By DONALD WILLIAMS
Williams Accounting & Consulting
Over the past decade, entrepreneurship has been on a steep incline, which was further accelerated by the events of the COVID-19 pandemic. The U.S. Census Bureau reported that approximately 5.4 million businesses were created in 2021 alone, trumping the 4.4 million businesses that were created in 2020, which was the hardest year for businesses during the pandemic.
Unfortunately, the more new businesses that are created, the more opportunities there are for these fledging business owners to make simple mistakes that could deal a hard blow to their new venture later on down the road. And one area that a lot of new entrepreneurs seem stumped is their taxes.
Without guidance, it’s easy for new entrepreneurs to make the mistake of filing their business taxes the same way they file their personal income taxes in the past. Not too long ago, most taxpayers were rushing to complete filing their taxes by the federal deadline of April 18.
However, for businesses, tax season doesn’t end on April 18, it’s an ongoing process that happens quarterly.
With businesses, taxes are filed quarterly and this year April 18, June 15, Sept. 15 and Jan. 17 of next year, are the deadlines for businesses to file their taxes.
With over 20 years of experience in accounting, Williams provides financial advice and services to individuals and businesses from his locations in Atlanta and New Orleans.
Normally, an individual who is an employee receives a W-2 form at the beginning of the year which shows the earnings that their employer took out throughout the year, which is known as that person’s estimated taxes. In this case, the employer withholds the individual’s taxes and pays them to the Internal Revenue Service for the individual based on an estimate, and anything over is given back in a tax return. However, businesses pay taxes quarterly and are responsible for calculating exactly what they own the IRS.
It is very common for businesses to find themselves in tax debt due to what is called the estimated tax trap. Most of the time, these businesses are actually paying taxes, but not correctly. Without following guidelines, they are miscalculating what they owe which can lead to a hefty surprise tax bill from the IRS later on down the road.
In 2020, the IRS reported that it was owed almost $400 billion in taxes, with the number one cause being “owing more than expected on taxes.”
This is exactly why people need accountants, not just businesses but individuals also. We are here to help. The average person is not only is unable to handle their own taxes, but there are a lot of guidelines, benefits and changes that they’re not aware of. This goes for business owners as well.
If you’re an individual or a business owner and you don’t have an accountant, you’re really shooting yourself in the foot. It’s unfortunate that many people allow themselves to either go into tax debt all because they won’t bother to hire an accountant.
There are a lot of new business owners on the scene and a lot of them are going to end up paying more in the long run, because eventually, they’re going to be forced to hire an accountant to clean up the mess they’ve made for themselves.