Whether you’re a new business owner or a seasoned one, filing taxes for your company takes some work every year. Doing this diligently will allow you to have the maximum returns, as well as preventing the consequences of tax evasion.
5 Things Every Business Should Know About Tax Filing
However, sales tax filing for your business or when you’re self-employed is quite different from when you are working under a company. Mostly, salaries are tax-deductible.
In contrast, a business owner needs to declare one’s income and spending in order to report the correct taxes and get the appropriate returns.
Thus, in this post, we will be learning about some things one needs to know about the current tax filing situation for entrepreneurs.
Review your business tax return documents
Once you receive your forms, it is essential to give them a thorough review. Look at all the items and see which ones are applicable to your business. Some business owners prefer to do this on their own, but others have a third-party sales tax filing company or professional that works with them.
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The form will have items to be filled out on the information of your business such as your industry, years of operations if it is a product or service-based, and all other types of pertinent data. It is also important to keep your accounts accurate for both income and expenses in order to fill out the tax return correctly.
Consider economic nexus
If you are selling products or services in another state, you should also keep in mind collecting tax from your customers if you have a threshold of sales. There are different economic nexus laws by state, so if you have branches in different areas aside from your headquarter state, it is important to know the regulations that apply.
Staying informed about the state’s income tax nexus guide is crucial when navigating the complexities of cross-border commerce. Understanding the specific thresholds and requirements set by each state will help ensure compliance with tax collection obligations. By familiarising yourself with the nuances of economic nexus laws in various jurisdictions, especially if you operate branches outside of your primary headquarters, you can proactively manage your tax responsibilities and avoid any potential legal complications. Keeping abreast of the ever-evolving landscape of state tax regulations is vital for businesses seeking to expand their reach while maintaining a solid footing in compliance matters.
The nexus phenomenon is fairly recent and some laws are being still modified depending on the state, so make sure to consider this area when filing for taxes.
Businesses most affected by the nexus are:
- Stores with physical locations: Brick and mortar stores often trigger nexus because they have bulk sales in that particular area.
- Out-of-state services: There are also service-based businesses that sell on a particular state different from the headquarter company. When these go above the selling threshold, it is important to think about the nexus for tax filing.
Include your home office expenses
If you are self-employed or have a working space in your home for your business, you should include this detail in your tax filing as well. Including the space area, new equipment or tools purchased such as laptops or supplies, and other expenses in the home which are related to your business should be reported.
Doing this will allow you to get an accurate report while getting the maximum returns for your business. This is most crucial for business owners who have a home-based venture, or those who are self-employed from home.
Make sure to report vehicle expenses
Another large part of returns in your tax filing is automobile expenses. If you are in charge of transporting goods or using vehicles to fulfill the logistical needs of your business, this is a major expense that needs to be reported.
Some things to consider in automobile expenses include:
- New purchases: Did you recently purchase transportation equipment for your business? If so, this should be declared as an expense in your business tax filing.
- Transportation logs: If transportation or vehicle-related logistics are a large part of your business, you must have a log of the date of transport, purpose of the trip, and other useful expense details.
- Maintenance: Businesses that have a transportation fleet also have major expenses in terms of maintenance. It can also help to keep receipts of maintenance expenses or other logs for filing when you do in-house repairs.
Keep and compile your W-2s when received
Self-employed individuals with multiple clients also have multiple W-2s. The W-2 is a very efficient way to keep a solid record of your income per client, especially if you have earned more than $600 annually.
Although many companies will send in one’s W-2 in advance, others will have them placed electronically.
Make sure to collect all your W-2 forms to avoid the challenging itemized computation in your business. Without the W-2, you need to input all your income manually from all the sources you have.
Preparing to Succeed: Nailing Your Business Tax Filing
Tax filing can sometimes be a complex and stressful season for business owners, but it doesn’t have to be. With these considerations and strategies in mind, you can prepare ahead and make the tax season smoother as an entrepreneur.
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