Most people feel the dread of tax time as April approaches, but for small business owners, that tax crunch is happening right now. With corporate taxes due March 15th, the 30 million small business owners across the U.S. are making sure their house is in order, if they haven’t done so already. A corporation that does not file its tax return by the due date may be penalized 5 percent of the unpaid tax for every month, or part of a month, the return is late, up to a maximum of 25 percent of the total unpaid tax.
Like any tax situation, corporate taxes can get complicated, time consuming and headache-inducing. With that in mind, we wanted to offer up some last-minute tips you may be able to take advantage of during corporate tax time.
Here’s five tips to keep in mind:
1) There are three corporate tax return forms that must be completed by March 15, 2013. Forms 1120, U.S. Corporation Income Tax Return; 1120-A, U.S. Corporation Short-form Income Tax Return; and 1120S, U.S. Income Tax Return for an S Corporation. The IRS website provides a complete list of Small Business Forms and Publications. Failure to submit these completed forms by the March 15 deadline will result in non-compliance fines from the IRS. In addition, business owners who are classified as a limited liability company or sole proprietorship have until 11:59 p.m. on the due date of their personal income tax return (April 15, 2013) to file for a six-month extension by filing Form 7004.
2) To avoid incurring a fine for non-compliance with the IRS, which can cost a business thousands of dollars, small business owners who don’t have access to an accounting or tax expert are advised to consult with the IRS, and take advantage of the IRS.gov website as a resource to aid them throughout the process.
3) Verify all 1099 contractor payments have been properly allocated on your payroll. The 1099 is a form that needs to be issued to any contractors hired during the year, as they are considered self-employed and file different tax forms.
4) Confirm the proper withholding for taxable fringe benefits. A small business owner can consider offering employees fringe benefits such as health, vision and child-care assistance instead of standard raises to reduce tax burdens. Consult IRS Publication 15 to find out what pre-tax fringe benefits are available and consider applying any or all of them to your company.
5) Confirm you have the correct legal names and Social Security numbers of your employees. The IRS may impose a penalty for each Form W-2 without this information. When issuing the W-2 forms, don’t forget to account for terminated employees who will need it to file their personal taxes.