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Category: Tax Forms

Tax Refund

Do Small Businesses Get Tax Refunds?

In 2021, the average tax refund was $3,039. Small potatoes? Hardly, especially given the economic downturn of the last couple of years.

New small business owners may be hopeful for a tax refund, a small gift to invest back into their operations. Not all types of small businesses can receive tax refunds, however. Is yours one of them?

Do small businesses get tax refunds? It’s one of the most common questions we receive—in the same way that there are many types of taxpayers, you’ll find there are more than a few types of small business tax entities.

Which Businesses Are Eligible for Refunds?

In general, your tax refund eligibility depends on whether you’ve paid more taxes than you owed, at least as an individual. While the same is loosely true for businesses, only C-corporations are entitled to tax refunds in their own rights.

The business entity you choose may influence your tax eligibility significantly, so we recommend choosing yours wisely from the outset. If your entity type passes your income directly onto you, the owner, you’ll be the one receiving the refund on its behalf. Sole proprietorships, partnerships, S-corporations, and limited liability companies (LLC) are all beholden to this convention and, accordingly, are not eligible for tax refunds on their own in any capacity.

If your business is a C-corp, all your revenue is taxed separately from your personal finances. C-corporations that have overpaid payroll or sales taxes, for example, are likely to see a tax refund at the end of the year.

Different Types of Taxes Businesses Pay

Small businesses pay many types of taxes in the United States. Among them:

  • Federal taxes
  • State taxes
  • Local taxes
  • Self-employment taxes
  • Payroll taxes
  • Income taxes, both state and local
  • Excise taxes
  • Property taxes
  • Sales taxes

How to Maximize Your Tax Refund

As a small business owner, there are plenty of ways you can maximize your tax refund every year:

  • Review your bank and credit card statements
  • Prepay upcoming expenses
  • Check for tax credits you may be entitled to
  • Offer matching 401(k) benefits
  • Reward employees generously
  • Check for a home office deduction
  • Track your mileage and other expenses

Business tax credits may be particularly lucrative for your small business. You may also benefit from other subsidies, such as research and development tax credits, credits designed to assist in employee leave, and work opportunity tax credits for those who hire marginalized individuals.

Your Small Business Accountants and Bookkeepers

Do small businesses get tax refunds? The short answer: It depends. For the full answer, consider Vyde for all of your accounting needs.
It’s a lot of ground to cover; that can’t be denied. If you’re an entrepreneur looking for the best possible outcome, we would love to hear more about your story and assist in any way we can.

21 Tax Benefits of Owning a Small Business

21 Tax Benefits of Owning a Small Business

21 Tax Benefits of Owning a Small Business

Many obvious perks come with owning your own business, including setting your own schedule, being your own boss, and having control over your career. But there are also many tax benefits business owners that can take advantage of to maximize their profits.
Here's a quick guide that covers important tax deductions for your business.

What Will a Deduction Save Me?

A deduction, or write-off, is a business expense that can help lower your taxes. For example, if your business made $75,000 last year but you invested $10,000 in new business equipment, you would deduct that $10,000 from your net income. That means when it comes time to pay your taxes, you would need to pay tax on only $65,000 instead of the full $75,000.

How much will that deduction actually save you on your taxes? It’s important to weigh out the costs versus tax savings when you’re making a business purchase. Sometimes the tax benefits of owning a business don’t outweigh the expenses involved with a deduction. Luckily, we have a simple formula that can help you see the value of these deductions:

Business Expense x Tax Rate = Money You Save on Taxes

For example, if you spent $2,000 on a new camera for your business and your tax rate is 25%, your savings would be $500:

$2,000 X .25 = $500

If you don’t know your tax rate, you can always visit IRS.gov to see the latest tax rates and brackets for the year. Keep in mind that if you are self-employed, you will also need to pay self-employment tax, which is a little over 15%.

Of course, you can’t write off every expense as a business expense. According to the IRS, you should write off expenses that are ordinary (i.e. common and accepted in your industry) or necessary (i.e. helpful and appropriate for your business). That doesn’t mean you can’t be creative regarding a tax deduction. Think broad. Just be sure you know and document the business purpose.

Common Business Expenses That Qualify For Tax Deductions

A great example of getting creative in maximizing your tax benefits for owning a business comes from a client I work with who wrote off her houseboat at Lake Powell. She is a photographer who takes senior graduation photos, and she also loves Lake Powell.

She came up with a promotional idea of taking a handful of her clients down to Lake Powell each year for an exclusive photo shoot. Because of these promotional trips, she decided to purchase a houseboat as a business expense. While she can still enjoy the houseboat throughout the year with her friends and family, the reason for purchasing the boat was to grow her business, which makes it a business expense. The chance to win a vacation to Lake Powell and the stunning photos that result from these trips help build her client base and generate more revenue. Overall, it’s a win-win!

This example illustrates that business owners should not feel limited in the deductions they take. Below, I have listed several common business expenses you should consider as tax deductions, but this is by no means a comprehensive list.

  1. Business Travel

  2. Business Meals

    • These include meals where you discuss business or meet with clients, partners, prospects, etc.

  3. Retirement Contributions

    • Business owners have more flexibility that allows them to strategize around their retirement contributions. At the end of the year, you can determine how much you want to contribute to your retirement to help lower your taxable income. If you have questions, reach out to our team to develop with the best game plan.

  4. Vehicles and Transportation

    • This can include purchases, leases, mileage, repairs, maintenance, insurance, etc. As we saw from the example above, it can even include houseboats!

  5. Phones

    • This can include the initial purchase, repairs, and monthly phone bills.

  6. Equipment

    • Some examples include tools, furniture, cameras, computers, monitors, printers, and machinery. Again, this can be broad depending on your business needs, so don’t limit yourself.

  7. Depreciation on Assets

    Depreciation on any capital under your name is fully deductible. Equipment, rentals, vehicles, and other depreciable items of contention are covered under a Section 179 deduction—up to $1,050,000 from new.

  8. Inventory

    One of the tax benefits of owning a business is that everything in your warehouse can be written off at the end of the year. This will be valid whether you’re producing these goods yourself or serving as a middleman.

  9. Supplies

    • Do you need office supplies or marketing materials like brochures, business cards, or posters? What about cleaning supplies or hardware like memory drives, routers, or servers? Keep track of all these expenses because they are all great tax deductions.

  10. Employee Expenses or Contract Labor

    • Whether you have employees or pay someone to help set up your office or website, you can count those payments as a deduction. In addition, any money you spend on business equipment, education, travel, meals, gifts, etc. for employees can be written off.

  11. Insurance

    • This includes health insurance as well as business-related insurance expenses, such as data breach insurance, liability insurance, property insurance, etc.

  12. Financing

    • If you finance expensive equipment, vehicles, or more for your business, you can write off the full purchase price of the asset using bonus depreciation in the year you financed it, even though it might take you years to pay off

  13. Website and Software

    • Are you paying to maintain your website or domain? Do you use editing software, subscriptions, or Microsoft products for your business? Make sure you write those expenses off!

  14. Education

    • Say there’s a seminar, class, or workshop that could help you gain important skills for your business. Take advantage of the learning opportunity and then take advantage of the tax deductions by writing off the expenses related to that education. That includes books, travel to and from seminars, meals purchased while attending a workshop, etc.

  15. Taxes

    • Since you are self-employed, you will need to pay self-employment tax, which covers Medicare and Social Security taxes and is roughly 15%. While there’s nothing fun about paying extra taxes, you can deduct half of the self-employment tax to lower your tax bill.

  16. Marketing and Advertising

    • This is another great area for thinking outside the box. You’ll likely have expenses related to ads, signs, logos, brochures, etc. but you could also sponsor community events, host a client retreat, or hold a promotional treasure hunt to build up your business.

  17. Home Office or Rent

    • Whether you rent an office space or work from home, you can take advantage of tax deductions. With rent, it’s easy to calculate your business expense because you have a monthly bill. For a home office, that can get a little trickier. Check out our guide for getting the most from your home office tax deduction.

  18. Utility Costs

    One of the significant tax benefits of owning a business: Every single one of the utilities required to keep you in operation is totally tax-deductible. The only limitation? Double services—if you have a dedicated phone line for your business on-site, you can’t also claim this same deduction for your home line.

  19. Interest

    Any interest accrued on a small business loan, credit cards, or other borrowed money your business depends on can also be written off. As long as you, the owner, are legally liable for the debt, you should be good to go, making this one of the best tax benefits of owning a business.

  20. Internet, Phone, and Other Bills

    • Water, heat, air conditioning, internet, phone, hotspots, monthly subscriptions for marketing tools or video conferencing—these could all be important for your business to function. Don’t forget to add those as tax write-offs.

  21. Professional Fees

    • Do you have to maintain a license for your job? Or do you need permits to operate? Those are additional tax deductions you’ll want to take advantage of.

owning a business

More Questions About Tax Benefits of Owning a Business?

Have additional questions about how to write off your business expenses and the tax benefits of owning a business? Reach out to our team for advice. At Vyde, we help small businesses save time, money, and stress by staying on top of their taxes and finances. We’d love to help you in any way we can.

Interested in Learning More?

Schedule a free consultation with our team!

Tax Form

Tax Forms Explained

As we approach tax season, it is important to understand different types of tax forms, and why we need them.  If you’re hiring a new employee, or trying to report your income tax returns, you have come to the right place!  Tax forms are essential for all small businesses and must be filled out properly.  The Internal Revenue Service (IRS) is constantly on the move and requires every small business to file their taxes.  Tax forms can be complicated and cause major headaches.  To make sure you are prepared for the future success of your small business, here are some of the important tax forms you will need to know about:

1120 Form:

Form 1120 is used to report business taxes to the IRS. With these forms, you’ll report income, gains, losses, deductions, or credits associated with your business.


1099 Form:

The 1099 form is an IRS tax return document used to report income from self-employment earnings, government payments, dividends and interest and more.  Basically, a 1099 form is used to record money that an entity or person, not your employer, paid you.

1040 Form:

Is used by U.S. tax payers and a standard IRS form used for individuals to file their annual income tax returns. It is also used to claim tax deductions and credits.  It calculates the amount of tax refund or tax fill for the year.

W2 Form:

Is a document an employer is required to send to each of their employees and the IRS at the end of the year.  Also known as the Wage and Tax Statement, the W-2 form reports the employee’s annual wages and the amount of taxes withheld from his or her paychecks.

1040-ES Form:

Is used by independent contractors or freelancers to estimate the federal tax they owe from their income.  This is used to figure and pay your estimated tax.

941 Form:

This reports income taxes, social security tax, or Medicare tax withheld from employee’s paychecks.  Typically, most small businesses file this form if they have employees.  The 941 form is filed quarterly and is the employers federal tax return.

SS-4 Form:

This form is used to apply for an employer identification number or an EIN.  This is a 9-digit number assigned to sole proprietors, employers, corporations, partnerships, trusts, and other entities for tax filing purposes.

W-4 Form:

The purpose of the W-4 form is for new employment.  When you are hired for a new job, one of the many documents needed is your W-4 form, which determines the amount of tax your employer will withhold from your paycheck.

W-7 Form:

Is used to apply for an IRS individual taxpayer identification number.  This ITIN form can be also be used to renew an existing ITIN that is expiring or has already expired.

4506-T Form:

This document is an IRS document that is used to gather past tax transcripts that are in the IRS’s files.

9465 Form:

This document is an installment payment plan, and IRS application form.  Taxpayers who owe less than $50,000 in taxes, interest and taxes may be able to complete an online payment agreement (OPA) application.

4506 Form:

This is a form that is filed by tax payers to request copies or transcripts of previously filed tax returns and tax information.  You can request a range of different types of previously filed tax returns.

So, no matter your type of business—whether you are a blogger, online retailer, or an attorney—small business owners must file with the correct tax forms.  At Vyde, it’s our goal to help you stay compliant with the IRS. Reach out to our team for any of your tax related questions.

Income Tax Checklist: What Your Accountant Needs to File Your Income Taxes Copy

It’s everyone’s favorite season! TAX TIME! We’re here to make this the easiest tax season ever.

You won’t be scrambling to find all of the important financial documents you need to file your income taxes, only to have your accountant call and tell you he needs just one more thing. Instead, you can take charge with this comprehensive income tax checklist with everything you’ll need to take to your accountant to get the job done accurately and on time.

Download the printable version here.

Here's a comprehensive income tax checklist of everything you'll need to take to your accountant to get the job done accurately and on time.

When Should I Start Paying Quarterly Taxes for my Small Business?

If you caught Ben on Periscope this morning, he provided a quick overview on the basics of quarterly taxes for your small business. As a small business owner, you’re no stranger to Uncle Sam wanting his cut of everything you’ve make. While you may not need to worry about quarterly taxes during the first few years you’re in business, you’ll eventually get to a point where you need to start paying them…yes, four times each year.

Small business owners operate under a pay-as-you-earn system for federal taxes, rather than a W2 employee who has taxes taken out of their check before it hits their account. The IRS expects small business owners to be responsible tax payers, and softens the blow of a huge end of year tax bill by splitting it up into four installments. These are called quarterly taxes, and you’ll need to pay them if you anticipate your end of year tax bill to be more than $1,000. Use IRS Form 1040-ES to see if you’re tax bill might end up being more than that.

So what if you don’t pay quarterly taxes and you were supposed to? Well, unfortunately the IRS doesn’t forget it and you won’t fly under the radar for long. You’ll just pay your quarterly taxes all at once, when taxes are due in April. The penalty and interest for not paying your quarterlies is based on the difference between the amount you should have paid in for each installment and the amount you actually paid for as long as the underpayment remains outstanding.

Our CPA, Ben, suggests paying quarterly taxes for your small business if you plan to bring home more than $10,000 profit this year.

For 2016, quarterly taxes are due on April 18th, June 15th, September 15th, and then again on January 17, 2017.

How to Save Money on Your Taxes if You Were Uninsured in 2015

If you were uninsured in 2015, you may owe a penalty on your taxes this year. However, you can still save money by claiming an exemption, which about 70% of Americans are doing in 2016. A whopping 300,000 people who paid the penalty last year would have qualified for the exemption, according to the IRS. No worries, Mazuma won’t let that happen to you. Here is the good news and the bad news about being uninsured in 2015.

Here’s the bad news first: the penalty has increased since 2014. The penalty for being uninsured in 2015 is $325 per adult and $162.50 per child (up to $975 for a family) or 2% of household income, whichever is greater. Yikes. You’ll sometimes hear this penalty called the  “individual responsibility payment.” If you went without coverage for only part of 2015, you’ll only owe part of the fee.

There is good news, though! For some Americans who do not already have insurance through their employer, their parents, Medicaid, Medicare, the Veterans health care program, individual insurance, or healthcare.gov– you may be exempt.

The Affordable Care Act allows certain people to claim exemptions, even if they were uninsured in 2015. These people may be followers of particular religious groups, members of Native American tribes, and people who do not meet the minimum income requirement, leaving them unable to afford healthcare coverage.

For the most part, if you were uninsured in 2015, you’ll have to pay the penalty. But, here’s a list of specific cases where you may be able to get an exemption.

Exemptions include:

  • You’re uninsured for less than 3 consecutive months of the year
  • Your lowest-priced coverage option is more than 8% of your household income
  • You don’t have to file a tax return because your income is under the IRS filing requirement ($10,000 if single, 20,000 married filing jointly)
  • You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
  • You’re a member of a recognized health care sharing ministry
  • You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
  • You’re incarcerated, and not awaiting the administering of charges against you
  • You’re not lawfully present in the United States,
  • You may qualify for the Cancellation Hardship Exemption if you received a cancellation notice due to your health plan not meeting minimum requirements.
  • You also may qualify for a hardship exemption if your circumstances affected your ability to purchase health coverage

(List from Intuit.)

Still not sure if you qualify for an exemption? Give Mazuma a call, we can help.

Which Tax Forms Do I File as a Small Business Owner

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:
  1. 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!
  2. Get your refund on it’s way. If you’re receiving a tax refund this year, filing early will get you your money sooner.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.

Pay Personal Income Taxes

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.

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Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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