Tax season can be a stressful time for small and medium sized businesses alike. With so many rules and regulations, it’s easy to get overwhelmed. To make matters worse, there are plenty of tax myths floating around that don’t help the situation at all. Whether you run a business or work with taxes on behalf of someone else, it pays to understand the truth behind these common misconceptions. In this blog post, we will look at 10 of the most common tax myths for medium-sized businesses in order to separate fact from fiction and ensure your taxes are handled correctly. Need Tax Help Now? Or just want to learn more, let’s dive in!
All Business Income is Taxable:
This myth is actually false. While most forms of income generated by a business are subject to taxes, some types of income may be exempt from taxation depending on your location and the type of business you run. Get tax advice from the tax experts now!
Corporate Tax Rates are Always Lower than Personal Tax Rates:
While this may seem like it should be true, this one is also a myth. Different businesses have different tax rates based on their legal structure as well as the amount of income they generate each year. It’s important to understand your own business’s specific rate so that you don’t overpay or underpay in taxes owed.
LLCs Have No Taxes:
This myth actually depends on the type of LLC you have. There are two types: single-member and multi-member LLCs. Single-member LLCs will pay personal income tax, while multi-member LLCs must pay corporate taxes in addition to whatever personal taxes the individual members owe.
You Don’t Need an Accountant to File Your Taxes:
Filing taxes as a business can be complicated and time consuming, so it definitely pays to have someone who knows what they’re doing handle your finances. Accountants will not only help ensure that everything is done correctly but they can also offer advice on how best to manage your taxes throughout the year in order to minimize any potential burden at tax time. Have questions about your business taxes or need help preparing them? Get Help Today!
Tax Deduction Don’t Matter:
Many small business owners falsely believe that deductions don’t make much of a difference in their taxes due at the end of the year. However, deductions can actually lead to significant savings and should absolutely be taken advantage of when available.
You Can Deduct Anything:
While it’s true that there are plenty of deductions available for businesses, not every expense is deductible. Be sure to do your research before claiming any expenses as they may not qualify or you may need additional documentation to back up your claims.
Business Losses Are Always Taxed:
If your business has suffered losses in the current year, this does not necessarily mean that you will be taxed on them. Depending on the type of business, your losses may be deductible or exempt from taxation in certain situations.
You Don’t Have to Pay Social Security and Medicare Tax:
This is a terrible myth! All businesses, regardless of size must pay these taxes for their employees as required by law. It’s important to understand what taxes you are responsible for paying so that you can remain compliant and avoid any potential penalties from the IRS.
Sales Taxes Don’t Apply to Online Businesses:
While this was true in some cases for many years, it no longer applies with the passing of the Wayfair decision in 2018 which requires online businesses to collect sales taxes in many states.
You Can Write Off Anything:
The last myth we will discuss is that you can write off anything related to your business as a tax deduction. This isn’t true and it’s important to understand the rules and regulations around deductions so that you don’t claim things that could get you into trouble with the IRS. Despite what you may have heard, you cannot write off everything, but that does not mean you can’t write off anything! Find out what you can do from tax experts!
The bottom line is that there are plenty of tax myths out there and it pays to be aware of them so that you can ensure your taxes are handled correctly. By understanding which ones are true and which ones aren’t, you can make sure your business remains compliant with all applicable laws while minimizing any potential financial burden. Have any questions? Feel free to contact Employee Tax Experts!