NEWS & RESOURCES

Nathan Cacka, CPA, Financial Advisor, Manager

By: Nathan Cacka, CPA, Financial Advisor & Manager

For many business owners, tax season can be daunting – especially when you’re completing your federal tax return for your business for the first time. From compiling financial documents to filling out lengthy forms, it can be difficult to know where to start. Here are the most important steps to follow and reminders about what to keep track of.   

Depending on your chosen business entity type, you will need to complete the following IRS forms. These forms show how much money your business earned in a tax year and how much money you paid in taxes. Remember: an activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. 1 

• 1120-S (S-Corporation) – Due 3/15/23. Form 1120-S must be filed by a domestic corporation or LLC for any tax year covered by an election to be an S corporation. No tax is paid on this form, instead, the activity pass-through to the owner’s tax returns. Use this form to report the income, gains, losses, deductions, credits, etc.

• Form 1065 (Partnership or Multi-Member LLC) – Due 3/15/23. All partnerships must file Form 1065 to report their income, gains, losses, deductions and credits. No tax is paid on this form, instead, the activity pass-through to the owner’s tax returns.   

• Form 1120 (C-corporation) – 4/15/23. All domestic corporations have to file Form 1120 , even if your income is not taxable. 

• Form 1040 Schedule C (Sole Proprietor or Single-Member LLC) – Due 4/15/23. If you are a sole proprietor for your business, you will need to complete a Form 1040 Schedule C, which is used to report all business income and expenses. If you run your business as an LLC, the IRS considers you a sole proprietorship that can use this same form.  

Note: Six-month extensions are available for all return types if you need more time to fill out these forms. However, it is important to note that an extension does not extend the time to pay tax, only to file the tax form. If you have any questions about how to properly structure or amend your business structure, please consult a tax professional.  

If you’re hesitant to file your taxes because of how much you could potentially owe, consider some of these ‘not too late’ tax planning ideas and other deductions to maximize your savings.  

Increasing retirement plan contributions such as IRA’s, SEP IRA’s and 401(k) profit-sharing contributions is a way to reduce your taxable income. Contributions can be made to any employee-sponsored plan (SEP), and you have up until the due date of your business’s income tax return to make the contributions. Keep in mind that traditional IRA contributions are tax-deductible, which has a cap of $6,000 for total contributions for 2022.  

Health savings accounts (HSA) can be a powerful planning tool allowing you to save and invest money on a pre-tax basis to pay for qualified medical expenses. By maximizing your contributions to an HSA, the funds you contribute are yours to keep and will roll over year after year and allow you an opportunity to put those savings toward retirement or a long-term care plan. If you’re looking to reduce your taxable income, you can exclude annual contributions from taxes up to the limits placed by the IRS. For 2022, the limits are $3,650 single plan and $7,300 family plan. There has recently been an annual adjustment made to these limits, which pushed them significantly higher in 2023.  

 One of the most important areas business owners should focus on for tax season is ensuring you take advantage of available deductions. This is the time to review your record-keeping. Keeping accurate records and tracking expenses helps you understand where your money is going, facilitates budgeting and financial planning and supports accurate tax reporting. Don’t forget about these deductions for business:   

• Auto mileage – If you have a personal vehicle that is also used for business purposes, you can deduct the miles spent for the business. The standard mileage rate is currently $0.625 per mile.   

• Home office expenses – The home office deduction allows you to deduct certain home expenses when you file taxes. To claim the home office deduction on your return, you must regularly use part of your home or a separate structure on your property as your primary place of business.  

• Cell phone – If you're self-employed and you use your cell phone for business purposes, you can claim this as a tax deduction, based on a percentage of the usage between personal and business purposes.  

• Meals and transportation – No matter if it’s by plane, train or automobile, you can deduct the cost of non-commuting transportation from your home to your destination for business purposes. This also applies to bus, taxi or ride-share services.                

• Required continuing education – To be deductible, your expenses must be for education that (1) maintains or improves skills needed in your present work or (2) your employer or the law requires you to keep your present salary, status or job.

Filing your federal returns takes a lot of time, diligence and attention to detail. As a business owner, you can file your taxes independently, but there’s no substitute for expert advice from knowledgeable tax professionals. If you need professional tax services this season, contact Cordell, Neher & Company, PLLC to learn more at (509) 663-1661.