Additional menu

eFile360.com

Where e-filing information return forms comes full circle. We support 1099, 1098, W-2, and Affordable Care Act forms.

tax tips

Tips for Reducing Your Business Tax Liability

By

Managing business tax liability is a great way to save yourself some money (or even procure a refund) at the end of the calendar year. There are several lucrative (and legal) ways to do that. Here are some great tips for reducing your 2022 business tax liability. How the Super-Rich Reduce Their Business Tax Liability - & How You Can, Too Often, small and medium-sized business owners think they will have to bear the brunt of their business success or failures come tax time, but it’s worth looking into what the super-rich are doing to save some money. One of the most common ways to reduce that tax bill is to have a giving heart. If you want to reduce your business tax liability, there are so many charitable ways to do so. You can sponsor community events, pledge money for certain causes that are dear to you or pair well with your business’s mission, vision, and values, and donate supplies to local homeless shelters, food banks, and charity drives. You can also participate in charity days, where a percentage of your sales for one day, one product, or one month all goes to a cause of your choice. There are several small businesses that partner with other area businesses or charities and create a product or service in which all the proceeds from those sales go right back into the community or charity. Another way to reduce business tax liability is to invest in stocks – the taxes are lower on these investments than they are on wages, the losses can actually help you lower your tax bill, and any gains can circumvent capital gains tax if you just wait a bit to pull the profits out of the market. Bundle Your Expenses There are several ways to use a bundle approach that can help you use your expenses to reduce your business tax liability. The first, and biggest, tip we can offer is to wait until the end of the year to make major business-related purchases. This includes purchases that make sense for your business – buying a brand-new piece of …

Continue Reading about Tips for Reducing Your Business Tax Liability →

Tax Tips: Payee vs. Payor

By

Payee, payor, payer – what’s the difference? Let’s break down these designations so you can distinguish who pays what on your taxes and transactions. Payee The “ee” suffix can be confusing for many, and that’s why we wanted to walk through the definition of payee with you today. The “ee” usually denotes that the role in question is the receiver of the action. For example, if your business or industry wants to honor you at a conference with an award or other accolades, you would be the honoree. Therefore, the payee is the party that will receive payment in exchange of products or services. You can have a single payee in a transaction or there can be multiple. For example, when you receive a tax refund, for your personal or business taxes, you are the payee. The IRS is providing the payment, and you are receiving it. Designating your role as payee also often means identifying whether the transactions are subject to income or other taxes – the payee in a retail transaction (the business) will have to pay tax on that revenue, for example. Investment management transactions (with retirement or other investment-focused accounts) will often include payee accounts where the business will receive payments for the benefit of a client’s separate account. Payor/Payer Conversely, if the payee is the one who receives the payment, then the payor (or payer) is the one providing or sending out that payment. When it comes to payor vs. payer, the only true distinction is that “payor” is the preferred spelling for legal documents and instances. For tax purposes, the payor is the payment provider. Some examples of payors would be an employer paying their workers, a person writing a check, and any other entity that is settling a financial obligation. Where It Gets Tricky For many businesses, individuals, and independent contractors, transactions and tax relationships can get complicated quickly. Miscommunication abounds in many areas of business, and that’s why …

Continue Reading about Tax Tips: Payee vs. Payor →

What To Do When You Have Business Tax Errors

By

It feels like the tax code changes weekly sometimes. And in any business process, we know that errors are costly. So, let’s talk about what to do when you encounter business tax errors. Determine Which Business Tax Errors Need to be Corrected Math is a tricky subject – and tax code math is some of the trickiest math to do since every business decision and its financial outcome can affect your calculations. But before you start worrying about every single decimal point, a great first step once you realize you have business tax errors is to assess whether the error even needs to be corrected. “A broken clock is right twice a day.” “You used the wrong equation and got the right answer,” – these phrases are perfect for describing business tax errors versus your reportable tax liability. Big tax errors are going to affect your tax liability and – ultimately – your business. But not all errors need to be corrected. If you have math errors that don’t result in higher tax liability when corrected, you don’t need to correct them. But if your error ends up creating more tax liability for your business – those need to be corrected as soon as possible. And if there are many different business tax errors, you may have to file an amended business return to ensure that you and the IRS are on the same page when it comes to reporting your tax liability. Double-Check and Amend Your Tax Return Depending on your business structure, amending your tax return to account for business tax errors means filling out either a Form 1040-X (for sole proprietors and single-owner LLCs), Form 1120-X (for C corporations), or Form 1120-S (for S corporations). Amended tax returns can’t be sent electronically, they have to be completed on paper and then mailed out. Make sure you double-check your returns, even if you paid a professional service or CPA to prepare your business taxes for you. You can amend any of your tax returns up to three years after the original return was …

Continue Reading about What To Do When You Have Business Tax Errors →

7 IRS Tax Tips for Businesses in 2022

By

The IRS Newsroom has a section of their website dedicated to IRS Tax Tips, and we’ve compiled the best ones from 2022 related to business taxes. Non-employee Compensation & Backup Withholding In an IRS Tax Tip from July 2022, the agency reminds businesses that if they hire independent contractors, they aren’t responsible for withholding the employer portion of income, Social Security, or Medicare taxes. But any compensation equal to or more than $600 paid to these non-employees must be reported on Form 1099-NEC. In order to file this information return, you must know the nonemployee’s TIN, which can be one of the following numbers: Social Security Number (SSN), Employer Identification Number (EIN), individual taxpayer identification, or adoption taxpayer identification. Because of this nonemployee relationship to the business, these businesses are sometimes stuck in situations where the payer (your business) is required to withhold taxes from payments known as backup withholding (the current rate is 24%). Business Taxes & Travel Deductions Another July post from the IRS tax tips page talks about the importance of knowing what business travel expenses are tax deductible. Generally, these travel expenses must be “ordinary and necessary.” For example, it would be considered tax-deductible to stay in a regular hotel room for an industry conference but booking a penthouse suite or other luxury room will not be. Travel tickets and fares – Uber, train rides, plane tickets, and the like – are deductible. Lodging, business calls, and even laundry or dry cleaning are included, and these deductions aren’t just reserved for corporate employees – self-employed individuals can take advantage as well! For a more thorough list of the deductions, check out this IRS article. And for a bonus explanation about enhanced business meal deductions, check out this article. Spear Phishing Threats Some of our favorite IRS tax tips come in the form of …

Continue Reading about 7 IRS Tax Tips for Businesses in 2022 →

What Is the Employee Retention Tax Credit & Can My Business Benefit?

By

The Employee Retention Tax Credit has seen some recent amendments that have made it so that many more businesses, initially either excluded or those who chose PPP loans instead, are now eligible for several thousand dollars per each retained employee during 2020 and 2021. Read on to find out if your business qualifies. Employee Retention Tax Credit: Recent Changes That Could Help Your Business During the pandemic, there were several tax relief programs and items that made their way into the tax code. Some were near-permanent, and others were only for a short time during the worst of the lockdowns and layoffs. The Employee Retention Tax Credit was one of those programs, but it has seen big changes that may mean larger tax credits are available for your business even if you’ve already filed your business taxes for 2020 and 2021. The Employee Retention Tax Credit is one that has recently been expanded. In the early days of the program, businesses were told they could choose either PPP loans or the Employee Retention Tax Credit (ERTC). Because the PPP loans were more of a focus point for financial institutions like banks and other financial services providers, many businesses chose to take PPPs. But now, that stipulation is gone. So. Even if your business took a PPP loan to be able to continue paying your employees, you may also still be eligible for the ERTC. There are a few main ways to qualify for the Employee Retention Tax Credit if you paid employees during most or even just some of the pandemic: Full or Partial Shutdown: Your business is eligible if it was fully or partially shut down by any federal, state, or local shutdowns – these include travel restrictions, capacity restrictions or maximum occupancy gatherings, and more. Gross Receipts (Revenue) Lost: Your business is eligible if you experienced revenue loss in certain quarters of 2020 and 2021 as compared to those same quarters in 2019. How Much Tax Credit Does Your Business …

Continue Reading about What Is the Employee Retention Tax Credit & Can My Business Benefit? →

4 Most Common Tax Season FAQs

By

Even though we have taxes due every year, we always have some questions. The tax code changes frequently, and it’s extremely complex. Here are some of the most common tax and tax season FAQs. How Can I Lower My Tax Bill? Far and away, the biggest tax questions are always some variants of “How can I lower my taxes?” and “What deductions am I eligible for?” Tax deductions and credits are the most common way to reduce your tax obligation, whether you are doing your individual or business taxes. The hard part about this question is that it’s different for everyone. A lot of your tax information comes in the form of Information Returns, the forms like 1099s, 1098s, W-2s, and others that show you what your financial activity looked like throughout the tax year. These Information Returns help you fill out the tax forms you need in order to take advantage of many of these deductions and tax credits. eFile360’s top-tier e-filing services offer you a great solution for filling out and storing these forms. What Are This Year’s Tax Changes? Every year, the IRS makes adjustments to the tax laws, processes, and procedures based on the latest government regulations, technology changes, and overall performance during the last tax season. This tax question is one that people are worried about all the time. American taxes are like a high-level puzzle: you have to put all the pieces together, solve the equations, and hopefully submit the right answers. But if the rules have changed, you may be making inadvertent mistakes. The IRS website, specifically their Newsroom, is a great way to stay up-to-date on any and all changes that are coming up during the next tax season. What’s the Difference: W-2 vs. 1099-NEC? The 1099-NEC is one of the newest Information Return forms to be (re)instated. These forms are used to calculate non-employee compensation, including freelancer and independent contractor work. W-2s are given to employees of a business early on during tax …

Continue Reading about 4 Most Common Tax Season FAQs →