It’s March and you’ve already filed your taxes. What a relief!
That is…until…you receive a letter from the Internal Revenue Service in the mail.
So how can you avoid that uneasy feeling that comes with making a mistake on your tax return? Here are 3 ways to solve common mistakes business owners make:
- Register in every state you do business.
According to a recent supreme court ruling, a company is legally obligated to pay taxes in every state in which it does business – even if the company has no property or employees located within the state. If your business was incorporated or organized in Connecticut but you frequently sell in New York and New Jersey, you may need to file in all 3 states.
Or, for instance, if your business has a founder based in California, a team in Pennsylvania, and an office in Delaware, you may need to file tax forms in these states as well. Your small business must also file returns for all states in which employees work.
The threshold for filing differs from state to state so what forms are required and what taxes must be paid may even vary each year. A tax professional can help you to navigate these laws!
- File as the correct business entity.
When you first open your business you will file your first tax return as whatever entity (i.e. disregarded entity (DBA), limited liability company (LLC), partnership, S corporation, C corporation, or sole proprietorship) you chose when structuring your young enterprise. However, as your business grows and evolves over time, you may find it necessary to change that entity designation.
This is especially vital if you’re deciding whether or not to elect to change the way your entity is taxed, for example, you may be looking to apply for s-corporation status for your LLC or c-corporation. There are a lot of factors that should be considered when making this type of change including the tax treatment of different entities, whether your business meets all of the requirements to make such an election, the time and financial cost of any required ongoing compliance, and most importantly whether or not you fully understand the pros and cons of making such a decision.
- Work with a professional!
At Alfano & Company, we carefully examine all business documents and forms to ensure we are filing tax forms for ALL required states. Additionally, we assist both newly formed and well-established businesses to determine the correct entity they should be filing as to avoid tax penalties and even save thousands of dollars in taxes!
There’s no need to face tax season, or really any portion of the fiscal year, alone! We can help you organize and understand your tax documents, prepare your tax returns, and reduce any chance of you receiving yet another notice from the IRS. So don’t hesitate, we can help!