Tax services are as crucial for small and mid-sized businesses as is the bookkeeping and financial analysis. Large enterprises might have a small team of expert accountants on board. However, that is not feasible for the approximately 99 percent of the total businesses in the USA that are small businesses. Therefore, small and mid-sized businesses tend to outsource to business tax service providers.
And that is a wise decision. The tax preparation services not only replace the in-house accountants but also bring quite advanced features to small companies. Experts say that every small and mid-sized business should outsource tax preparation and research to accounting firms. We will get to the bottom of this story and discuss why small companies must work with accounting services providers.
But first, let us explore the importance of tax service providers and the benefits they provide to businesses.
A company needs to share a significant portion of its earnings as income tax. However, that is not the only type of tax a business has to pay. In addition to the income taxes, the business must pay the taxes for employment, excise, property, etc. Let us go through each type of business tax in detail.
Individuals and businesses earning above a particular threshold amount are required to share a specified percentage of their income as taxes to the IRS. However, the income taxes they pay depend on their net income, type of employment or business, and the state or locality. A business can be of several types, such as:
Generally talking about small and mid-sized businesses, the company taxes are considered as personal taxes for the self-employed business owner unless the business is registered as a corporation. These types of companies can either be a sole proprietorship or a partnership. The taxes paid by the business owner depend on the net business income of the owner. For a partnership, taxes are calculated by evaluating the business income of each owner.
In the case of a corporation or limited liability company, the company’s liabilities, such as taxes and debts, are not directly in the name of the business owner.
However, the exact tax rates may vary and depend on the state in which the business is physically located.
This is also called Social Security and Medicare taxes. The taxes for social security and medical insurance are usually deducted from the paychecks of the salaried employees. However, for self-employed business owners, they need to pay their taxes for social security benefits and medical insurance. In the case of small businesses, the company taxes are directly filed in the name of the business owner.
Your business might have several employees, and you are required to pay their social security benefits and Medicare taxes. The employment taxes include various types of taxes such as payroll taxes, federal unemployment taxes, federal income tax withholding, etc.
A business often owns property such as real estate, vehicles, etc. Similar to how an owner is supposed to pay taxes for their property, the regional authorities, such as state or locality, require the businesses to pay property taxes. This tax is utilized for development purposes.
A business must not ignore estimated taxes and might be charged a penalty if they don't pay estimated taxes through withholding or estimated tax payments. Businesses need to pay their tax returns throughout the year if their estimated taxes are expected to be at least USD 1,000 when the tax returns are filed during the tax season. The total estimated taxes you pay will be used to pay the income and other taxes, and you’ll be generated a refund in case your payment exceeds the total taxes. Therefore, make sure to pay the estimated taxes through withholding or estimated payments lately, as paying them lately will result in a penalty.
A business needs to pay excise taxes when they manufacture and sell products specified by the IRS. Moreover, the business needs to pay excise taxes for running specific kinds of businesses or using different kinds of equipment facilities. The excise taxes are not limited to the above and also apply to environmental activities, fuel, communication, air transport, retail sales, etc.
Local taxes are a large umbrella of taxes demanded by the local authorities, which may cover taxes for property, sales, amusement, stamps, capital gains tax, etc. Therefore, the business needs to keep these miscellaneous local taxes in mind and ensure to pay them to prevent non-compliance.
In addition to income tax, business needs to pay payroll tax, excise tax, property tax, etc. Moreover, it should conduct tax research, cut tax costs, and prepare tax documents. That is a long and sophisticated process and begins with maintaining accurate records and accounts. Also, a company must stay compliant with the legal regulations at every step to reduce the risks of penalties and lawsuits.
Therefore, a professional tax service helps companies meet all the above mentioned requirements. Here are the top benefits a premium tax service provider offers:
Tax service providers help businesses keep accurate records and prepare error-free tax returns. These firms use accounting software that reduces human interventions and eliminates the maximum possibility of errors. Therefore, small and mid-sized businesses can prepare and file taxes more accurately.
Tax research is incomplete without a complete and in-depth analysis. The outsourced accounting firms have advanced technology at their disposal. With that, they generate powerful insights and conduct detailed tax research. This helps the client businesses better track the cash flow and cut tax costs.
Business tax planning is vital to minimize tax costs, reduce tax liabilities, and prevent non-compliance. Businesses need to pay several types of taxes, such as income, employment, and local taxes. The service providers help companies conduct proper tax planning to accommodate all kinds of taxes.
Strategic tax planning is also crucial for a business to benefit from tax deductions, breaks, and credits. Expertise in federal, state, and local tax regulations allows accountants to seek opportunities to reduce tax liabilities. The business tax services help the companies reduce the net taxable income and tax bill. This considerably cuts the expenses of the client companies and allows them to dedicate more capital to growth and profit.
Every step of the way, businesses operating in the United States must stay compliant with the legal regulations in the locality, state, and nation. Tax accounting firms help companies operate in accordance with the rules and prepare taxes accordingly.
Small, mid-sized, or large businesses may need to sort the tax obligations to the Internal Revenue Service and states. The tax service providers help the companies settle these obligations and come up with an alternative middle ground. This can include an agreement for installments, compromise, or a waiver on penalties or interests.
Business taxes can be time-consuming and require significant expertise to manage efficiently. Therefore, entrepreneurs and business owners must focus on other aspects and delegate the taxes to accountants. This is where we come into the picture.
We are accounting and tax services providers committed to simplifying business operations. For small and mid-sized businesses out there looking forward to outsourcing their business taxes, we are the best bet. However, we have more than just promises to prove our credibility.
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Unlike others, they are professional and always work hard to keep my business finances in order.
I can totally rely on them with my accounts, and I really think they care about what I am doing.
The team has a good knowledge of tax laws, and they've really helped me to avoid several mistakes.