A small business owner usually has a lot to deal with. From managing customers to marketing and budgets – the list is almost infinite. Taxes add a big chunk to this plate. And as the Tax Due Dates for Tax Year 2021 are looming, tax filing deadlines and taxes themselves become a really big deal for e-commerce business owners, adding even more stress to their busy lives.
So it’s no wonder that the business tax season is a hot time for small business owners, just as it is for accountants. But is there a way to escape tax filing season disturbance? The answer is yes if you approach the 2022 tax filing deadline for the Tax Year 2021 preparation wisely.
The article below encompasses some basic tax due preparation aspects that e-commerce businesses have to take into account while they are getting ready for the 2022 tax season, in particular:
Read till the end to find a helpful table with all important 2022 Tax Deadlines for the Tax Year 2021!
How much do small businesses pay in taxes?
It’s worth noticing that your small business taxes may differ and highly depend on the form of business you operate. But generally, we speak about five types of taxes that apply to e-commerce businesses, such as income tax, self-employment tax, employment tax, excise tax, and estimated tax.
How to file income tax?
The income tax is the tax you pay on the net income that your e-commerce business received during the year (it’s the total income minus expenses). In most cases, the income tax is a federal tax. However, in some states, the small business income tax can be the local state tax and can be paid instead of the federal tax. So if you are unsure about what works for your state, don’t hesitate to inquire with your state authorities to clarify the matter.
How to file self-employment tax?
Usually, when we speak about self-employment taxes, we mean the taxes that sole proprietors, partners in a partnership, and LLC owners pay for Social Security and Medicare. The self-employment tax is based on the net income of the business. It’s an important tax that needs to meet the 2022 tax season deadlines for the 2021 tax year, as by paying it, you make your contribution to the social security system, which includes retirement benefits, disability benefits, survivor benefits, and hospital insurance benefits.
How to file employment tax?
If you have employees working for your small business, then you are obliged to pay the employment taxes. Such taxes include the Social Security and Medicare taxes, the federal income tax withholdings, and the federal unemployment tax. Please bear in mind that it’s your responsibility as a business owner to withhold these taxes from employees’ paychecks. The Social Security and Medicare taxes are paid by both employees and employers. And the federal unemployment taxes are a business owner’s burden.
How to file excise tax?
If your business comprises manufacturing or selling certain types of products, using various equipment, facilities, and goods (fuel, for example), or receiving payment for certain services, it’s your responsibility to pay the excise taxes. There are also excise taxes on activities, such as wagering or highway usage by trucks.
How to file estimated tax?
The estimated tax is the tax that you need to pay quarterly throughout a year as a business owner. The thing is, you don’t get paychecks, as your employees do, and still, you need to withhold income tax and self-employment tax from the money you get out of your business. Usually, the estimated tax form for e-commerce business owners combines business and personal income and taxes. It’s critical to pay this tax on time, as failing to do so may result in penalties from the IRS (and that’s definitely not something you are up to).
This is not a complete list of all the small business taxes, and I strongly encourage you to consult with the IRS official website for more information on business taxes that might apply to you to be fully ready for the tax filing deadline.
Tax-filling preparation in 5 steps
But before filing or paying your small business taxes, there’s a lot to do. Depending on how well you prepare your e-commerce business for the tax season 2022, the process can be quite placid or turn your life into total mayhem. Here are some small business tax preparation steps that you can take to make all the tax calculations, filing, and payments loads easier for you and a tax professional that may be helping you.
Tip #1 for filing your tax return: Collect your accounting records
Keeping accurate records throughout the tax year is a cornerstone you can’t do without when you plan and prepare your taxes. However, many e-commerce business owners don’t collect financial information regularly and often end up hectically bringing their business transactions data into books at the beginning of the tax season.
Automation software can be of great help in such cases. It gives you the opportunity to connect your sales channel or payment platform with your books and collect your accounting records, eliminating manual data entry from the process.
Tip #2 for filing your tax return: Carefully categorize your expenses
Simply put, small business tax deductions are the expenses that can be extracted from your taxable income if they comply with the IRS criteria for deductible expenses. We usually speak of ordinary and necessary expenses in this context, which means these are the expenses that are usual, helpful, and appropriate for your trade or business.
The list of deductible expenses is quite broad and, depending on the type of your business, may include the following:
- Business travels,
- Business meals,
- Business insurance,
- Use of your car for business purposes,
- Home office expenses,
- Education costs,
- Independent contractor fees,
- Bank or payment processor fees, and many more.
Tip #3 for filing your tax return: Ensure you have correct payroll records
As mentioned above, if you have employees working for your small business, it’s your responsibility as a business owner to withhold income taxes from your employees’ paychecks and take care of the Social Security and Medicare taxes. Thus, it’s drastically important to keep accurate payroll records in your accounting for the correct employment tax filing for the 2021 tax year.
Tip #4 for filing your tax return: Gather all the needed documents
Like many e-commerce business owners, you can decide to entrust preparing and filing your tax returns to a professional, be it a certified accountant or a tax preparer, etc. A good rule of thumb here will be to plan ahead and get all the necessary documentation prepared before scheduling an appointment. Moreover, such a tactic will help you build better relations with your tax specialist, leading to significant time and cost savings.
Though the list of required documents may vary depending on the type of your business, the minimal set of documents can be as follows:
- Last year’s tax return
- Financial statement
- Capital-asset activity
- Vehicle use/Home office expenses
📌 Check all the important dates for the 2022 tax season for the 2021 tax year at the end of the article!
Tip #5 for filing your tax return: Choose a tax preparer
Finally, geared with the up-to-date accounting data and the necessary documents, it’s time to look for a tax professional to help you with preparing and filing your taxes. As you trust a preparer with your most sensitive information, and your tax payments depend on the accuracy of filing your returns, you need to approach choosing a tax preparer wisely. Here are some tips to consider:
- Ensure that a tax preparer has a preparer tax identification number (PTIN) issued by the IRS;
- Make sure that you are choosing a preparer with the necessary level of skills, education, and expertise;
- Check the Directory of Federal Tax Return Preparers to look through the IRS-recognised tax specialists;
- You can also search for a specialist that belongs to one of the national organizations for tax professionals.
Done with that, it’s time for calculating and filing your taxes.
Small business tax filing deadlines for 2021 tax year
Nobody loves late payments, and the IRS is no exception, especially when the tax deadlines are breathing down your neck. Failing to file or pay your e-commerce business taxes can lead you directly to penalties. So, when preparing for the upcoming 2022 tax season for the 2021 tax year, you need to keep in mind the key due dates. Let’s take a closer look at them.
A list of the tax season 2022 Tax Day deadlines for the 2021 Tax Year:
|January 31||— the deadline for preparing all the documents (W-2 Salary income, 1099 Income, tax deduction related documentations)|
|April 15||— 2018 Tax Return IRS Refund deadline (the last date you can submit the return on paper if you still have not filed 2018 IRS Tax Return)|
— Quarter I deadline: prepare Form 1040-ES for Tax Year 2021 estimated tax payments
|April 18||— 2021 Tax Return Deadline (the date was changed due to the Emancipation Day in Washington DC)|
— 2021 State Return and IRS Income Tax Return
— prepare 2021 State Income Tax Return (without an IRS return)
— 2021 IRS Tax Return Extension
— 2021 State Income Tax Extensions
— 2021 Tax year IRS Tax Return Deadline
|June 15||— due date to pay IRS taxes for the US citizens who work and live abroad (can be paid online)|
|July 15||— Quarter II deadline: prepare Form 1040-ES for Tax Year 2021 estimated tax payments|
|September 15||— Quarter III deadline: prepare Form 1040-ES for Tax Year 2021 estimated tax payments|
|October 15||* — extension deadline for tax filing, after this date you can not e-file a 2021 Tax Return|
— 2022 IRS Tax Refund Estimate deadline
*You need to file a tax extension, otherwise you might become subject to tax penalties.
📌 Note: you need to prepare your Tax Amendments as well: State and IRS. For the 2021 Tax Year you can e-file Form 1040X by mid 2022, but do not use the same form for the IRS Tax Amendment. They usually have their own form.
Conclusion: How to prepare for tax filing season
Ideally, an e-commerce business owner needs to keep small business taxes in mind all year round. A wise and structured approach may help prepare business taxes much easier and make tax season 2022 less stressful for you. And usually, it comes down to keeping accurate accounting records throughout a year, making appropriate estimated tax payments, and finally, filing correct returns and making payments by the end of a business tax season. You don’t necessarily need to go through it alone – e-commerce business tax preparation is the time when you definitely need the help of an accountant or a tax advisor. However, a little advance preparation won’t hurt.
Hope this article’s given you a clearer idea of the steps you need to take before completing and submitting your 2021 tax returns!