Answers to Questions Business Owners Ask Us Most
Running a business comes with plenty of tax questions, and many of them don’t wait until tax season.
Here are answers to some of the questions business owners commonly ask, along with additional Barklee resources if you want to learn more.
Should I consider electing S Corporation status?
Short Answer: Maybe. An S Corporation can provide tax advantages for some business owners, but it also comes with additional payroll, filing and compliance requirements.
Whether it makes sense depends on factors such as your business income, how you pay yourself and the additional costs and responsibilities involved.
Read more: Should You Switch to an S Corp?
What do I have to do every year if my business is an S Corp?
Short Answer: Electing S Corp status is only the beginning. S Corporation owners have ongoing responsibilities, including filing the appropriate business tax return, maintaining payroll and paying shareholder-employees reasonable compensation.
Staying on top of these requirements throughout the year can help prevent problems at tax time.
Read more: What S Corp Owners Must Do Each Year
Do I need to make quarterly estimated tax payments?
Short Answer: Maybe. Generally, if you expect to owe at least $1,000 in federal tax when you file your return after subtracting withholding and refundable credits, you may need to make estimated tax payments during the year.
This is particularly common for self-employed individuals, business owners and others who receive income that isn't subject to regular withholding.
Read more: Do I Need to Make Quarterly Estimated Tax Payments?
What business expenses can I deduct?
Short Answer: Generally, business expenses must be both ordinary and necessary for your business to be deductible. Depending on your situation, that could include expenses such as software, advertising, professional services, supplies, education and certain business meals.
Good recordkeeping matters. Small expenses can add up over the course of a year and missed, or poorly documented expenses can mean missed deductions.
Read more: Most Common Self-Employed Business Expenses You Could Be Missing
Can I deduct my home office?
Short Answer: You may be able to if you meet the IRS requirements. Generally, the space must be used regularly and exclusively for business, and additional rules apply. Simply working from your kitchen table occasionally doesn't necessarily make part of your home a deductible home office.
Read more: Home Office Deductions
Can I deduct mileage or other vehicle expenses for my business?
Short Answer: If you use your vehicle for business purposes, you may be able to deduct qualifying vehicle expenses. Depending on your circumstances, you may use the standard mileage rate or calculate eligible actual vehicle expenses.
Either way, keeping accurate records of your business driving is important.
Read more: Can I Claim Vehicle Expenses for My Business?
What should I do if I receive an IRS notice or letter?
Short Answer: Don't ignore it, but don't panic either. Read the notice carefully, pay attention to the response deadline and determine exactly what the IRS is requesting. Keep the notice with your tax records and send a copy to your tax professional if you're unsure what it means or how you should respond.
Read more: What Do I Do If I Receive an IRS Notice or Letter?
How do I make a payment to the IRS?
Short Answer: The IRS offers several ways to make federal tax payments electronically. The right method can depend on what you're paying and whether you're making an individual or business tax payment. Before submitting a payment, make sure you're applying it to the correct taxpayer, tax year and tax type.
Read more: How to Make a Tax Payment
How can I check whether my IRS payment went through?
Short Answer: Don't assume a payment was properly credited simply because the money left your bank account. Depending on how you made the payment, you may be able to review your payment history or IRS account information online. Keeping the confirmation number or other payment documentation can also be helpful if a question comes up later.
Read more: How to Check Your Tax Payment
Can the IRS waive a penalty if I usually file and pay on time?
Short Answer: Possibly. The IRS provides penalty relief in certain circumstances, and the process for first-time penalty relief has changed. Eligibility depends on your filing and payment history as well as the type of penalty involved.
Read more: IRS Changes First-Time Penalty Relief: What Taxpayers Need to Know
Can I see my business tax information online with the IRS?
Short Answer: If you're eligible, the IRS Business Tax Account can provide online access to certain federal tax information for your business. Depending on your business type and your role in the business, you may be able to review balances and payments, access certain notices and transcripts, make payments and manage other tax-account information.
Read more: The IRS Expanded Its Business Tax Account: What Business Owners Need to Know
When should I talk to my CPA instead of trying to figure it out myself?
Sometimes the most important question isn't whether you can find an answer online. It's whether the answer depends on your particular business. Changes in business structure, significant purchases, hiring employees, receiving an IRS notice, falling behind on taxes or making a major financial decision are all good reasons to talk with your tax professional rather than waiting until your next tax return is due.
Have another tax question?
Tax rules can be complicated, but understanding how they apply to your business doesn't have to be. Barklee Financial Group helps business owners understand their tax and accounting questions, stay ahead of important deadlines and make informed financial decisions throughout the year.
