Last year was a crazy year for just about everyone, and now is the time to do that one last thing necessary to put 2020 in the rear-view mirror. Hopefully you are ready to dive in and get your 2020 taxes filed in the next week or two. Here are a couple of tips that may help you get it done.
DO YOU NEED TO EVEN FILE?
For a single person earning less than $12,400 or a married couple with under $24,800 in income, there is no requirement to file. (There are different rules for dependents.) But … wait a minute. There are many reasons that you still should file a tax return. Do any of the following apply?
• Did you get all of your stimulus payments?
• Do you want to get your refund for taxes withheld?
• Are you eligible for Child Tax Credits or Earned Income Tax Credits?
All of these types of payments are claimed on your tax return. If you are not sure whether you should file, our team at CS CPA Group can evaluate your tax situation over the phone or by email. Feel free to call us at 520-568-3303 or email us at firstname.lastname@example.org.
WHEN SHOULD YOU FILE?
As you might remember, last year’s tax deadline was extended to July 15. No such luck for this year. In 2021, the 1040 tax filing deadline is April 15. for individual returns, including Schedule C Sole Proprietorships. For larger businesses utilizing more sophisticated tax strategies, March 15 is the deadline for S-Corps or Partnerships.
Of course, an extension to file will allow you an additional six months to file. Sorry, but if you owe taxes, these payments must be sent by the April 15 deadline.
WHAT DO I NEED TO FILE FOR MY BUSINESS?
First and foremost, if you have employees, your payroll tax returns should have been filed in January. Get these filed first and ASAP! Next, every business has to file a tax return. For a Sole Proprietor just starting out, their business return is filed as Schedule C on their 1040 Individual tax return. This 1040 is still due by April 15. As the entrepreneur’s business continues to grow or as they bring on business partners, there are different types of returns that would be better for the business owner. (This is a good time to remind that an LLC or Limited Liability Company is a legal classification, not a tax entity election.)
The three most common business returns are described below:
• S-Corporation — Form 1120S. One to 100 owners. Does not pay any taxes. (For pass-through entities, taxes are paid by owners, not the business.) May reduce self-employment tax liabilities. Tax return or extension due March 15.
• Partnership — Form 1065. At least two partners. A slightly more flexible accounting and tax structure, pass-through entity, self-employment taxes due on all profits. Return or extension due March 15.
• C-Corporation — Form 1120. Unlimited owners. Pays corporate income tax. Profit distributions are also taxable to shareholders. Usually used by larger companies and required for publicly traded companies. Tax Return or Extension due April 15th.
No matter the type of business you own, the number one key for your business and tax strategies are clean, well-maintained accounting records. We have seen the penalties incurred by businesses that don’t “know their numbers” and those penalties are a lot more expensive than getting it right from the start.
Good financials make for great tax returns.
If you have any questions or would like to discuss your needs, please give us a call or an email. We would be happy to answer any questions that you might have.