In 2021, amid the continued pandemic and “Great Resignation,” Americans filed a report 5.4 million purposes for brand spanking new companies, in accordance to knowledge from the U.S. Census Bureau.
That means a whole lot of new business homeowners are dealing with their first filing season. While many individuals can file their private returns on their own, tax consultants strongly advise that business homeowners search skilled assist.
“Do not do that on your own,” stated Adam Markowitz, an enrolled agent and vp at Howard L Markowitz PA, CPA in Leesburg, Florida. “There’s simply an excessive amount of on the market.”
Here’s what tax consultants say new business homeowners ought to know before filing their 2021 taxes.
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Understand your construction
One of the primary issues that new business homeowners need to know before they file is how their firm is structured.
“Lots of [the] time, entrepreneurs do not perceive the default taxation of their business,” stated Sheneya Wilson, CPA and founding father of Fola Financial in New York.
This is essential as a result of the construction of your business determines how you file. Most entrepreneurs know if they’ve a restricted legal responsibility firm, or LLC, however do not know if their business is a partnership (that means a number of folks own the business), if they are a single member or in the event that they beforehand elected to be an S company.
“What it actually boils down to is that if you’re a single member you file on a Schedule C; if you’re a multi-member, you file on a partnership,” stated Markowitz. If you suppose you’re an S company, you ought to have made an election on Form 2553 and obtained affirmation from the IRS, he added.
“If they do not have the affirmation from the IRS, they are not an S company,” he stated.
In addition, firms arrange as S companies, which frequently have “Inc.” or “Corp.” in their names, need to file Form 1120 or Form 1120-S; they cannot file a Schedule C.
This is essential as a result of how you’ve structured your business might change your filing deadline. While many returns are due April 18, returns for companies are due March 15.
Find an expert in your area of interest
If that every one sounds complicated, it’s. Most business homeowners — and particularly new ones — ought to take the time to discover a tax skilled to information them by this course of.
Yet discovering a tax skilled might be overwhelming. Wilson recommends that entrepreneurs slender their search by searching for somebody who has expertise in their business space.
“A tax skilled who’s skilled in your area of interest might be of higher service to you in ensuring you’re maximizing your tax profile,” she stated. That consists of serving to you correctly deduct bills and claiming credit that would get your business a refund.
You can also need to work with somebody who has expertise in the state the place your firm is situated, as a result of there are generally native guidelines, stated Markowitz.
If you have not had luck discovering somebody on-line, Markowitz recommends checking with your native chamber of commerce or any native CPA organizations.
Once you’ve discovered a number of professionals you’re in working with, be certain that you vet them completely. That consists of their training and expertise — you ought to gravitate towards individuals who have earned both a CPA designation or are so-called enrolled brokers.
It’s essential that you file business returns precisely to keep away from penalties. For instance, the penalty for failing to file a partnership return is $210 per 30 days for up to a 12 months multiplied by the full variety of folks in the partnership for the tax 12 months.
That can shortly add up to 1000’s of {dollars}, stated Markowitz. If its your first time making such a mistake, you might give you the option to get the penalty waived, although it is “not a slam dunk,” in accordance to Markowitz.
Have your data prepared to go
Once you do discover a skilled to work with, there are some things they’re going to need immediately to assist put together your taxes.
That consists of your Employer Identification Number (EIN), articles of incorporation and working settlement. You also needs to come ready with your business’ monetary paperwork, together with your steadiness sheet and bookkeeping.
Do no do that on your own
Adam Markowitz
enrolled agent and vp at Howard L Markowitz PA, CPA in Leesburg, Florida