Tax Preparation Tips for Small Businesses

Tax tips for businesses

Do you own a small business? Trying to educate yourself in terms of how to prepare for the tax season? If so, you are also probably asking yourself a number of questions, such as whether or not you should try to handle all of your tax-related matters yourself as well as how can you reduce your company’s chances of being audited by the IRS? Here are some tax preparation tips for small businesses to help you on your way.

Make the Most of It

It is possible to really take advantage of your tax deductions and credits if you make the effort to keep track of them throughout the year. Deductions that you can take into account include items like business furniture, supplies for the office, and start-up expenses.

Invest

You will quickly come to find that keeping track of all the necessary numbers and information necessary for small business tax is time-consuming and demanding. This is why it can be a much better idea to invest in software to do it for you. There is also an array of useful apps available for a fraction of the cost, which can also help to streamline these processes.

Research the Forms

There are a lot of different tax-related forms that you should familiarize yourself with upon first starting your small business. Doing so will save you a lot of time in the future! Most importantly, you’ll want to know which ones are relevant to your business based on its type. For example, sole proprietors will need to attach a Schedule C to their personal income tax return, while corporations will need to use a Form 1120 or 1120S.

Looking for professional assistance when it comes to tax requirements for your small business? Look no further than the experts at Georgen Scarborough Associates PC. Contact us for more details today.

Is Your Non-Profit Board in Compliance with IRS Regulations?

Having proper due diligence when it comes to IRS regulations will minimize the legal liability of board members. Having a financial committee on your board or a 3rd party accounting service can help you to keep up with the records. Board members should have an understanding of IRS regulations and limitations under Section 501(c). Abiding by these regulations, along with filing proper documents, will help an organization stay in compliance with IRS tax-exempt status.

How Are Nonprofits Monitored, Regulated, and Governed?

Nonprofits can occur damage caused by fraudulent solicitors, financial improprieties, as well as executives and crooked board members. Nonprofits can engage in revenue-generating activities that result in annual surpluses or profits. Nonprofits must reinvest surpluses back into the organization and its tax-exempt purpose. Excess revenues may not be distributed to individuals affiliated with the organization.

Ideally, the founders and/or persons who oversee the operation of your Nonprofit serve as its board members. In most states, one person may serve as the sole director for incorporation purposes. However, when submitting a 501(c)(3) application or another type of tax-exempt application, the IRS almost always requires at least three distinct individuals to serve on the board of directors. 

Is My Organization Tax Exempt Once I File My Nonprofit Articles of Incorporation?

No. Nonprofit status is granted by your state but tax-exempt status is granted at the federal level by the IRS. You must complete a separate IRS application to be granted tax-exempt status at the federal level.

Can I Still Be A Nonprofit If I Don’t Apply For Tax Exempt Status?

Yes, you are a nonprofit corporation once you are filed with the state. However, your corporation will still be liable for federal (and possibly state) income taxes. Donations made to your nonprofit will not be tax deductible without tax-exempt status. Further, it may also be difficult to obtain grants if you are not a 501(c)(3) organization.

Does the IRS Require Salary Information for Tax-exempt Status Applications?

The IRS wants to know what percentage of the overall budget is devoted to salaries. If salaries are large, the IRS may determine the Nonprofit is actually benefiting the salaried directors, not the Nonprofit’s programs. The IRS wants to see how much each board member is paid. Nonprofit applications must justify why these directors are being paid this amount. If the amount is too high, the IRS will probably ask you to provide justification for the salaries.

People who are being paid by the Nonprofit are also considered “interested” persons. If a majority of the board members are compensated, the IRS perceives a risk of pay increases spiraling out of control.

How Much Does It Cost to Submit My Tax Exempt Status Application to the IRS?

The IRS charges a one time fee to review and approve your application. The filing fee is based on your projected budget. If you expect annual revenues of $10.000.00 or less in your Nonprofit’s first three years, the filing fee will be $275.00. For an organization whose projected revenues exceed $10.000.00 per year, the filing fee will be $600.00. The IRS may still ask you to pay the higher filing fee based on their review of your budget and proposed activities. If your budget and activities do not match, the IRS will instruct you to revise and resubmit your application with the higher filing fee.

 Georgen Scarborough Associates, PC for Your Accounting Needs

At Georgen Scarborough Associates, PC we have never wavered from our commitment to give each client the personal attention they deserve. We also utilize the latest in technology for financial and accounting services, including NetClient CS. This secure online software package puts write-up, trial balance, tax, and accounting software on a single platform, creating powerful password-protected connections with our clients. It’s a tested, proven approach that combines powerful functionality and unprecedented collaboration capabilities into an unparalleled package.

For more information on IRS Regulations for your non-profit organization, contact us today.