Finance

3 Facts Business Owners Need to know About Tax Returns

Written by lavinandassociates

Running a small business in New York requires fulfilling several obligations towards the federal, state, and local tax agencies. Owning to the tax codes being in a perpetual state of flux, that makes it difficult for common people to understand the Internal Revenue Code properly. Due to this, many small companies overpay their taxes because they were not aware of the legally entitled deductions that could have lowered their tax bill. Hence, strategizing and preparing taxes is the only way to hold back on to hard-earned dollars.

For that, employing a renowned CPA firm is the best course of action. Their expert accounting services in NYC can not only save time, frustration, and money but also stop an unexpected audit. These tax professionals have years of tax preparing experience on and above attending seminars, reading journals and magazines to interpret the ever-changing tax code correctly. They can save small business owners from misapprehension and misconceptions generated because of the complexity of the law.

Here three important facts regarding the business owners’ tax returns are explained in detail.

  1. ALL START-UP COSTS NEED NOT BE DEDUCTED IMMEDIATELY

Business start-up costs refer to the expenses incurred at the beginning of the operation and include both start-up and organizational outlay that usually varies depending on the type of trade. They are also called capital expenditures that include advertising, travel, surveys, and training.

An entrepreneur can choose to deduct or amortize certain business start-up costs. Starting in the tax year 2011, he can deduct up to $5,000 of both establishment and organizational costs that he had paid or incurred after October 22, 2004. However, if the combined costs exceed $50,000, then the deduction is reduced by that amount and remaining expenses are amortized.

  1. OVERPAYING THE IRS DOES NOT REDUCE THE CHANCE OF AUDIT

Whether a business owner is paying the right amount of taxes or overpaying them, the IRS cannot care less. However, they do care if a company firstly pays less than what it owes and secondly, it cannot substantiate its deductions. Hence, even if it overpays in one area but underpay in another, the IRS will still levy the befitting penalties and interests.

Therefore, it is always best to pay just the rightful share of taxes. To achieve this, all expenses need to be documented for lowering the incidence of an audit. There are several reputed CPA firms that provide excellent accounting services in NYC. They can ensure that the taxes are neither overpaid nor underpaid and can deal with auditors if required.

  1. BEING INCORPORATED DOES NOT ENABLE EXTRA DEDUCTIONS.

Incorporating a business does not warrant extra tax gains because all self-employed individuals qualify for most of the same deductions that it does. It also requires substantial expenses that can be unnecessary and burdensome. It can so happen that a start-up spending huge money in incorporation may discover later that they should have moved in a different direction for better tax benefits.

In fact, many small business owners who incorporate but cannot make enough money in the first few years, find themselves encumbered with mandatory corporate tax payments without an income. Hence, an experienced tax accountant should be employed who can advise the ideal time or the requirement for incorporation and other viable ways of deduction that benefits small enterprises.

Conclusion

All companies are entitled to tax benefits. However, due to the ignorance of the nuances in tax laws, many organizations usually pay more taxes than necessary. The complicated tax laws also engender numerous misinformation that leads to costly mistakes. In this situation, hiring professional accounting services in NYC is ideal because of their vast knowledge of the Internal Revenue code and their expertise in tax preparation.

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