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Business Tax Rates: How Much Do Small Businesses Pay in Taxes?

January 16, 2023/in Taxes /by Team

Filing taxes as a small business owner can be complex, with numerous factors to consider. From tax law revisions to the overwhelming number of forms, understanding your small business tax rate and how to file can be difficult.

Your business entity type and preferred filing status will also affect your tax rate. For example, LLCs that opt for the IRS to tax them as corporations are subject to corporate tax rates. Other businesses like sole proprietorships and limited partnerships may be subject to self-employment taxes. Understanding your entity type and requirements is the first step toward filing your taxes accurately and efficiently.

Tax laws are constantly changing, and it can be challenging to keep up with the latest revisions. A professional tax advisor or CPA can accurately file your business taxes on time. Our experienced tax specialists also know all the deductions and credits that can lower your tax bill.

We’ll cover small business tax rates, filing requirements, and various strategies that can help to reduce your taxes.

Table of contents

How Are Small Businesses Taxed?
Small Business Tax Rates
Updates to Small Business Tax Rates
What Taxes Do Businesses Pay?
How Much Do Small Businesses Pay in Taxes by State?

How Are Small Businesses Taxed?

Depending on your business structure and income, you may be subject to one or more types of taxes.

Corporate tax
Self-employment tax
Sales tax
Payroll tax

We’ll cover everything you need to know about tax rates for the most popular business entity types—corporations, partnerships, sole proprietorships, and LLCs.

Pass-Through Entities

The IRS considers most U.S. businesses (around 95%) pass-through entities, also known as flow-through entities. Pass-through entities include:

Sole proprietorships – Businesses with a single owner
Partnerships – Businesses with two or more owners
Limited liability companies (LLCs) – LLC owners can protect their personal assets from their business, but get the tax benefits of a pass-through entity. LLCs can also request the IRS tax them as corporations.
S corporations (S corps) – Corporations that have a special tax designation, so the IRS taxes them as pass-through entities.

The biggest advantage of pass-through entities is that they avoid double taxation. The term refers to when the IRS taxes the same income twice—once at the corporation level and again on an individual shareholder’s personal income tax.

Corporations

A corporation (C corporation) stands alone from its shareholders. The IRS taxes corporations as separate legal entities, which opens them up to double taxation. C corporations must report profits and earnings to the IRS. The IRS then taxes them at the corporate income tax rate. Shareholders still must file their personal income tax returns and report the corporate dividends and capital gains they get as part of their taxable income.

Let’s say a corporation earns $1,000,000 in profit and then passes on $200,000 in dividends to its shareholders. The business would have to pay corporate income taxes on the full amount of $1,000,000. Individual shareholders would also be subject to taxation on their share of the $200,000 dividend earnings.

The federal corporate income tax rate currently sits at 21%. A corporation with $100,000 in taxable income would owe $21,000 in taxes. With that said, that’s not necessarily the amount you need to pay. You can apply various small business tax deductions and credits to help reduce your tax liability.

While corporations have advantages, double taxation can be a major drawback. Most small businesses operate as pass-through entities instead.

Small Business Tax Rates

Unlike C corporations, the IRS taxes income for pass-through entities at the individual level. Owners file and pay taxes on all income—including business earnings—on their personal income tax returns. However, there are specific forms you need to include depending on your business structure. For example, partnerships will file Form 1065. S corporations will file Form 1120-S.

If you operate a pass-through entity, your small business tax rate will depend on your income tax bracket. The higher your taxable income, the higher your tax rate. Federal income tax rates range from 10% to as high as 37%.

It is important to note that pass-through entities may be subject to other taxes, outside of income. For example, you may need to pay self-employment tax.

Tax rate	Single individual income	Married (filing jointly) income
10%	$10,275 or less	$20,550 or less
22%	$41,775	$83,550
24%	$89,075	$178,150
32%	$170,050	$340,100
35%	$215,950	$431,900

Updates to Small Business Tax Rates

The IRS updates small business tax rates yearly to account for inflation or other economic changes. Therefore, you should look out for the latest rules and regulations or consult a tax professional. Legislation also impacts your tax bill.

Tax Cuts and Jobs Act (TCJA)

For example, the Tax Cuts and Jobs Act (TCJA) made major changes to the U.S. tax code, deductions, credits, and business tax rates. One of the biggest changes is that it lowered the corporate income tax rate from 35% to 21%. It also introduced a 20% deduction for qualified business income (QBI) from pass-through entities. However, some of those changes will phase out in the next few years.

A total of 23 individual and business tax TCJA provisions are set to expire on December 31, 2025. A tax professional can help you understand these changes and their impact on your business.

Inflation Reduction Act (IRA)

The Inflation Reduction Act (IRA) also influences how much you could pay in taxes. For one, it increased incentives for electric vehicles and other energy-efficient upgrades.

It also proposed a minimum tax rate of 15% for corporations that have made over $1 billion over three taxable years. This change has little to no impact on small business taxes. Unless you are a large, publicly traded corporation—think Walmart, Amazon, and Apple—it won’t have an impact on your business taxes.

What Taxes Do Businesses Pay?

Other than income tax, your small business may be subject to payroll taxes, self-employment taxes, and more. In addition to federal taxes, you may also have state and local taxes. Here is an overview of the taxes that businesses must be aware of:

Payroll or Employment Taxes

If your business has employees, then you’ll need to consider payroll tax. Payroll taxes are the taxes employers pay on employee salaries and wages. They include federal, state, and local taxes and Federal Insurance Contributions Act (FICA) taxes. You’ve likely seen FICA taxes appear as Social Security and Medicare on a paycheck.

The current FICA tax rate is 7.65% for the employer and 7.65% for the employee, or 15.3% total. As the employer, you’re responsible for withholding the appropriate payroll taxes from your employee’s salary and paying them to the IRS.

You’ll also withhold income tax from employees’ wages. To know how much tax to withhold, you’ll need to collect a W-4 Form from employees before they start work. This IRS form has details like an employee’s address, social security number, and tax filing status.

In addition to withholding and FICA taxes, there are other types of payroll taxes, including FUTA and SUTA. For example, Federal Unemployment Tax Act (FUTA) is an employer-paid tax that funds state unemployment benefits. Likewise, employers pay State Unemployment Tax Act (SUTA) taxes to fund state unemployment benefits.

Quarterly Taxes (Estimated Taxes)

Most sole proprietorships, partnerships, and S corps owners pay estimated taxes to the government on a quarterly basis. Instead of paying taxes all at once, it’s broken into four payments. You must pay estimated taxes if the amount you expect to owe is greater than $1,000.

Quarterly taxes usually fall into two categories—self-employment taxes (Social Security and Medicare) and income taxes. Even though you pay quarterly taxes, you’ll still need to file an annual tax return.

There are a few ways that you can calculate your estimated taxes. First, you’ll need to estimate your gross income and how much of that is taxable. Then, factor in possible tax savings from deductions and credits. You can also estimate your yearly taxable income and look at the tax rate for your income bracket.

Another method you can use is to look at your tax return for the past year. You can use last year’s figures to estimate your tax liability for this year. However, this method only works if you don’t expect your income to change much year over year.

The due dates are usually April 15, June 15, September 15, and January 15 of each year. However, some of the dates change if they fall on a weekend or holiday.

Here are the due dates for 2022 and 2023.

2022 tax year	2023 tax year
April 18, 2022	April 18, 2023
June 15, 2022	June 15, 2023
September 15, 2022	September 15, 2023
January 17, 2023	January 16, 2024

If you underpay your estimated taxes or don’t pay them by the due dates, you may be subject to penalties.

Xendoo’s business tax services will help you figure out what you owe if you’re unsure of how to calculate your estimated taxes.

Self-Employment Taxes

You’ll factor self-employment taxes into your quarterly or estimated tax payments. As the name suggests, self-employment taxes are taxes that self-employed individuals must pay. This includes those who own an unincorporated business or another type of pass-through entity.

Self-employment taxes consist of two separate parts: Social Security and Medicare. Currently, the combined tax rate is 15.3%. This situation differs from employers who only have to pay half of their employees’ Social Security and Medicare taxes. You won’t be subject to these payroll taxes if you don’t have any employees.

When filing your taxes, you can deduct your self-employment tax payments as an adjustment to income on your tax return. This deduction ensures that you aren’t double-taxed on the same money. Other tax credits may be available to small business owners to offset some or all of the cost of paying self-employment taxes.

To avoid paying self-employment taxes, consult a tax professional to discuss incorporating your business. You can take advantage of certain IRS regulations for corporations that may reduce your overall self-employment liability.

Sales Tax

While sales tax laws differ by state, retailers generally collect sales tax when they sell tangible goods to customers within their state.

The location of the sale, not the business location, will determine how much you pay in sales tax. For example, if your business is in one state but sells to someone in another state, you’ll pay the respective state’s sales tax. Certain states have reciprocal agreements that allow businesses to only collect sales tax from customers within their own state. It’s best to check with an accountant or tax professional to comply with the applicable laws.

In most cases, you’ll need to register with the applicable state government before collecting and remitting its sales tax. This process usually requires you to list the items you plan to sell and provide account information. You must also keep accurate records of all transactions made within the state. Failure to comply with the applicable laws could result in penalties, interest payments, and other fees.

Xendoo’s bookkeepers and CPAs are familiar with tracking and remitting sales tax for all types of businesses, including ecommerce. If you’re interested in sales tax services, we can do a consultation for your business.

Capital Gains Tax

The IRS collects capital gains taxes on the profits you earn from selling an asset such as stocks, real estate, or other investments.

Capital gains fall into two categories—short-term and long-term. Short-term gains are from assets that you’ve owned for less than one year before selling. Long-term gains are from assets that you’ve owned for more than one year.

Your capital gains tax rate depends on which category it falls under. The IRS taxes short-term capital gains as income. Tax rates for long-term capital gains are different and usually lower than income tax rates.

Here are 2022 long-term capital gains tax rates.

Tax filing status	0% rate	15% rate	20% rate
Single	Under $41,675 taxable income	$41,675 – $459,750	Over $459,750
Married, filing separately	Under $41,675	$41,675 – $258,600	Over $258,600
Head of Household	Under $55,800	$55,800 – $488,500	Over $488,500
Married, filing jointly	Under $83,350	$83,350 to $517,200	Over $517,200

Keep in mind that capital gains tax rates can vary from this for particular types like collectibles. The time that you own a capital gain can also impact how much you owe in taxes.

How Much Do Small Businesses Pay in Taxes by State?

In addition to federal income taxes, you’ll likely have state and local taxes. The federal corporate income tax rate is currently 21%, but most states have individual tax rates and rules.

Currently, 44 states and Washington D.C. impose taxes on corporate income. Top rates range from 2.5% in North Carolina to 11.5% in New Jersey.

There are also states that don’t have personal income taxes. If you are in one of the below states, you don’t have to file and pay state income taxes on earnings.

Alaska
Florida
Nevada
South Dakota
Tennessee (on wages)
Texas
Washington (state)
Wyoming

Even though some states don’t have an income tax, they may have other taxes. For example, some states have a gross receipts tax that taxes sales instead of profits. Companies must pay taxes on their total amount of sales, even if they don’t make any profit. Look up your state’s requirements or verify with a tax accountant to comply with the applicable laws.

Small Business Tax Professionals

As a small business owner, filing taxes can be confusing. It can be difficult to understand that tax code and all its complexities. But, with an experienced tax specialist, you shouldn’t have to.

Xendoo is an all-in-one service. We have expert bookkeepers, accountants (CPAs), and tax specialists in-house. Our experts work together on your accounts and know all the tax code changes to file your tax returns accurately. They can also choose the best tax deductions and credits that will save you and your business money.

Our bookkeeping plans come with flat monthly fees, so you know exactly what you’re paying each month. If you want to get personalized advice from our tax CPAs, you can add on tax services for as little as $100 per month. We’ll file your taxes too. Schedule a free consultation to see how we can help your business.

Two people exchanging receipts and money

Free Small Business Expense Tracking Spreadsheet

April 20, 2022/in Small Business Tips /by Team

Small business expense tracking can be a tedious task. But, it’s one that all companies–from “mom and pop” shops to international enterprises–must do. Fortunately, business expense tracking apps make the job easier. If you have a business with many employees, sales, and tax considerations, an app is ideal.

For some small businesses, however, paying a subscription fee for an expense tracker may not be feasible in the beginning. In this case, small businesses can use a free business expense tracker or template. While expense tracking will remain manual, it will keep your finances organized in one place.

We’re sharing a free business expense tracking spreadsheet that you can use. You can jump to the spreadsheet here and scroll further to learn how small businesses can keep track of expenses for free or at little cost.

Why do you need to track small business expenses?
What are common business expenses?
What is the best way to track expenses for small businesses?
Small business expense tracking spreadsheet

Why do you need to track small business expenses?

As you may know, you’re required to file taxes each year. Come tax time, no one wants to sift through old receipts to account for each expense.

Once you start expense tracking on a regular basis, you can eliminate such hassles. Moreover, up-to-date records ensure that you file tax returns accurately. Therefore, you won’t have anything to worry about should the IRS audit your company. Besides saving you time, you’ll also want to track expenses to take advantage of tax deductions and better financial health.

Tax Deductions

Everyone has to deal with taxes every year–companies and individuals. You may be eligible for tax deductions for certain expenses or activities. If you qualify for a deduction, you can lower the tax amount you owe and use the savings to grow the business.

While it may come as a surprise, many small business expenses qualify for tax deductions. However, only a small proportion of small business owners benefit from them. This is primarily due to inadequate expense tracking practices and not knowing how much you can save.

With reliable accounting software, you’ll have expense reports. These will give you a complete picture of your spending and tax deductions. If you’re not sure what counts as a deduction, you can review our list of over 20 tax deductions for small businesses.

Financial health

Data from the Bureau of Labor Statistics (BLS) shows that 20% of small businesses fail within the first year. This figure rises to 50% by the fifth year. But, there’s a silver lining.

Most of these businesses do not fail because there’s no market. Surprisingly, some companies make a lot of money and still fail. Some of the reasons for this include:

Financial mismanagement
Cash flow issues
Unsustainable growth
Poor planning

As you can see, all those factors are related to finances. By ironing up your expenses tracking processes, you can significantly increase the chances of success for your business. You’ll be able to quickly spot unnecessary, unusual, and fraudulent activity that may bring your business down.

This way, you can limit business expenses to necessary expenses and prevent costs from going overboard. In addition, you can learn how to read and interpret financial statements.

What are common business expenses?

Businesses in varying industries have different expense profiles. Even still, there are expenses that almost all businesses have. In the expense tracking spreadsheet, you’ll find areas to record each of these expenses, including:

Advertising and marketing – Costs associated with hiring a marketing agency or a consultant.
Auto expenses – If you use your car for business, you can expense repairs and mileage.
Bank charges – Fees and costs for a business bank account and credit cards.
Commissions – If you pay out sales commissions, they would be recorded here.
Contract labor – This is for businesses that hire freelancers or contract employees.
Interest – If you have a business loan, the interest on it is considered an expense.
Legal & professional – Consults with lawyers, accountants, and other professionals.
Merchant fees – These are costs that merchants like Shopify and Amazon charge.
Payroll, payroll taxes, and processing – Expenses related to paying employees and processing those payments.
Recruiting & HR – Costs associated with finding and hiring employees.
Training & education – Expenses related to furthering your or your employees’ business education.
Software and tools – Many tools that you use for your company are expenses (and tax-deductible).
Rent or lease – If you have a physical store or office, you can add it as an expense.
Utilities – Many utilities including the Internet are business expenses.

These are just a few examples. You’ll find more inside the small business expense tracking spreadsheet.

What is the best way to track expenses for small businesses?

At this stage, you know why it’s important to track business expenses, but how do you track expenses? In this regard, you have two options–business expense tracking spreadsheets or apps.

1. Business expense tracking apps

When it comes to business expense tracking, the best options available are expense tracker apps. These solutions sync to your bank accounts and business credit cards and categorize your expenses for you. This eliminates most of the manual work and automates the process of inputting the costs yourself in a spreadsheet. As a result, the only expenses you usually add manually are those you pay for in cash.

Aside from maintaining expense records, such solutions also generate expense reports. These help you understand your spending habits and how they impact cash flow and financial health. And you don’t have to set time aside for this. Using a mobile app, you can review your expenses while on the go. Overall, they reduce the amount of time you spend on expense records.

Some business expense tracking apps include:

Mint
Quickbooks (integrates with Xendoo)
Xero (integrates with Xendoo)
Zoho Expense
Expensify

To learn more about each app and if it’s a good fit for your company, you can view our guide to expense tracking apps here.

2. Business expense tracking spreadsheets

While business expense tracker apps may be ideal, they’re sometimes not accessible to small businesses. There may be a learning curve. Your company may not have many employees or complex expenses or the budget to afford a subscription. Whatever the reason, you’ll still have expenses to manage and report.

Using this free business expense tracking spreadsheet is the ideal option. Expense tracking spreadsheets use standardized templates to help you track various business expenses and key details. It’s the perfect middle ground between expense tracker apps and other inadequate methods.

Instead of worrying about how to record expenses, you’ll have a simple outline to follow. And you’ll have key insights such as:

The amount of money spent
The purpose of spending money
What the money was spent on
Who spent the money

The good thing about spreadsheets is that they give you flexibility. Along with the general expenses spreadsheets, you can have spreadsheets to report particular expenses. For example, this may include:

Mileage reports, especially if you reimburse employees for mileage
Travel expense reports for long business trips

Although, it is ideal to keep everything in one central place. Otherwise, it becomes harder to manage and you might not have the full picture of your finances.

While the purpose of each expense spreadsheet may vary, they’ll have similarities. These include:

Columns for filling in data such as expense descriptions, date, unit cost, vendor, and method of payment
Rows for each expense item
Columns with formulas that automatically calculate total expenses

In fairness, updating expense tracking spreadsheets requires commitment and can be tedious. However, if you are just starting out with a low budget, they can help you stay organized. Most entrepreneurs move to accounting software as their business grows because it will integrate with other tools like those for eCommerce stores, payroll, and inventory.

Small business expense tracking spreadsheet

You can get the Google sheet for small business expense tracking here. To use the sheet, you’ll first make a copy and edit the copy.

When you’re tracking expenses or any finances, you’ll come across accounting terms like gross revenue, net income, and gross income. To use this spreadsheet, you’ll want to be familiar with them.

What is gross revenue?

Along with the primary revenue stream, your business may have several sources of revenue. Gross revenue is the total of your business’s revenues over a given time period. It is not the same as gross profit.

Gross revenue solely focuses on earnings. As such, it does not account for the expenses incurred, such as the cost of production. Therefore, tracking gross revenue is important as it shows the potential of a business to grow and generate profits for shareholders.

Gross revenue is also known as the “top line” because it usually appears at the top of the income statement. Similarly, gross revenue is at the top of our free expense tracking spreadsheet. It’s important not to confuse gross revenue with net revenue. Along with the total earnings, the latter also accounts for expenses.

What is gross profit?

Unlike gross revenue, gross profit accounts for the costs of goods sold. To calculate your gross profit, you take the costs of goods or the cost it takes to produce, and subtract it from the total gross revenue. The calculation will look like this:

Gross Revenue – Cost of Goods Sold = Gross Profit

What is total net income?

For this, you’ll need to calculate net income (NI), also known as earnings. It refers to the business’s total amount of money (gross revenue) minus total expenses. Your expense items are on the left column of the sheet–marketing, bank charges, interest payments, etc.

To calculate total net income, you have to subtract all your expenses from the total gross revenue or the amount earned.

Gross Revenue – Total Expenses = Total Net Income

In simple terms, net income is the money the business remains with after paying for all the expenses. Keep in mind that the cost of goods sold or (COGs) is often considered a necessary expense. It should also be subtracted when calculating your total net income.

Total net income vs. total expenses

The two most important numbers for expense tracking are total net income and total expenses. It’s important to know how they’re related and how they differ.

Total expenses refer to the sum of all the costs your business incurs. On the other hand, total net income refers to the money that’s left once you deduct total expenses from gross revenues. Therefore, to calculate total net income, you first need to know the total expenses.

How to use the sheet

With our free expense tracking template, you won’t have to worry about building your own and figuring out the categories to include. It comes with a list of the common small business expenses and sections for other expenses, gross revenues, refunds, and total net income.

Depending on the expense you want to record, all you need is to find the right category and add it. The sheet will automatically calculate the total gross revenue, expenses, and net income for each month.

Tracking business expenses is a task every business must do. However, paying for an expense tracking app may not be an option. Also, while it’s possible to track expenses manually using a spreadsheet, you may want to focus on other business activities.

If that sounds like you, Xendoo is exactly what you need. We have a team of virtual bookkeepers and accountants who can manage all your accounting needs. Moreover, you can also integrate Xendoo with software like Gusto, Stripe, Quickbooks, Xero, and more.

How Long Does It Take an Accountant to Do Taxes?

February 23, 2022/in Accounting, Taxes /by Team

As tax season looms, you may be wondering whether you should have an accountant prepare your taxes. In addition to considering how much an accountant costs, you’ll also want to consider how long an accountant will take to do taxes compared to trying to do it yourself.

How do you know when to bring in a tax professional? Complicated tax situations like inheritance, small business taxes, or other big life changes usually warrant bringing in a certified public accountant or CPA.

How Much Time Does it Take an Accountant to Prepare Taxes?

The time it takes an accountant to do taxes depends on the complexity of your return and how quickly you make your tax information and necessary documents available to them.

It is better to plan ahead before the tax filing deadline. You can ask an accountant to have a better understanding of the timeline required to complete the process. There are a few ways that you can speed up the process.

Cost and Time Considerations

A number of factors affect the time it takes to file taxes. Not all of these will be the responsibility of the tax preparer.

First, you must make sure that you have all of the required documentation available for the tax preparer. Documentation includes any statements of income you have received from an employer or other entity, as well as any other tax forms for expenses.

Some of the most common forms include:

W-2
1099-NEC
1098

The W-2 is used to report income earned from an employer, as well as the payment of any taxes. A 1099-NEC includes independent contractor earnings. The 1098 form is a statement of any mortgage interest or insurance premiums paid.

Deductions are another consideration. If you prefer to itemize rather than take the standard deduction, you’ll need to have receipts available.

Typical items that are itemized include:

Medical and dental expenses
Mortgage interest
State or local property tax

All of your receipts should be organized and provided to your tax preparer.

Tax Preparation for Small Business Owners

Business owners will have more complex taxes. Businesses are able to claim certain deductions for expenses incurred throughout the year, but they need to have appropriate evidence of these expenses.

Gathering this documentation may take some time, especially if you haven’t kept track of your receipts during the year. Online accounting software can assist in managing small business income and expenses.

The cost of the tax preparation and filing varies. More complex returns will incur higher fees. Often you may offset the cost of these services with your tax refund if you are eligible for one.

If you choose to use a local accounting firm that specializes in tax return preparation, you will pay significantly more. However, if your tax situation is complex, it pays to engage the services of true tax professionals.

Xendoo has a variety of plans that are priced to meet tax needs for businesses of all sizes. The accounting team will be familiar with tax law and tax code and can make sure to include all deductions available to you. Xendoo’s team can also assist you with tax planning to mitigate your tax expense in future years.

How Much Time Do You Spend Preparing Your Return?

If you have filed your own tax return in prior years, you may have spent a significant amount of time to ensure you filled it out properly. When you did, you likely had to gather all of your tax forms and expense records. Then, check that you included each applicable tax form, including form 1040.

You may have struggled with situations that required more complexity, such as capital gains or business deductions. Perhaps you had significant medical expenses that required you to itemize rather than take the standard deduction.

Whatever the reason, you likely spent significant time and effort preparing your own tax return. At the end of the process, you may not have even been entirely comfortable that your return was correct. This oversight is why it makes sense to hire someone to handle tax preparation for you.

Plus, if you have errors in your tax preparation, it can slow the process down. Tax professionals can prevent common errors so that your taxes are filed faster.

Is It Worth Getting an Accountant to Do Your Taxes?

There are three main types of qualified tax preparers. These include enrolled agents (EAs), certified public accountants (CPAs), and tax lawyers. Other individuals may prepare taxes through retail firms, but often they will not have received education specific to tax.

Thus, if your tax situation is complex, it makes sense to hire someone to prepare your taxes who has the education and experience that fits your particular situation.

While there is an expense associated with hiring a qualified tax preparer, doing so saves you time, energy, and potentially even money. Tax preparers are generally familiar with most of the IRS tax code and must stay up to date on any changes that are made. They will be aware of deductions that you may not know you qualify for.

If you own a business, it is likely that you will need the services of a tax preparer. Business taxes are typically much more intricate than personal tax returns.

They involve a number of different considerations, especially if your company has employees, equipment, or investments. Tax consulting services can assist you with ensuring your business tax return is properly completed.

Tax Accounting Software

Some people decide that engaging the services of a professional isn’t necessary, especially if they have simple returns and have some knowledge of tax. They may choose to utilize tax software to prepare their returns.

To prepare yourself for tax time, there are a few online accounting software options that may help.

When you get a Xendoo plan, you can also sync to online accounting software and tools through our partners. These include:

Xero
Quickbooks

Although these tools can make the tax filing process easier, there is still some heavy lifting that you need to do. Xendoo comes with accountants that can advise you when filing tax returns.

There are a number of factors that impact how long it takes to complete income taxes. To speed up the process, store all of your tax-related documents throughout the year and keep them organized.

For small business owners and more complex tax needs, using a tax preparer like Xendoo can save time and money. If your return is complicated, consider small business tax preparation services.

How Much Is a Tax Consultant?

February 15, 2022/in Taxes /by Team

If you own a business or earn a significant income, you may be wondering how to manage your tax situation and how much a tax consultant costs. There is a lot to consider when weighing the costs and benefits of hiring a tax consultant. You might need help mitigating tax exposure and ensuring tax planning, charitable giving, and other complex tax needs.

A tax consultant can help with any of these issues. They can also help file taxes as a business owner. How much you can expect to pay for the services of a tax consultant? Read on to find out.

How Do Tax Advisors Set Their Prices?

A tax consultant will charge a fee based on different factors. One factor is the type of forms that you need to file. The National Society of Accountants (NSA) reports that tax consultants typically charge between $176 and $457. It may cost more if you are filing more complex and specialized tax forms.

It costs $323 on average for an individual filing a tax return Form 1040 and a state return with itemized deductions. Tax filings such as business, gains and losses, and estate are more complex and have higher fees associated with them.

However, the actual costs vary based on your tax situation. Some elements that play a role in tax consulting fees include:

Location

The location of a tax consultant plays a big role in their fees. You can expect to pay higher fees for accountants based in a larger city with a high cost of living. For example, filing taxes in California will likely cost more than in other parts of the United States.

Complexity of Services

For simplified matters, such as preparing an average tax return, fees may be fairly low. However, you can expect to pay more in more complex cases that involve significant research or time.

If your situation requires specialized knowledge about tax codes, fees are usually commensurate with qualifications.

What Does a Tax Consultant Do?

A tax consultant is trained in tax law and financial accounting. They advise clients on income tax returns during tax season and help with financial matters, including trusts and estate planning.

They also should know recent tax law changes on both a federal and state level.

Tax consultants offer a wide variety of services. These may include:

Preparing your federal form 1040 and state return
Navigation business tax requirements and preparation
Looking for available deductions to lower your tax burden
Helping to manage capital gains taxes
Sorting through tax advantages of life events

A tax consultant may work with individuals, businesses, or both. Business tax law is often far more intricate than individual tax law. Companies can benefit from the services that a tax consultant provides. They will have an in-depth knowledge of legalities surrounding the business structure of an entity and the deductions that may be available to a given company.

Tax forms as a first-time business owner can be complex, which means that it can be helpful to have someone help you navigate through them.

Is a Tax Advisor the Same as an Accountant?

A tax advisor is not the same as an accountant. Tax advisors may specialize in tax law, wealth management, and tax mitigation strategies.

While an accountant may have some tax training, their understanding is typically more basic unless they specialize in tax accounting. An accountant’s regular duties vary based on their industry. If they work in public accounting, they may oversee or conduct an audit of a public company’s financial statements.

If they work for a company, they may record journal entries, prepare financial statements, or reconcile general ledger accounts.

What Qualifications Does a Tax Advisor Have?

At a minimum, a tax advisor has usually obtained an undergraduate degree, typically in accounting or finance. They may also have received a master’s degree in finance, accounting, or tax. Oftentimes, they will hold a Certified Public Accountant or Enrolled Agent certification.

Highly specialized tax advisors may earn a law degree in taxation. This degree can assist them with more complicated tax matters, such as international tax or corporate business planning and strategy.

Why Do I Need a Tax Advisor?

A tax advisor can be quite helpful for complex tax matters. They may also serve to advise businesses on specific tax strategies, such as identifying available deductions or setting up a business entity.

There are a variety of different activities that a tax advisor may assist you with. Some of the more popular services include:

Minimizing Taxes in Retirement

The goal of most individuals is to retire from their careers at an age at which they are still able to enjoy their time with minimal health issues. However, retirement planning is a lot more intricate than simply depositing funds into an employer’s qualified retirement plan.

A good tax consultant can work with you to ensure that your income is protected from significant taxation as you age. With adequate resources, you can maintain your quality of life well into your golden years.

Helping to Mitigate Business Taxes

Business and corporate taxes can be complex, especially if you are the owner of a sizable organization. Having someone by your side who understands the tax code can prevent excess taxation and protect your business assets.

A business tax consultant will also be familiar with relevant state tax laws, sales, and local taxes.

Even if your business is not complex, a tax consultant can assist you with navigating potential small business accounting tax issues. For example, a professional can help you ensure that your employees are paid in compliance with federal and state payroll tax laws. They can also assist in completing relevant tax forms for the IRS, such as your estimated taxes and yearly W-4 tax filings.

Preparing Your Personal Tax Returns

If you have a lot of investments, operate as a sole proprietor, or have complex personal tax matters, you can definitely benefit from the help of a tax consultant.

Oftentimes, investments can result in net investment or capital gains taxes that can be arduous for someone without tax experience to deal with. Tax consultants can advise you about strategies to prevent excess taxation on these holdings.

If you operate as a sole proprietor or a freelancer, you may be unaware of tax deductions that you can use when preparing your tax returns. Engaging the services of someone who understands tax codes can help you to save money on your taxes and ensure that you remain compliant.

If you have questions on a specific situation, you are much better off in seeking the assistance of a qualified tax professional than trying to go it alone.

When Should I Get a Tax Advisor?

No one is immune to the need for tax consulting services. Anytime you have questions surrounding a tax situation, no matter how small it may be, it’s a good idea to seek the advice of a tax professional.

At Xendoo, our tax advisors can help with a wide range of situations, including retirement planning, business entity setup, and preparing your taxes. Get in touch to learn more today.

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22 Startups to Watch in 2022 by South Florida Business Journal

January 21, 2022/in In the News, Media, Press Releases, Professional Articles /by Alejandra Gomez

This Startups to Watch featured by the South Florida Business Journal includes businesses from a variety of industries, with everything from virtual reality to psychedelic mental health care represented. The companies are tackling the future of work, crypto investing, real estate development, banking, and more. They’re also attracting substantial funding from investors with an eye out for early-stage startups poised for growth in the years to come. Xendoo is honored to be mentioned among an amazing group of companies.

Best FinTech Companies For Tax Management

January 21, 2022/in In the News, Professional Articles, Taxes /by Alejandra Gomez

We frequently discuss the impact of fintech companies on financial services, but taxation is frequently overlooked. Tax filing is an unavoidable requirement, and most people hire professionals to do their taxes for them to avoid any misunderstandings with the government. Taxes can cause stress not only for consumers but also for small businesses. There are numerous fintech companies available to assist both individuals and businesses in not only understanding but also paying their taxes. In this article, we will explore the best fintech companies for tax management.

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Do You Need to File Personal and Business Taxes Separately?

January 17, 2022/in Taxes /by Team

As a business owner, how do you go about filing personal and business taxes with the IRS? The answer to this question actually depends on the way your business is structured, so there’s not a one-size-fits-all approach to filing small business taxes.

But that doesn’t mean that tax season needs to cause you stress. We’ve prepared this helpful guide explaining tax preparation for small business owners in the hope that it will help you learn to meet the requirements of both your personal and business taxes.

Are Business Taxes and Personal Taxes Filed Together?

When your business earns money, you’ll have to submit a tax return to the IRS for the income you receive. But does that mean you’ll be filing personal and business taxes together? That depends entirely on the structure of your business.

For example, many small businesses are set up as pass-through entities. This setup means that any income the business earns is passed directly to the business owner. Such pass-through means that rather than filing separate tax returns, you’ll simply pay the tax on your business income via your personal tax return.

Sole Proprietorships and Single-Owner LLCs

Some of the most common pass-through entities include sole proprietorships and single-owner LLCs (see below for other types of LLCs).

The IRS does not consider these business types to be separate tax-paying entities. That means you can simply submit your personal tax return (Form 1040) along with any related schedules or documents, showing income that came from your business and was passed on to you personally.

Some businesses may be asked to file information returns, which simply detail your business earnings to the IRS. You’re not subject to any separate taxation on this income; information returns simply function to report your income to the IRS in an effort to be thorough. Ask a tax advisor if your business needs to file one of these documents.

Partnerships

In a partnership, each partner will pay tax based on business income on their personal tax return (Form 1040).

Partnerships, therefore, follow the following process:

Partnerships report income and deductions to the IRS using Form 1065
Partnerships distribute a K-1 to each partner indicating their portion of the profits
Each partner will include the data from the K-1 on their personal tax return

This approach means that partnerships will also not file personal and business taxes separately, though you’ll still need to file Form 1065 with the IRS.

S Corporations

S corporations are also considered pass-through entities, which also means you won’t be filing a separate business tax return.

However, S corporations work a bit differently than the examples we listed above. For one thing, S corporations pay taxes through their owners, more commonly known as shareholders. The process will therefore look something like this:

S corporations file information return Form 1120-S to report their income
Shareholders receive form K-1 to show their portion of the company’s profits
Shareholders report data from the K-1 on Form 1040 Schedule E

Additionally, if any shareholders participate in managerial decisions, the IRS may classify them as employees. If so, you’ll have to ensure that these shareholders receive Form W-2 in addition to their K-1 and pay taxes on both sets of earnings.

C Corporations

C corporations are the one business type that must file separate business tax returns. The IRS considers these companies separate tax-paying entities, and if you operate a C corporation, you’ll report your company’s income to the IRS using Form 1120.

If any shareholders receive dividends, then the C corporation must distribute Form 1099-DIVs so that shareholders can report this income on their personal taxes.

How do you Separate Business and Personal Taxes?

If you operate a sole proprietorship, it can be especially difficult to keep your personal and business taxes separate. The best way is to maintain detailed, accurate books throughout your fiscal year so you have an accurate understanding of what your business earns.

Many business owners take active steps to keep their personal and business finances completely separate. Opening up a business bank account, for example, can make it easier to distinguish between personal and company funds, plus it will shield you from personal liability if your business ever goes under.

Are LLC and Personal Taxes Separate?

While individual states recognize limited liability companies (LLCs), the federal government does not. This distinction means that when filing personal and business taxes, your LLC will have to be taxed in the same way as one of the other major business entities:

Sole proprietorship
Partnership
S corporation
C corporation

For instance, some LLCs are classified as single-owner LLCs. This designation means that the owner will be taxed in the same way as a sole proprietorship and only be required to submit a personal tax return.

If your LLC has more than one owner, your business is automatically taxed as a partnership. This classification also means that the business will not pay taxes, but each partner will include business income on their individual tax return.

An LLC can also be taxed as an S corporation, which means you’ll have to fulfill your obligations to any shareholders you have.

However, an LLC can also be taxed as a C corporation. When this happens, you will have to file a separate business tax return for your company using Form 1120.

In other words, you can only file separate LLC taxes if your LLC meets the criteria to be taxed as a C corporation. In all other circumstances, you’ll simply file your LLC taxes as part of your personal income.

Are Personal and Business Taxes the Same?

As long as your business meets the criteria of a pass-through entity, your business income and personal income are considered to be the same. Granted, some business owners may have additional income apart from their business, but any profit from their business is classified as personal income unless they are set up as a C corporation.

Therefore, instead of filing personal and business taxes separately, most business owners will simply report business earnings on their individual tax forms.

That also means that your business will be taxed on the same basis as your personal income. The IRS does not impose a different tax percentage or tax bracket for business income vs. personal income. All of your income will be treated equally and be taxed at whatever tax bracket you fall into.

Can I File My LLC and Personal Taxes Together?

If you operate an LLC, your small business taxes will depend on how your company is recognized by the IRS. At the federal level, LLCs are not recognized. Therefore, you’ll have to pay taxes the same way you would a sole proprietorship, partnership, or C corporation.

To be clear, this means that you’ll nearly always file an individual tax return, with no separate tax return for income from your LLC. Single-owner LLCs will simply file their taxes in the same way as a sole proprietorship, reporting business income using Form 1040.

LLCs with multiple owners will be taxed in the same way as partnerships and have to report income to the IRS using Form 1065. Each partner will receive a K-1 detailing their portion of the profits. While the IRS receives the notification of the profits, the LLC will not pay taxes separate from the personal tax returns of each partner.

LLCs taxed as S corporations will likewise submit Form 1120 to the IRS and distribute K-1s to their shareholders, who will report income on their personal tax returns.

The only instance in which an LLC will file a separate tax return is when they are set up as a C corporation, which is treated as a separate taxable entity by the IRS. This designation means that your business will have to file Form 1120 with the IRS and file a separate business tax return based on company earnings.

Thankfully, the latter situation is relatively rare, at least for the small business community. In most cases, LLC owners will simply include earnings from their company in their personal income and then pay these taxes when they file their personal tax returns in April.

Tax Preparation Made Easy

Of course, the easiest solution of all is to have someone else do the work for you. Why focus on last year’s earnings when this year has so much untapped potential? At Xendoo, our financial wizards can provide expert-level tax services that let you meet your obligations and deadlines, all without you lifting a finger.

Xendoo will help you file your business taxes and your personal taxes, and our team of experts is familiar with every type of business you can throw at us. You’ll not only save yourself the headache of filing your taxes, but you’ll also be better prepared for next year.

As every business owner knows, tax season is always right around the corner. Give us a click today, and sign up for our free trial offer. We can keep you on target for your personal and business taxes and help you stay focused on your business.