Let’s say you’re faced with the daunting prospect of putting together a business tax return, and you want to inquire about a tax refund. If an accountant isn’t in your budget or you prefer to take the DIY route, you can use tax preparation software tools to anonymous fulfill your tax obligations. With tax software, you’re essentially doing your taxes yourself, but your program can help guide you and point you toward some deductions and other tricks to help you minimize your taxable income. Some programs may offer live support from CPAs on staff, too. If you make estimated tax payments and overpay, you could receive a tax refund in April. Business owners who report income from pass-through companies include the income on their individual 1040s.
- These types of entities pass taxable income to the owner, so they don’t pay the tax directly to the IRS and would therefore never receive an income tax refund.
- It’s hard to know in advance whether your small business will get a tax refund, but what can be said is that you can take steps to increase your chances.
- Basically, if you’ve paid in more than your actual tax liability, you will be owed a refund.
- The lost client accounted for more than one-fourth of Larry’s income last year, so Larry estimates he’ll earn about $80,000 this year.
The minimum estimated tax Larry must pay is 90 percent of the tax he will owe on his $80,000 income. If you are unsure about how your business is being taxed and whether you should be getting a refund, contact an experienced tax preparer. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. In addition to the above options, consider consulting an accounting professional to find out the best ways for your business to maximize its refunds.
Sales Or Excise Taxes
A tax credit is an amount of money that you can subtract from your tax debt before paying it. Unlike a tax deduction, a tax credit is subtracted from the taxes you owe instead of your taxable income. On a federal and state level, no shortage of tax credits is available to your small business. Your accountant or other tax professional may be aware of tax credits you might not have otherwise known about. The easiest and safest way to calculate your estimated taxes is to pay 100% of the total federal taxes you paid last year, or more if you’re a high-income taxpayer as described below.
Take Advantage Of The Qualified Business Income Deduction
Review your personal bank and credit card statements for business expenses you may have otherwise missed. Your business accountant should know how to record these expenses in your books so that they can be reflected on your tax return as a business expense. When you started your business, you decided what type of business entity to form, which in turn determined the way you’ll pay your small-business taxes to the IRS and state.
Regardless of entity type, if your business withholds and pays payroll taxes, you might receive a refund if your account is overpaid. Some restaurants may also receive a tip credit, which is a tax credit that an employer can claim to recover FICA taxes paid on tips received by employees. The tip credit can be used to reduce the income tax owed by the employer, which could result in a refund. Because C Corps are taxed differently than other types of entities, they can receive a refund. Basically, a corporation’s profits are taxed separately from its owners and the C Corp pays income tax directly to tax authorities. Another way to increase your deductions as a small business owner is to take advantage of the Qualified Business Income deduction.
Although there are plenty of perks to business tax refunds (hello, it’s money), there is a downside to receiving one. With a small business tax refund, you don’t receive your money until tax season. That means that the IRS is holding your money without interest for the year. Calculate your estimated business net income for the year and add self-employment taxes on this income to get a total of your expected business tax liability for the year. Then make quarterly estimated payments through the IRS Payments service.
Can A Small Business Get A Tax Refund? Factors To Consider
The type of taxes you pay can determine if there is a tax refund for your business. If you’re a small-business owner, chances are you have to work even when you are at home. If you have an office in your home, you may be eligible for a home office deduction — allowances based on the square footage of your office space. You may also be able to claim a portion of your homeowners insurance, utility expenses and depreciation of your home as business expenses. You can make estimated tax payments during the year to increase your chances of getting a refund. Don’t waste time going from bank-to-bank filling out multiple applications.