The results of a recent survey showed that nearly one-third of all small business owners believe that they are overpaying their taxes. They also believe that they could be claiming more credits and deductions.
Do you feel the same way when it comes to filing your business taxes?
There’s a lot of information to juggle when you’re trying to sort through corporate tax information. If you’re overwhelmed or don’t know where to begin, keep reading.
Explained below is everything you need to know about corporation tax filing. Keep this information in mind to make sure you aren’t overpaying when your tax bill is due.
Corporation Tax: The Basics
Let’s start by going over some corporate tax basics:
Corporate Tax Rates
First of all, let’s address the federal and state corporate tax rates. The federal corporate tax rate was recently lowered from 35 percent down to 21 percent.
State corporate tax rates vary, but they can be as low as three percent or as high as 12 percent. The average state corporate tax rate is six percent.
When are Corporate Taxes Due?
In the United States, corporate tax returns are usually due on March 15. Corporations can also request a six-month extension and file in September instead.
Businesses must also make installment payments every three months in April, June, September, and December.
Corporate Tax Deductions and Credits
There are a lot of different tax deductions and tax credits that corporations can take advantage of. The following are some of the most popular deductions and credits corporations claim:
Fuel Credit
The government places a lot of different taxes on fuel types. If your business uses fuel for off-road purposes, such as to operate machinery or for farming purposes, you may be eligible for the fuel tax credit.
Research and Development Credit
Businesses in just about any industry can claim a research and development tax credit.
If you’ve developed new products, new software, or made improvements to existing products, software, or processes, you likely qualify. You also qualify if you attempted to make improvements but were unsuccessful.
Work Opportunity Credit
If you hire employees who belong to certain groups (veterans, food stamp recipients, ex-felons, etc.) your business might qualify for a work opportunity tax credit.
Investment Credit
Has your business invested in new property, equipment, or buildings? Have you invested in any general improvements to the company? If so, you might qualify for an investment tax credit.
New Family Leave Act
If your business has created a new policy that offers qualified employees at least two weeks of paid family leave (in addition to sick time, vacation time, and other forms of paid time off), you might qualify for a tax credit.
This credit is an incentive that is part of the 2017 Tax Cuts and Jobs Act, and it’s only available for the 2018 and 2019 tax years.
Business Energy Tax Investment Credit
Has your business taken steps to be more environmentally conscious? Have you purchased and implemented tools like solar panels or fuel cells?
If so, you can likely claim the Business Energy Tax Investment Credit.
There are lots of other tax credits out there that incentivize businesses for “going green.”
Access for Disabled Persons Tax Credit
If you’ve installed ramps, added automatic doors, or made changes to your business’s location to accommodate individuals who have disabilities (either employees or customers), you can likely claim the Access for Disabled Persons tax credit.
Small Business Health Care Tax Credit
Small businesses that pay at least half of the cost of single health care coverage for their employees are eligible for the Small Business Health Care Tax Credit.
This credit is designed to offset the cost of paying for health care for businesses that have fewer than 25 employees who work full-time.
Alternative Motor Vehicle Credit
Did you purchase a new hybrid, diesel fuel, or electric vehicle for your business? If so, you can claim the Alternative Motor Vehicle Credit.
In order to qualify for this credit, the vehicle you purchased must be new. It also must meet specific mileage and fuel efficiency guidelines.
Benefits of Paying Corporate Taxes
Initially, it might not seem like there are any perks to paying corporate taxes.
In reality, though, if you have to pay taxes (and, sorry, but you do), these are the ones you want to pay.
In addition to all the tax credits and deductions available to you, you also get to take advantage of a low tax rate.
The federal corporate tax rate is 21 percent. That’s lower than the top five individual income tax brackets (these range from 22 percent to 37 percent).
Why Business Owners Should Hire CPAs
If you want to leverage the benefits of low corporate tax rates and make sure you’re not overpaying, you most likely will need to hire a Certified Public Accountant (or CPA).
One of the biggest tax mistakes small businesses make is neglecting to hire a professional. There are lots of benefits that come with hiring a CPA, including the following:
Clear Up Confusion
A CPA can help you navigate the often murky waters of corporate taxation to ensure you claim every credit possible and don’t pay too much.
Financial Planning
A CPA can also provide you with financial planning advice so that your business is better prepared for tax season in the future. They can also recommend other professionals who can help you manage your finances as a business owner.
Audit Protection
In the event that your business gets audited (which is highly likely if your business is brand new), you’re going to want to have a CPA on your side to help you through the process.
Hire a CPA Today
Dealing with corporation tax can certainly be frustrating or overwhelming, especially when you’re a new business owner.
Luckily, a CPA can help you manage the most stressful aspects and ensure you reap the benefits of paying corporate taxes.
Do you need to hire a CPA for your business?
If you live in Utah, Maryland, Washington, D.C., Florida, or New York, we can help with all your business accounting needs.
Contact us today for a free consultation or to learn more about our accounting services.
