Business Taxes - Vyde

Q&A: Do I need to request a state tax extension if I filed an IRS tax extension?

The IRS requires you to fill out a Form 4868 to request a tax extension, but many states also have their own guidelines on requesting an extension on state taxes. Some states, like California offer automatic extensions, while many other require separate paperwork from the Form 4868.
Since almost every state in the US is different in this regard, you’ll need to check with your state’s tax authority to see what you need to do to file a state tax extension. States including Alabama, California, and Wisconsin offer automatic six month extensions without any additional forms, while New York grants extensions but they must be requested specifically. Nine states do not have a state income tax, so you don’t even have to file an income tax return in those states.
See detailed information about state extension filing deadlines and mailing addresses by selecting your state of interest from this state tax authority’s website. Many states have state-specific tax extension forms, separate from the IRS Form 4868.
Keep in mind that a tax extension with the IRS and with your state does not also mean an extension to pay any taxes you may owe. This payment is still due by the original tax deadline of April 15th. To avoid paying any penalties, calculate a quick estimate of what you might owe and submit a payment with your tax extension paperwork. Even if you overpay, you can always claim a refund in a few months when you eventually file your state tax return.
Extended state tax returns are due October 15th, which is the same IRS deadline. If you miss the extended tax deadline, you will likely be subject to penalties and interest from both sources. Have more questions on state tax extensions? Vyde can help answer them and other small business bookkeeping questions.
Other posts that might interest you:
6 Reasons Why Filing a Tax Extension with the IRS is a Good Decision
Top 10 Things You Should Do If You File a Personal Tax Extension
Q&A: How to file an individual income tax extension with the IRS
Q&A: My 6 month extension on my personal taxes is due on 10/15. Help!
Q&A: What if I missed the IRS tax extension deadline?
Q&A: What if I can’t file my personal taxes by my IRS tax extension deadline?
Q&A: Can I file a second IRS tax deadline extension for my personal taxes?

Q&A: How to file a corporate business income tax extension with the IRS

The IRS allows businesses to file an income tax extension which provides additional time beyond the original deadline for filing income taxes. For most business partnerships, the original filing date is April 15th; while most corporations, including S-Corps and C-Corps have their taxes due on March 15th. A corporate business income tax extension provides an additional 5 or 6 months to file.

All businesses owners other than sole proprietors should submit an IRS Form 7004 to request an income tax extension. Since all business activities are reported on a sole proprietor’s personal tax return, they will need to submit a Form 4868 instead. You do not need to provide a reason for requesting a tax extension, but your income tax extension request must be submitted by the original due date of your taxes (March or April 15th). Business tax extensions are automatic and only rejected if there is an error in the information provided on the Form 7004, such as an incorrect tax ID number.

A corporate business income tax extension does not give you extra time to pay your taxes, it only provides additional time to fill out your tax forms. You are still expected to pay any taxes you may owe by the original due date. It is best to pay your taxes when you submit your tax extension to avoid IRS penalties and interest charges.

A business tax extension can be filed electronically or by mail, but must be filed online by midnight or postmarked by the original tax deadline.

If you filed a business income tax extension this year and need help preparing your taxes, Vyde can help.

Top 10 Things You Should Do If You File a Corporate Business Tax Extension

If you filed a corporate business tax extension this year, you now have an additional five or six months to file your taxes, depending on when your original tax deadline was. Most corporate business tax extension requests allow a business owner until October 15th file taxes with the IRS. Some tax extensions are only valid until September 15th if they are operating based on a calendar year, rather than a fiscal year.

Assuming you’ve already sent your Form 7004 to the IRS requesting an extension, here’s what you need to do next:

Determine your tax payment and submit it to the IRS before April 15th. If your business bookkeeping is up to date, you should be able to determine your payment total by multiplying your taxable income by your current tax rate.
Subtract any quarterly estimated tax payments you have already made throughout the year from your tax payment. It is best to submit your tax payment and your tax extension request at the same time.
Wait for an approval from the IRS. Unlike a personal tax extension request, a corporate business tax extension must be approved before proceeding. The IRS will generally approve or deny your request within 24 hours of submitting your corporate business tax extension paperwork.
Check to see if you need to file a state tax extension form as well. If you don’t owe any state taxes, you do not need to file an extension form. Click here for specific instructions on filing a personal tax extension in your state. In many cases, unless you owe state taxes, your federal automatic extension can be used to extend your state return(s) as well.
If you are not able to pay your entire tax bill or did not submit any taxes due by the April 15th deadline, contact the IRS about setting up a payment or installment plan.
Small businesses with employees can apply for an in-Business Trust Fund Express installment agreement. Find out if you qualify here.
If you haven’t already, start preparing your tax return now. If you filed a corporate business tax extension but don’t necessarily need the full five or six months, it is best to get your return completed as soon as possible.
If your corporate business tax extension request happened to be rejected by the IRS, they will notify you. Your request may be rejected for various reasons including a recent name change, business type change, if you moved your office, or entered your Tax Identification Number incorrectly. You will need to make any corrections on your tax extension request and resubmit.
Hire a professional. If you’re behind on your medium or small business bookkeeping and taxes, a professional accountant can help you get caught up, file your taxes by your extended deadline, and maintain current records for the tax year ahead.
Submit your tax return by the September or October 15th deadline. If you plan to e-file, your return must be submitted by midnight; if you plan to mail your tax return to the IRS, it will need to be postmarked by the due date.

Filing a corporate business tax extension is can be a complicated process, depending on your business entity type and the amount of tax documents you need to catch up on. If you still have questions about your personal tax extension, contact Vyde; we can help.

Q&A: My 6 month extension on my corporate business taxes is due on 9/15. Help!

If you filed a 6 month tax extension with the IRS for your corporate business taxes back in April, it probably seemed like October 15th was eons away. However, that rapidly approaching October 15th deadline may have you feeling a little stressed out. If you filed a tax extension and still haven’t finished your tax return, here’s what you need to do:

If you owe a tax bill to the IRS, make sure you paid it when you submitted your 6 month corporate business tax extension. If you didn’t pay your tax bill then, that is the most important thing to take care of. The sooner you make that payment to the IRS, the less penalties and interest you will have to pay.
Start your return now. Don’t wait until October 14th to start on your tax return and then rush through it. Give yourself time to gather the proper documents and file your corporate business taxes accurately. Corporate business taxes can get complicated in a hurry with multiple forms to fill out; it’s best to take your time and do it right the first time so that you don’t have to worry about filing an amended return later on.
E-file or send your tax return to the IRS by October 15th. The IRS does not accept e-filed tax returns after October 15th and mailed tax returns must be postmarked by this date as well.
Contact a CPA. They can help you gather needed tax information, accurately fill out your tax return, and file it for you. They can even help you set up a payment or installment plan with the IRS if you cannot make your full payment right away. Vyde accountants can help you file your corporate business taxes with the IRS before the October 15th deadline. Contact an accountant with any questions you may have about your tax extension.

4 Accounting Mistakes That Put Your Small Business At Risk

Accounting is one of those tasks that grow with your business. The bigger your business grows, the larger and more complicated accounting tasks become. Which means accounting mistakes are more prone to happen. You shouldn’t take managing a company’s finances lightly.

Many small business owners choose to tackle their own accounting and small business bookkeeping tasks and while some are able to pull it off, many are making costly accounting mistakes they don’t even know they are making.

Here are four common accounting mistakes to avoid in your small business:

Mixing business and personal finances

While your business is still in its infant stage, it’s easy to use your personal bank account. Most new business owners use the same bank account and record keeping methods you’ve always used, without separating the two. However, this can be a costly mistake to small business owners. One of the first steps when starting a new business should be to open a new bank account. If you pay for business expenses out of pocket, keep your records for tax deductions and reimburse yourself. It’s the same idea as turning in receipts to your employer for a business expense. Try to keep your personal and business accounts as separate as possible.

Forgetting to record small transactions

Many small business owners don’t keep track of small expenses simply because they seem insignificant. Mailing a package, or purchasing file folders don’t seem like expenses you need to keep track of. However, it is essential that you track even the smallest of transactions, no matter how insignificant. Those small business-related purchases add up and after a while, you’ll rack up a decent amount of tax-deductible business expenses. If the IRS ever audits you, you’ll want to have records or each and every business expense. Not to mention, staying on top of the small transactions makes managing the larger business expenses that much easier.

Not setting a clear budget for each project

Failing to effectively budget even the smallest projects within your company can be a costly mistake. A project that isn’t properly budgeted can end up costing a company way more money than it should have. Simply because there is no clear plan going in. Set a budget for each project, convey that number to employees working on the project, and stick to it. Setting budgets for all projects keeps a business’ finances on track and cuts spending significantly.

Trying to manage all accounting in-house

When a business is first starting out, they have limited expenses which makes it easy to manage your own accounting. However, as your company grows, managing your own accounting could actually be costing your business money. While hiring an accountant will cost you more money each month, you’ll actually save money long-term. An accountant can help you free up your time and focus, find tax deductions you didn’t know about, and find errors that only an expert can spot. In fact, the IRS reported over $3 Billion in penalties and fees charged to business owners for mistakes in taxes and payroll in 2013.

To speak with an accountant about saving your small business time and money, and avoiding these costly mistakes, contact Vyde today.

FAQs about Accounting Mistakes:

Why is mixing business and personal finances a mistake?
Combining finances can lead to confusion, hinder tax deductions, and complicate financial tracking. Separate accounts streamline record-keeping.
Why should small transactions be recorded?
Small expenses accumulate and impact financial records. Proper documentation ensures accurate tax reporting and facilitates financial management.
Why is setting a clear budget for each project important?
Clear project budgets prevent overspending, enhance cost control, and promote financial discipline. They ensure efficient resource allocation and project management.
Is managing all accounting in-house advisable for growing businesses?
While manageable initially, in-house accounting may lead to costly errors as businesses expand. Professional accountants offer expertise, uncover deductions, and mitigate IRS penalties.
How can an accountant benefit small businesses?
Accountants provide financial expertise, uncover tax-saving opportunities, and identify errors that could result in IRS penalties. Contact Vyde for professional assistance and long-term financial stability.

6 Accounting Tips For Really Small Business

Before you read on, take a quick guess at how many small business start-ups fail within the first five years. No reading ahead!

According to the Small Business Administration, about half of all businesses fail within the first five years. 50% of businesses make it, and 50% don’t. Are you shocked? Maybe feeling a little unsettled about your new business venture?

If you’ve found a way to make money and suddenly it feels more like a business than a hobby or side-job, you’ve got a business on your hands. Congrats! Here are a few quick accounting tips for making sure you’re business is among the 50% that are still around five years from now.

Keep it simple. Get organized, get legal, and get to work. The simplest entity you can form for now is a called a sole proprietorship. This means your business is owned and run by person and there is no legal distinction between the owner and the business. No employees, no payroll, no fuss.
Obtain proper licenses and tax information. Since you’re going to be the owner/entity of your sole proprietorship, you’ve got a few other tasks to take care of. You need to acquire an occupational license (if mandated in your area) and you must remit all state or city tax collections on retail or sales your business collects.
Concentrate fiercely on your business, but don’t be irresponsible. Now is the time to buckle down and build your business—find ways to market to your customers and clients, improve your products and services, and build your brand. As a sole proprietor, the IRS won’t even know you exist until after you file your first personal income tax return. You’ll file your personal taxes (like usual) and also a Schedule C form where profits and losses of your business are reported. If you don’t quite have a streamlined process of doing business yet, not to worry. For a sole proprietorship, a separate bank account is not mandated as it is for an LLLC or Corporation. If your business claims a loss during the first few years, those losses can offset your day job’s income and provide a possible tax refund.
Develop an organized way to pay yourself. Another advantage of a sole proprietorship is that there are no payroll taxes taken out, and no set way you have to pay yourself. You can set up a certain percentage of profits you plan to pay yourself, or you can simply keep what’s left over after paying all business expenses. Often times, S corps don’t have to pay quarterly estimated taxes either. Click here to learn about specific scenarios when they do.
Keep track of expenses and income. You don’t really have to do much with your receipts until tax season comes along, but definitely keep them in a safe place. Perhaps an easier method of tracking expenses and profits is to use a simple two-page Excel spreadsheet, one with incoming money, and the other with outgoing. You can use your business expenses as write offs at the end of the year which deduct from the amount of money owed on taxes.
Plan to succeed, but be prepared for the worst. Remember that statistic from the beginning? If your business fails, no special forms are required to be reported to the IRS, you just simply stop doing business. All you have to do is file one final Schedule C and you’re done.

After your business experiences significant growth or you hit the five year mark, talk to a CPA about changing your entity type to one that could save you more money and be more efficient for your business. Vyde offers free accounting and small business bookkeeping advice all year long. Contact us with your sole proprietorship questions and we can offer some accounting tips and point you in the right direction.

FAQs:

What is the simplest business structure for a small startup?

A sole proprietorship is the simplest entity, where the business is owned and run by one person without legal distinction between the owner and the business.

What licenses and tax information are required for a sole proprietorship?

Owners need to acquire an occupational license (if mandated) and must remit state or city tax collections on retail or sales their business collects.

How does taxation work for a sole proprietorship?

Profits and losses of the business are reported on a Schedule C form along with personal income tax returns. Losses can offset other income, possibly leading to a tax refund.

How should a sole proprietor pay themselves?

Sole proprietors have flexibility in paying themselves, either by setting a percentage of profits or taking what’s left after business expenses. No payroll taxes are deducted.

What’s the best way to track expenses and income for a sole proprietorship?

Keep receipts safely stored for tax season. Utilize a simple Excel spreadsheet to track incoming money and outgoing expenses. Business expenses can be written off at year-end to reduce tax liability.

10 Ways To Use Your Tax Refund To Improve Your Work Life

If you’re among the 54% of Americans who will receive a tax return this year, you’ve probably already spent it ten times over in your head. However, if you’re not quite sure what to do with that bit of extra cash, here are a few ideas of how to put that money back into your business and improve your work life.

10 Ways To Use Your Tax Refund To Improve Your Work Life

Buy an ergonomic chair.
Have an occupational therapist set up your work area to your specific height.
Invest in a larger computer screen or side-by-side screens.
Buy an ergonomic split screen keyboard to go with your new screen.
Treat yourself to a foot rest.
Or, if you’re still sticking to your New Years resolution, buy an exercise bike pedal or pedometer to keep you moving, even at the office.
Grab an exercise ball to sit on to engage your core muscles while working at your desk.
If you’re a road warrior, have your car detailed.
Consolidate your rewards points and refund and plan a once in a lifetime trip with your family.
Take your employees to lunch.

How are you using your tax refund this year? Share with us on our Facebook page.

Is My Blog A Business?

We’ve worked with a lot of bloggers in the last few years and we hear a lot of the same questions over and over again from talented and tech-savvy wordsmiths blogging on everything from gardening to exercise. We’re tackling your blogging business questions, one at a time, starting with the question all bloggers wonder at some point: Is My Blog A Business?

Why did you start your blog? The reasons probably range from “for fun” to “to make some extra money.” Unfortunately, the reason you started the blog doesn’t matter when it comes to whether your Uncle Sam considers it a business.

There are technically two ways your blog, or any home based hobby, becomes a business.

First: Without consulting you, and without your consent, the IRS designates your activity as a business if you have a “reasonable expectation to earn a profit.” For a little more clarity on how that is defined, ask yourself these questions:

Does the time and effort I put into my blog indicate an intention to make money?
Do I depend on the income from the blog?
Do I run ads on my blog?

There are other considerations, but you get the idea. If you answer “yes” to any of these questions you’ve got a business on your hands, baby! Whether you like it or not.

Second: With your consent (they’re a little nicer), the State will designate you as a business if you apply to set up a business entity, like an LLC or S Corp. (Though, the caveat here is that if the IRS designates you as a business for tax purposes, the State does too.) But by setting up one of these entities, the State formally recognizes your activity as a business activity, separate and apart from your personal activities.

Why does it matter?

Big whoop, the IRS thinks you’re a business! So what?

Unfortunately, that means they expect to see the activity reported on your tax return…and for most bloggers or home based, hobby type, businesses, that means potential self employment tax, which can be an extra 15% surprise at tax time! A little planning can go a long way to make this a little easier to swallow.

For non tax, State purposes, having an LLC or S Corp will make a big difference if in the terrible chance you get sued for something your business did.

Feel free to contact us if you would like more information about your circumstances…and don’t worry about a bill. We don’t charge you a dime unless you sign up for our monthly services.

File Your Taxes Early to Protect Against Fraud and Identity Theft

Your taxes may not be due until April 15^th, but there are certainly benefits to filing early. One of them being greater protection against tax fraud and identity theft.

According to an estimate by the IRS, they paid over 5 billion dollars in fraudulent identity theft in 2013.

Basically, that means criminals 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 filing early is the easiest way to prevent this from happening to you.

Not expecting a return this year? You’re still at risk for identity theft. If a criminal gets ahold of your Social Security number, they can give it to an employer to avoid being taxed on wages, and the opposite effect can happen: you get stuck with the tax bill.

The risk of having your identity stolen during tax season is greater than the rest of the year, but still not something to lose sleep over. The IRS is constantly working to stop and prevent as many false returns as possible and they’re getting better and better at catching those sneaky little criminals before disaster strikes.

A new regulation put into place in the 2014 filing season is that only three refunds can be deposited into a single bank account. They’re also providing taxpayers with personal identification numbers–in addition to the Social Security number they’re required to provide–to prove their identity when filing tax returns. The number of taxpayers requesting these PIN numbers is nearly doubling every year.

Filing your taxes early can prevent the identity theft catastrophe and we’ll even reward you with cool Vyde gear. Send your tax documents to us by February 28^th and receive a $10 Amazon gift card and a trendy Vyde t-shirt.

FAQs about Filing Taxes Early to Protect Against Fraud and Identity Theft

1. Why should I file my taxes early? Filing taxes early offers greater protection against tax fraud and identity theft. Criminals may use your information to file false returns, but if you’ve already filed, it prevents them from doing so.

2. How does filing taxes early protect me from identity theft? By filing early, you reduce the risk of criminals using your Social Security number to file false returns and claim your refund. This proactive approach helps safeguard your identity and finances.

3. Am I still at risk for identity theft if I’m not expecting a tax return? Yes, even if you’re not expecting a refund, your Social Security number can still be used for fraudulent purposes. Criminals might use it to avoid taxes on wages, leaving you with unexpected tax bills.

4. How is the IRS combating tax fraud and identity theft? The IRS is actively implementing measures to prevent fraudulent returns. Initiatives include limiting the number of refunds to a single bank account and providing taxpayers with personal identification numbers for added security.

5. Are there any incentives for filing taxes early? Yes, some organizations offer incentives for early filers. For example, Vyde offers a $10 Amazon gift card and a trendy t-shirt for submitting tax documents by February 28th. Filing early not only protects against identity theft but also comes with rewards.

A Dozen Deductions for Your Small Business

It’s every business owner’s favorite time of year again! Tax season! Kidding…we know you may not love it as much as we do. But hey, if you’re already signed up with Vyde, we’ve got you covered.

Here are a dozen common and not-so-common tax deductions to get you started on your taxes:

Home Office. There are a few guidelines that go along with this deduction, but it is almost always worth the extra sorting and record keeping to get it right on your taxes. Uncle Sam says the space you claim as your “home office” must be devoted solely to your business and absolutely nothing else. If you sit on your couch and work on a laptop while watching TV, it won’t fly with the IRS. If you do have a legitimate home office, you can even write off a portion of your mortgage, insurance, and utility bills, based on the size of the space.

Office Furniture. 100% of office furniture, carpet, paint, and any improvements you’ve made to the space are tax deductible in the year you buy them. You can go that route or you can depreciate them over a course of seven years (meaning as their value lessens, you can still deduct a portion of the amount you bought them for each year.) You can use the IRS Tax Form 4562 to calculate these amounts.

Office Supplies. Even if you don’t have a home office, you’ve likely still bought supplies for your business. Think ink, paper, pens, scissors, tape, shipping supplies and notepads, highlighters, and the like. Keep your receipts; these things will help offset your taxable income.

Hardware and Software. There’s hardly a small business in existence that operates without a computer in this day and age. But this also includes other equipment like a camera, scanner, printer, laptop, webcam, Photoshop, Microsoft Office, Catch-up Bookkeeping, etc. Like office furniture, you can deduct the full amount of these things up front or you can depreciate them over five years.

Mileage. If you traveled at all for your business this year, you can deduct the costs incurred. You can either add up your mileage, parking, oil changes, tires, and other expenses and decide how much you use your car for business vs. personal use and then calculate your deduction; or you can take the standard mileage rate, which is simpler, and deduct .56 per mile for 2014.

Travel. Things get tricky tax-wise when you travel. It’s great to have a business trip/vacation, but you have to be careful. Hotel stays are 100% deductible (live it up!), but eating out is only 50% deductible (McDonald’s it is!). The cost of travel—airplane tickets, train rides, tips for a taxi driver are all 100% deductible as well.

Client Gifts. If you were an especially generous business owner this year, take those client gift receipts and use them to your advantage. The IRS allows you to deduct up to $25 per client in gifts.

Phone Charges. If you use your cell phone for business, you can claim that as a business expense. If you use your phone 50% of the time for business, you can deduct 50% of your monthly bill.

Advertising and Marketing. If you spent any money at all on advertising your business and its services, you can deduct those expenses. These usually include business cards, promotional flyers/campaigns, yellow page ads, graphic design services, marketing services, Internet ads, and the like. You can also deduct promotion costs for publicity, like sponsoring a local sports team.

Professional Fees. Accountants, lawyers, consultations, etc. are all tax deductible.

Service Fees. If you sell goods in an online story like Etsy or use Paypal to receive payments, all of those fees are tax deductible. This also includes bank fees, credit card fees, and check deposit fees.

Educational Expenses. If you took a course or bought research material to learn more about your industry, these fees are 100% tax deductible. Also consider books, manuals, local college courses, seminars, and professional publications that you may have purchased within the last year.

What tax deductions are most useful to your business? We’d love for you to share them with us!

Resources

Category: Business Taxes