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How to Prepare Your Business for Tax Time

November 29, 2023/by Team

A broker goes over his taxes for his real estate business.

Planning ahead is always a good business strategy, especially when it comes to taxes. Adopting a proactive strategy can help you stay ahead of business tax filing deadlines, avoiding the rush and the headache during tax season!

To help business owners prepare their tax, we’ve prepared a business tax filing guide to walk you through the process.

Deadlines

Any good business tax filing guide should start with the various filing deadlines associated with taxes for businesses. For a detailed explanation of these dates, you can check out this helpful article from Karen Doyle.

Here, we’ll summarize the need-to-know facts about various filing deadlines.

Income Tax for Individuals, Sole Proprietors, and Single-Owner LLCs

Individual taxpayers, sole proprietors, and single-owner LLCs must make estimated tax payments on a quarterly basis and file an annual income tax return.

The filing deadline is April 15. Deadlines for state income tax can vary, so your state’s tax collection authority can be a helpful tax guide for local deadlines.

2024 Tax Filing Deadlines for Estimated Income Tax

Businesses and self-employed individuals must submit quarterly estimated tax payments according to the following schedule:

First Quarter: April 15
Second Quarter: June 17
Third Quarter: September 16
Fourth Quarter: January 15, 2025

Estimated payments can be calculated using Form 1120-W.

Income Tax Returns for Partnerships and S Corporations

S Corporations and partnerships must file a return by March 15, 2024.

These organizations must generate a Schedule K-1 earnings statement for each partner or organization. The following forms will be needed to generate a Schedule K-1:

Partnerships: Form 1065
S Corporations: 1120S

You may file for a six-month extension by submitting Form 7004. You will also need to submit a deposit equal to the amount of tax owed. The return will be due on September 16, including any interest and penalties.

Corporate Income Tax Returns

Companies must submit a corporate income tax return by April 15, 2024. Corporations can request a six-month extension by filing Form 7004, though they will also be required to submit a deposit for their estimated taxes.

If your business requests an extension, the new deadline will be October 15, 2024. This will also be the deadline for your first quarterly tax payment.

If you do decide to request an extension, you’ll need to be prepared to pay your annual income tax from 2023, your quarterly tax payments, and any penalties or interest no later than October 15, 2024.

Employment Tax Filings for Wages and Non-Employee Compensation

Employers must distribute physical copies of tax forms by January 31 to any individual who received cash payments that include:

Wages
Non-employee compensation
Dividends
Royalties
Profit-sharing distributions

Electronic copies may be submitted instead, but only with the consent of the employee.

Electronic copies must also be submitted to the Social Security Administration by the same date. The following documents are subject to the January 31 deadline:

Forms 1097, 1098 and 1099
Forms 3921 and 3922
Forms W-2 and W-2G

Small businesses must submit corresponding copies to the IRS by February 28. Keep in mind that you may also be required to submit the following forms:

Form 1096, Annual Summary and Transmittal of U.S. Information Returns
Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips

You may be able to receive an extension for filing electronically, though this varies by year.

2024 Payroll Tax Deposit and Form 941 Due Dates

Small businesses must file Form 941, Employer’s Quarterly Federal Tax Return, according to the following schedule:

April 30
July 31
October 31
January 31

The following forms are due on the last business day of the first month after the end of each calendar year:

Form 940, Employer’s Annual Federal Unemployment (FUTA) Return
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
Form 944, Employer’s Annual Federal Tax Return
Form 945, Annual Return of Withheld Federal Income Tax

In 2022, this deadline falls on Monday, January 31.

Federal Excise Tax Requirements for Small Businesses

Some industries are required to pay excise taxes. Retailers, manufacturers, travel services, and communication companies file Form 720, the Quarterly Federal Excise Tax Return, on the following dates:

April 30
July 31
October 31
January 31, 2025

Form 11-C, Occupational Tax and Registration Return for Wagering is used for businesses that accept bets. This form must be submitted before accepting any bets. Form 730 must be submitted monthly.

Form 2290 is used for businesses that rely on heavy highway vehicles. This form must be filed by the last day of the vehicle’s first month of use. After this, the excise tax period runs between July 1 and June 30.

Tips

What can you do to adopt a proactive strategy when it comes to your business tax filings? Our business tax filing guide offers three tips that can help you be prepared for next year’s tax season.

Make Sure Your Books Are Caught Up

Keeping your books up-to-date is one of the most important things you can do for your business. The further you get behind in your bookkeeping, the harder it will be to stay current with your financial and legal obligations — that can quickly make tax season a nightmare!

Many small business owners cut corners by handling their own books, only to later discover that they’re in over their heads. Sound familiar? Don’t worry; you’re not the first.

Outsourcing these needs to a professional bookkeeping service can help you get caught up while keeping your business running smoothly all year round.

Gather Important Documents

You’ll also want to establish an organizational system to gather and preserve your important financial documents. We’ve already mentioned some of these earlier on this business tax filing guide, but the most important documents include:

W2s from employers
1099s from contractors or miscellaneous income
Documents showing itemized expenses (medical, educational, child care, etc.)
Statements regarding investments
Statements regarding mortgage interest payments
Receipts from charitable donations
Receipts for deductible expenses

These documents will be essential for calculating the federal income taxes that you owe.

Plan Ahead

Our business tax filing guide is based on a key principle: it’s better to be proactive than reactive. Not only does that mean keeping deadlines on your company calendar, but it also means finding creative ways to handle your tax debts each year.

For instance, you might plan a series of charitable donations that can be deducted from your income each year. You might also plan some type of investment or savings account that can be used to pay your tax debts.

Consulting a tax preparation service can help you to take advantage of every available deduction, which can lower your total tax payments for a given year.

Xendoo, Offering Proactive Solutions for Your Business

At Xendoo, we understand the demanding nature of modern businesses. We also understand that since the services of a CPA cost roughly $400 an hour, it can be challenging to stay up-to-date on your books. That’s why we’re committed to providing top-quality accounting and bookkeeping services that won’t break your budget.

When you partner with Xendoo, you’ll be able to rely on industry-leading services that include tax preparation, bookkeeping, and more, thanks to our experienced team of professionals.

Want to learn more? Reach out today, and we can start you and your business on the path to success.

What happens if you get audited and don’t have receipts?

May 16, 2023/in Taxes /by Team

Most small businesses are unlikely to go through an IRS audit, but it’s possible.

What happens if you get audited and don’t have receipts to back your expenses? It’s a common question and concern for many business owners.

The best way to avoid headaches during an IRS audit is to keep accurate business records and bookkeeping year-round, including tracking receipts.

Receipts are a paper trail for your business transactions and taxes. Without them, it’s harder to prove your tax deductions and other records are accurate. However, forgetting or misplacing receipts happens, especially when you’re busy running a business.

The IRS regularly deals with missing receipts, so there are guidelines for what businesses can do if they don’t have receipts.

Xendoo’s bookkeepers and CPAs have years of experience managing business records. Below, learn everything you need to know about IRS audits and receipts.

Table of contents

Why do businesses need receipts?
Receipts businesses should keep
What happens if you get audited and don’t have receipts
What to do when you don’t have receipts
How bookkeeping and tax services help

Why do businesses need receipts?

Receipts are records and proof of payment for the income and expenses your small business claims on tax returns. Without receipts, you may not be able to prove that a business transaction took place.

Businesses should keep receipts for record-keeping, but also to claim tax deductions and credits.

For example, if you’re traveling away from home for a business trip, you could deduct travel expenses, which would save you money on taxes.

However, you’ll need to prove that the travel was for business purposes and keep receipts for items like:

Airfare
Hotels
Parking fees
Car rental or ride-share
Other travel expenses

Receipts businesses should keep

Receipts aren’t the only records businesses should keep; they help you track your income and expenses.

Companies track a lot of receipts. Some examples of costs that you’ll need receipts for include:

Office supplies and equipment
Inventory purchases
Advertising and professional services
Company training and employee education
Travel expenses

Since this isn’t an exhaustive list, it’s best to track all your business receipts and update your records regularly. To make the process simpler, many small business owners use business expense tracking and receipt apps.

A bookkeeping service can also advise you on which records and receipts to track (and in some cases, do it for you).

What happens if you get audited and don’t have receipts

You have several options if you’re audited and don’t have receipts. Because the IRS regularly deals with missing receipts, there are standard steps businesses can follow.

In most cases, you can track down receipts or provide other documents, which we’ll outline later, to prove an expense. The worst-case scenario is that the IRS may remove some business tax credits and deductions you claim.

Audits aren’t as big a deal as movies and the media make them out to be, especially if you keep organized business records. There are many reasons the IRS might audit a business, but most happen due to random selection or tax errors.

If the IRS audits you, you’ll receive a notification letter. From there, you’ll communicate with your auditor and provide the documents they ask for.

The IRS doesn’t always share what triggered an audit, but these are some red flags:

Over or under-reported income
Suspiciously high tax credit and deduction claims
Rounded numbers ($2,000) for expenses instead of exact amounts ($1,930)
Other mistakes or inaccurate data

Although tax professionals and CPAs are familiar with tax laws and can help you navigate an audit, they focus on avoiding audits first. Business tax services prepare and file taxes for you, so they’ll catch inaccuracies and mistakes before you send tax returns to the IRS.

What to do when you don’t have receipts

If you don’t have receipts and you’re worried about an IRS audit, you have two options.

Hire a catch up bookkeeping service that also has tax CPAs. They’ll get your records caught up, file your taxes accurately, and help you avoid an audit in the future.
Gather all the receipts and tax documents yourself. You’ll need the time to dig through and organize your business records.

If you don’t do either of the above options, you’ll likely take the loss of deductions or credits. Depending on your situation, you may need to pay IRS fees.

Let’s look at the steps you can take when you don’t have receipts.

1. The Cohan rule

Missing receipts are so common that since the 1930s, a legal rule has outlined options for taxpayers who don’t have them. It’s called the Cohan rule, and in some cases, you can use it to claim deductions if you’re missing receipts.

In a nutshell, the Cohan rule says that:

You can claim business expenses without receipts if they’re reasonable and credible.
The IRS may not allow you to claim the full amount. Instead, they’ll calculate the minimum standard amount for expenses.

The Cohan rule has helped many small business owners prove their expenses when missing receipts. However, the IRS can reject your deductions even if you follow the Cohan rule.

For example, you can’t claim the Cohan rule if your deductions include certain expenses like entertainment. You’ll also need to explain and document the:

Exact purchase amount for products or services
Reason for the purchase
Dates and locations when you purchased it
Other relevant transaction details

2. See if vendors will provide invoices and receipts

To provide the IRS with documentation, you can reach out to vendors to request duplicate receipts.

Since most vendors use online invoicing and billing systems, they’ll have copies of your records.

Keep in mind that some vendors might charge a fee for their time to retrieve past invoices, receipts, and other statements.

3. Find checks, credit card, or bank account statements

If you’re unsure where you made a purchase or can’t contact them to provide copies, search through old checks and bank and credit card statements.

Going through these documents can tell you:

How much you spent
When you made a purchase
What company is the transaction from

You can use this information to reach out to vendors and ask them for receipts or use it to prove your expense is legitimate. Getting copies of the receipts is ideal though, since it will show exactly what you spent money on to count as a tax-deductible expense.

4. Review your calendar and emails

Reviewing your calendar and email will help you narrow your search for receipts.

When you make a purchase, companies often send payment confirmation and a copy of your receipt to your email. If you know the company’s name, purchase date, or other details, you may find it by quickly searching your inbox.

If you don’t, looking through your calendar could reveal where you were on certain days. It’s especially helpful to find when you travel for business so you can claim those travel expenses.

Although this method helps you find transaction details, the IRS doesn’t accept calendars or emails as proof of business expenses.

5. Look at location data and maps on your phone

A similar method for searching for transaction details is to use location data on your phone. Your phone stores a lot of information about your activities throughout the day.

You can search through your Google search or social media history to find the names of vendors and locations you visited.

Again, it will help you find where you purchased so you can track down receipts. However, the IRS doesn’t accept location data as proof of your deduction eligibility.

How far back can the IRS go to audit previous tax returns?

During audits, the IRS generally reviews income tax returns for up to three years. However, in certain cases, the IRS may extend this period to six years if they deem it necessary to investigate any issues in your past tax returns. It is crucial to note that such a six-year audit extension is uncommon and is typically reserved for more serious or complex situations.

How bookkeeping and tax services help

Although keeping records and receipts is best, you can claim reasonable business expenses without receipts. If you don’t have receipts, you may not be able to claim the full amount of deductions unless you can prove your claims are legitimate. Missing receipts could mean you have inaccurate records and tax returns, which could trigger an audit.

Businesses can avoid audits with accurate and organized bookkeeping year-round. However, there are many records that businesses need to keep, including receipts, financial statements, payroll, and much more. It’s understandable if you lose a few receipts or fall behind—many businesses do.

Professional tax services like Xendoo make bookkeeping easy for businesses. If your business needs catch-up bookkeeping, accounting, tax services, or a combination, chat with a Xendoo accountant. We’ll get to know your business and its bookkeeping and accounting needs during the chat. If you aren’t sure which services you need yet, we’ll help you figure that out.

General Business Credit (Form 3800): How To Fill it Out and Get Tax Credits

April 3, 2023/in Taxes /by Team

As a business owner, you can pay less in taxes by taking advantage of credits or deductions. Tax credits lower the amount you owe. For example, if your tax bill is $15,000 but you have $5,000 in tax credits, you’ll only owe $10,000. But, there are over 30 business tax credits. Which should you claim to get the most tax savings? What forms do you need to file?

If you’re claiming more than one business tax credit, you’ll need to fill out Form 3800, also called the General Business Credit form. In this guide, we’ll show how to file Form 3800, maximize your tax savings, and find out if any of the recent tax changes apply to you.

What is Form 3800? (General Business Credit)

The government uses tax credits to incentivize certain behaviors such as using electric vehicles or retaining employees. You might be unaware that you qualify for multiple credits that will lower your total tax burden significantly.

Form 3800 consolidates all of your business tax credits, so you tally up the total value of credits for the year. As you can see, the IRS form has a lot of information on it.

Who must file Form 3800?

Businesses and corporations must file IRS Form 3800 to claim multiple business tax credits during the current tax year. In some cases, you can also use the form to carry forward tax credits to a future year or carry them back to a previous year.

In simple terms, if you exceed the IRS limit on tax credits this year, you could carry forward or apply it a future year, depending on the credit.

Which tax credits are on the General Business Credit form?

Form 3800 collects all of your tax credits in one place, so you can calculate the total value. In addition to Form 3800, you’ll need to submit individual forms for each tax credit you claim. Here are some of the tax credits that business owners claim on Form 3800:

Investment Credit (Form 3468)
Work Opportunity Credit (Form 5884)
R&D Credit (Form 6765)
Foreign Tax Credit (Form 1116)
Small Employer Health Insurance Premiums (Form 8941)
Paid Family and Medical Leave Credit (Form 8994)
Employer-Provided Childcare (Form 8882)
Retirement Plan Startup Costs (Form 8881)
Qualified Electric Vehicle Credit (Form 8834)
Disabled Access Credit (Form 8826)

One of the biggest challenges business owners have is figuring out which credits and deductions they can use. You can always use a business tax service like Xendoo and a tax CPA can do it for you. But, we’ve also included guidance below to help with filling out Form 3800.

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How to fill out the General Business Credit (Form 3800)

Here’s a simple step-by-step guide on how to file Form 3800 properly.

1. Determine your tax liability

The first step is to determine your total tax liability. You calculate this by taking your taxable income and subtracting tax deductions. An easier way to determine tax liability is to check one of the following forms, depending on your business:

Form 1065 – Partnership or limited liability company
Form 1120 – C corporation
Form 1120S – S corporation

2. Calculate your alternative minimum tax

If your income is higher than a certain level, the IRS applies alternative minimum tax (AMT) rates. The rate is 26% or 28%, depending on your income. The idea behind AMT is that everyone pays their fair share of taxes regardless of deductions. Mostly, it applies to high earners.

To calculate your alternative minimum tax, first, take your total tax liability and add back the deductions you subtracted. Then, if your income is below $539,900 in the tax year 2022, you subtract an income exemption of $75,900. Multiply the result by 28% or 26% depending on your income level. The result is called the tentative minimum tax.

Individuals that have alternative minimum tax will use IRS Form 6251. Still, calculating AMT is confusing, but an experienced tax professional can do it for you.

3. Find your general business credit limit

Your general business credit limit is the maximum amount of tax credits you can use to lower your taxes. Finding your general business credit limit involves a bit of math, but here are the basic steps:

Calculate 25% of the portion of your net regular tax liability that exceeds $25,000.
Compare your tentative minimum tax and the 25% of the net regular tax liability calculated in the first step. Identify the greater value.
Subtract the greater value from step two from your net income tax to find your general business credit limit.

4. Understand carryback and carryforwards

If you’ve reached your general business credit limit, you can still claim the tax credits you have left by carrying them back or forward.

The IRS permits this to avoid penalizing small businesses that do the actions they are trying to incentivize. If this program were not in place, businesses would only be incentivized to claim credits until they reached their general credit limit, which would be counterintuitive.

You’re allowed to carry back most credits for one year. This means that if you did not reach your general business credit limit last year, you can amend the previous year’s return.

You are also allowed to carry forward tax credits. If you haven’t reached your general business credit limit this year, you can apply the unused credits from past years on this year’s return.

5. File Form 3800 with your tax return

The following businesses are usually pass-through entities, meaning you’ll file and pay personal and business taxes in one return. When you file taxes, you’ll also submit Form 3800 and other individual tax credit forms.

S Corporation
Sole proprietors
LLC members
Partnerships

Changes to know for the 2022 tax year

The U.S. tax code changes frequently. A tax credit that you received last year might not be available this year. There may also be new credits and amounts that save you more money. Here are a few of the credit changes for the 2022 tax year:

Child tax credit

In 2021, the child tax credit amount temporarily increased to $3,600 for each child under six and $3,000 for children between six and 17. Now, it is a flat $2,000 for each child under 17 years.

Electric vehicle credit

The Inflation Reduction Act of 2022 made changes to electric vehicle credits for tax years 2022 and 2023. This year, the credit ranges from $2,500 to $7,500 depending on your EV’s battery capacity. However, if the manufacturer has already sold 200,000 units of the vehicle in question you won’t be eligible. The 200,000-unit limit will phase out in 2023. You’ll also be able to get a credit of up to $4,000 for used EVs less than $25,000.

Business taxes can be complicated, and there are many tax credits and deductions that business owners miss out on every year.

If you want to avoid the headache of filing Form 3800 and the rest of your taxes on your own, consider a business tax service that has CPAs. Putting your business tax preparation in the hands of experienced tax professionals can save you stress, and help you save as much money as possible on your taxes. See how Xendoo’s business tax preparation can help you today.

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.

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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.

When Can You File Small Business Taxes in 2022?

January 12, 2022/in Taxes /by Team

Asian female business owner, working on her laptop in her art studio

This year, make things easier on yourself by planning ahead. You’ll thank yourself for filing business taxes according to the prescribed deadlines. Not only will this save you from sweating over a shoebox full of receipts, but making on-time tax payments will save you from any late fees or interest payments.

To help you with this process, we’ve put together this complete guide for filing business taxes in 2022. You can use the information and the dates we provide to form a strategic plan for preparing and filing your taxes in 2022.

What Is the Business Tax Filing Deadline for 2022?

You may have already marked April 18, 2022, on your calendar to remind you to pay your personal income taxes. This date is a slight change from previous years since April 15 (the common tax deadline) happens to fall on Good Friday.

But what about your small business taxes? The deadlines for filing business taxes depend on how your business is structured. Here are the deadlines for common business types:

Sole Proprietors, LLCs, and C Corporations

April 18, 2022, is the tax deadline for sole proprietors, limited liability companies (LLCs), and C corporations. They all must all file their taxes by this common April due date.

These businesses can also file for a tax extension, and this extension must also be received by April 18. Once your extension is approved, your new tax deadline becomes October 17, 2022.

It’s important to remember that your tax return must be at least postmarked by the due date. If you choose to send a paper return through the mail, take this into consideration to ensure you comply with the April tax deadline.

S Corporations and Partnerships

Some business types must file their taxes earlier than the April 18 tax deadline. For S corporations and partnerships, the deadline is March 15, 2022.

These businesses can also file for a six-month tax extension, which places their final deadline at September 15, 2022. As with the return itself, applications for a tax extension must be postmarked by March 15, 2022.

Estimated Tax Payment Deadlines

It’s quite common for business owners to make estimated tax payments. These payments are made in each quarter, though the deadlines don’t always fall at precise intervals. For the 2022 calendar year, businesses must adhere to the following quarterly tax payment schedule:

April 18, 2022 (for income received from Jan through March)
June 15, 2022 (for income received from April through May)
September 15, 2022 (for income received from June through August)
January 16, 2022 (for income received from Sept through Dec)

Keeping these estimated tax payment deadlines on your calendar can ensure that you meet your tax obligations. Keep in mind it’s better to overpay than to underpay, as the latter can result in a penalty if your payments are too low.

When Can I Do My Taxes for 2022?

We recommend that business owners not wait until April 17 when filing business taxes. Some entrepreneurs may be particularly eager to file their taxes, hoping to take advantage of deductions based on careful planning on their previous year’s taxes.

Generally, the IRS will begin accepting electronic tax returns by late January. In 2021, the IRS didn’t begin accepting returns until February 12, though this seems to be an anomaly. By January 24, you’ll likely be able to file a business tax return.

This date, of course, assumes you’re ready. Some business owners prefer to have a financial professional or tax services give their tax return a final check before filing to verify its accuracy and ensure that they received all of the deductions and credits to which they’re entitled.

Key Dates

Ready to mark your calendars? Here are all of the important dates for filing business taxes in 2022. You can bookmark this page for future reference or transfer this data to your personal or company calendar, so you never miss a deadline.

January 20, 2022: Employees who earned over $20 from tips in the month of December must report this income to their employers using Form 1070.
January 15, 2022: Your fourth-quarter estimated tax payment for 2021 is due on this date.
January 31, 2022: Employers must send W-2 forms to their employees and 1099 forms to their contractors for earnings from 2021.
February 10, 2022: Employees who earned over $20 in tips during the month of January must report this income to their employers using Form 1070.
February 15, 2022: Financial institutions must send Form 1099-B (sales of stocks/bonds/mutual funds through a brokerage account), Form 1099-S (real estate transactions), and Form 1099-MISC unless the sender is reporting payments in boxes 8 or 10.
February 28, 2022: Businesses must mail Forms 1099 and 1096 to the IRS.
March 1, 2022: Farmers and fishermen must file individual income tax returns (unless they paid 2021 estimated tax by Jan 18, 2022).
March 10, 2022: Employees who earned over $20 in tips during the month of February must report this income to their employers using Form 1070.
March 15, 2022: Corporate tax returns (Forms 1120, 1120-A, and 1120-S) for the tax year 2021 must be filed by this date, or you may file for a six-month extension using Form 7004 (for corporations using the calendar year as their tax year), or Form 1065 (for filing partnership tax returns).
March 31, 2022: This is the deadline to e-file Forms 1099 and 1098 to the IRS (but not Form 1099-NEC).
April 11, 2022: Employees who earned over $20 in tips during the month of March must report this income to their employers using Form 1070.
April 18, 2022: Household employers who paid $2,300 or more in wages in 2021 must file Schedule H for Form 1040.
April 18, 2022: Individuals must file their personal tax returns for 2021, or Form 1040 or Form 1040-SE. Form 4868 must also be filed by this date in order to request an extension.
May 10, 2022: Employees who earned over $20 in tips during the month of April must report this income to their employers using Form 1070.
June 10, 2022: Employees who earned over $20 in tips during the month of May must report this income to their employers using Form 1070.
June 15, 2022: Second-quarter estimated tax payments for the 2021 tax year must be received by this date.
June 15, 2022: U.S. citizens living abroad must file individual tax returns (or Form 4868) by this date to receive a four-month extension.
July 11, 2022: Employees who earned over $20 in tips during the month of June must report this income to their employers using Form 1070.
August 10, 2022: Employees who earned over $20 in tips during the month of July must report this income to their employers using Form 1070.
September 12, 2022: Employees who earned over $20 in tips during the month of August must report this income to their employers using Form 1070.
September 15, 2022: Third-quarter estimated tax payments for the 2021 tax year must be received by this date.
September 15, 2022: Partnership and S-corporation tax returns for the tax year 2021 must be filed by this date if an extension had been previously granted.
October 11, 2022: Employees who earned over $20 in tips during the month of September must report this income to their employers using Form 1070.
October 17, 2022: Final deadline to file individual or corporate tax returns for 2021 using Form 1040 and Form 1120 (if an extension had been previously granted).
October 17, 2022: Eligible taxpayers who earned $72,000 or less in adjusted gross income during 2021 can use Free File to file their returns by this date.
November 10, 2022: Employees who earned over $20 in tips during the month of October must report this income to their employers using Form 1070.
December 10, 2022: Employees who earned over $20 in tips during the month of May must report this income to their employers using Form 1070.

Remember, if you miss one of these important dates, you could face a penalty. At the very least, you might end up paying additional interest on the taxes you owe, so it’s important to keep these dates on your calendar and meet any deadlines that might apply to your business.

Tax Preparation and Planning Made Easy

Filing small business taxes doesn’t have to be a headache. In fact, with the right planning and preparation, your tax return can be the culmination of a year’s worth of hard work and careful strategy.

When you plan ahead for your next tax year, you can take full advantage of any deductions, credits, or other features that can save you money and keep your business financially healthy.

At Xendoo, we can help with that. Our team can help you with monthly bookkeeping in addition to helping you plan and prepare your business tax returns. Our tax preparation for small business services can help you save money and meet the IRS requirements, all while relying on our professional team to keep things running smoothly.

Want to learn more? Click here to get started, and our free trial can show you how Xendoo’s innovative features can take the stress out of your tax preparation.