Tax Tips for Small Businesses

Are you prepared to file your business tax documents? Many small business owners in Maryland find themselves scrambling this time of year to make sure they’ve got their records in order. And if you’re the proprietor of an S-Corporation, LLC, or electing large partnership, the deadline is looming to file certain forms and pay taxes.

The following March 15 deadlines may be relevant to your business:

S-Corps

  • File Form 1120S and pay any taxes due
  • Provide a copy of Schedule K-1 to each shareholder
  • File Form 2553 to elect S-Corp status beginning in calendar year 2016
  • File Form 7004 and deposit estimated tax if you need a 6-month extension

LLCs

  • File Form 1120 and pay any taxes due
  • File Form 7004 and deposit estimated tax if you need a 6-month extension

Electing large partnerships

  • Provide a copy of Schedule K-1/Form 1065-B to each partner

March 15 is also the deadline for all businesses to deposit payroll tax for February, if monthly deposit rules apply.

Getting Documents Together

No matter what type of business you operate, organized and accurate recordkeeping can make tax time a lot easier. If your 2015 records are less than orderly, now’s a good time to change your methods. First, make sure you’re keeping records for all aspects of your business, including:

Gross receipts – These documents show income received and may include cash register tapes, invoices, and Forms 1099-MISC.

Purchases – This category includes items bought and resold to customers, such as raw materials used to make products. Documentation of such transactions may include canceled checks and credit card statements.

Expenses – Expenses are the costs associated with running your business, such as paying for utilities or rent. Records may include account statements and proofs of payment.

You should also keep track of travel and transportation costs, employment taxes, and any assets used in the operation of your business (such as computers and office furnishings). Many more documents may be required, so it’s a good idea to consult with a business attorney to make sure you’re accurately tracking expenditures and revenue.

Once you’ve figured out exactly what you need to track, look for software that allows you to easily sort and search your records. Many of the most popular small business accounting software packages offer a basic option that’s affordable, if not free.

  • QuickBooks Online starts at $9.99 per month and offers a free trial period.
  • FreshBooks starts at $9.95 per month and includes features that streamline accounting from smartphones and mobile devices.
  • Wave Accounting is free, but customer service is a paid upgrade.
  • Zoho Books is $24 per month for an inclusive package that allows you to accept online payments quickly.

Setting Money Aside

New business owners sometimes underestimate what they will owe in taxes, and they end up struggling to pay a large tax debt when spring rolls around. Self-employed independent contractors, for example, may not realize they are required to pay not only income tax, but also self-employment (SE) tax that covers their contributions to Social Security and Medicare.

Self-employed entrepreneurs may be required to make quarterly tax payments to the IRS, based on the amount of tax they paid in the previous year. They may also have to pay their first quarter’s taxes, along with the taxes for the previous year, when they file their tax return.

Lusk Law, LLC, specializes in assisting small business owners with tax issues and other matters, helping to avoid litigation when possible, and representing our clients in court when litigation is necessary.

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