentation of those items. If you’re missing any W-2s or 1099s, you can request them from the IRS by filling out a Form 4506-T. Keep in mind that it can take the IRS up to 45 days to process your request.
Download previous year’s tax forms. In order to file last year’s taxes online, you must use the original tax forms from the year you missed. You can search for and download those from the IRS website.
Prepare back tax returns. As you’re preparing last year’s taxes, you cannot use this year’s tax instructions. Because tax laws change every year, you’ll want to make sure you are following the correct year’s instructions as you’re inputting your data. Online accounting software like Turbotax can walk you through your taxes and help you file last year’s taxes online. Vyde also offers catch up tax preparation and virtual bookkeeping.
Submit your tax forms. Send your forms to the address listed on the Form 1040 instructions. If you’re filing online, most tax softwares can submit your tax forms for you. If you owe taxes, try to send as large of payment as possible to avoid additional penalties and interest. After the IRS receives your taxes, they will notify you of the exact penalty you must pay for being late.

For more information on how to file last year’s taxes online, visit the IRS website.

How to Pay the IRS if You Owe Money on Your Federal Taxes

If you’re not receiving a refund on your federal taxes this year and just found out that you’ll actually owe money to the IRS, you’ll need to get that payment in as soon as possible. This is a common scenario for small business owners, self-employed taxpayers, and those who have held too little money withheld from their regular paychecks for the past year.

If you owe money on your federal taxes and need to pay the IRS, there are a few ways to go about this:

IRS Direct Pay: The simplest and quickest way is to visit the IRS website and choose the Direct Pay option. This will pull money directly from your bank account at no additional cost to you. The Direct Pay option also allows you to pay your federal taxes with a credit or debit card.
EFTPS: You can also use The Electronic Federal Tax Payment System (EFTPS) to pay your federal tax bill. This secure government website allows taxpayers to submit their payments electronically. To enroll, or for more information on enrollment, visit EFTPS or call EFTPS Customer Service to request an enrollment form: 1-800-555-4477

Pay by Check or Money Order: If you choose to mail your federal tax payment, make your check or money order out to the US Treasury. Do not use staples or paperclips to attach the check to your return. You’ll also need to include your name, address, daytime phone number, Social Security number or EIN, tax period and related tax form or notice number on your form of payment. Mail your payment to the address listed on the notice or instructions.
Same Day Wire Payment: Same-Day Taxpayer Worksheet to complete your transaction. If you are paying for more than one tax form or tax period, complete a separate worksheet for each payment.
Auto-Pay through your tax preparation software: Many tax preparation software programs give you the option of making the federal tax payment to the IRS for you. Turbotax and TaxAct both offer this option when you reach the end of your tax forms.

If you are unable to make your payment in full, visit this post for information on setting up a payment plan with IRS.

Still confused? We can help you make your Federal Tax Payment to the IRS if you are unable to use any of the methods listed above. If you owe money to the state, this post will direct you to the proper place to submit your payment.

Do I Have to Send 1099 Forms to Contractors Paid Via Credit Card or PayPal?

The deadline for mailing 1099s to contractors for your small business is February 2nd this year, a few days later than the usual January 31st deadline. Before you prepare all of those forms just yet, you’ll want to read up on the regulations concerning contractors paid by credit card or PayPal.

You actually do not have to send 1099 Forms to contractors paid this way. The IRS does not require you to send a form to independent contractors or unincorporated LLCS, even if you paid them more than $600 last year.

Of course, that money is still accounted for and taxed somewhere, right? In fact, the credit card companies and PayPal will handle all the required reporting for these contractor payments. These companies issue a specific kind of 1099 form, called the 1099-K instead.

Instructions for IRS 1099-MISC form can be found here (PDF).

Should I Send a 1099 Form Anyway?

When in doubt, send it out. You may still want to send a 1099-Misc form for contractors you paid more than $600 last year, and that’s completely fine. Your accountant may encourage you to do so, even though it is not technically required.

What if I am the Contractor or Freelancer Receiving the 1099 Form?

If you’re on the other end of the spectrum, and you receive a 1099 from the employer and a 1099-K from PayPal, things can get tricky. When preparing your income tax return, you’ll need to be careful to not double report the income. If you know payment from a received 1099-Misc form was actually paid through a credit card, you’ll just make sure not to add the total of both forms. If you don’t receive a 1099-K from PayPal or a credit card company, you’ll still need to report the income. The key is to not add your 1099-K income to your 1099-Misc income to avoid any discrepancies.

Resources

Category: Business Taxes