A small business can be anything really, from a hairdresser to a hardware store to a bakery or IT business. What defines them is that they are independently owned, have a small workforce, and require less capital to run.
Business tax is always charged on the profits of a company. Small business owners pay tax on Schedule C and when filling in these forms, most small businesses wonder if their business is entitled to a tax refund.
Excess money paid to the federal government
If you get a tax refund, it simply means you overpaid your taxes last year. So essentially, the IRS will give your business a refund if it overpaid their estimated taxes during the year.
The business paid more in estimated tax to the IRS than what it owed. But it’s not always a good thing. As an example, Rob, who is self-employed, paid $ 30,000 during the year to the IRS in estimated taxes. Completing his tax return, he discovers he owes $20,000 in taxes.
The IRS then returns Rob $10 000 as a tax refund, but they don’t pay interest on the surplus amount. In effect, Rob gave the IRS an interest-free loan of $10 000. To steer clear of dishing out interest-free loans to the IRS, you want to avoid paying more in estimated taxes than you owe and you need to understand the estimated tax rules.
Get help with reducing tax liability
It goes without saying that most people will be pleased to get a refund, but a refund is because you had too much tax withheld from your income. It pays to talk to a tax professional to ensure you’re paying the right amount.
There are a number of reasons a taxpayer may get a refund. It could even be that the taxpayer made an error in filling out the IRS forms, bringing on frustration and complications trying to deal with the IRS.
Tax resolution company Fortress Tax Relief brings relief as the financial services company takes on the IRS on your behalf, intervening with ruthless tax authorities to solve most tax liability issues. Tax relief like this is designed to reduce the tax liability of small businesses.
Tax refunds aren’t written in stone
Small businesses always ask tax practitioners if they can expect a tax refund. A small business only receives a refund when they have paid more tax than was due on their return. There are different types of taxpayers and different businesses, and these things determine a business’s tax refund eligibility.
Certainly, getting a tax refund can make a significant difference to small business owners. There are many small businesses where income is passed through the owners. They are taxed on their individual tax returns and pass taxable income to the owner. In other words, they don’t pay tax directly to the IRS and don’t receive an income tax refund.
Type of taxes you pay
Tax is complicated, and the type of taxes you pay could also result in a tax refund for your business. Regardless of entity type, if your business withholds and pays payroll taxes, for instance, if your account is overpaid, you could receive a refund.
Many businesses are subject to excise taxes and an overpayment of these taxes could result in a refund to your business. The bottom line is that if you have paid more than your actual tax liability, you’re up for a refund. If you are still unsure of how your business is being taxed or if it should be lined up for a tax refund, you shouldn’t hesitate to get help.