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Published on: 02/26/2024 • 6 min read

8 Benefits of Small Business Tax Accounts

From remaining profitable in day-to-day operations to small business retirement planning, staying on top of your business taxes are essential in every organization at every step, and are no less important — or less complicated — for small businesses than they are for larger ones.

Small business tax accounts can be an incredibly useful tool for maintaining and tracking crucial financial information for your business. Business tax accounts are used to manage essential aspects of the business’s tax obligations, including income tax, sales tax, payroll tax, and other taxes that may apply to the operation of the business.

The financial professionals who develop tax planning strategies at Avidian Wealth Solutions are here to share some key points related to small business tax accounts.

Benefit #1: income tax calculation

Businesses typically maintain records of their revenue, expenses, and profits in their tax accounts. This information is essential for calculating and paying income taxes, whether corporate income tax for a company or personal income tax for sole proprietors and partnerships.

Benefit #2: sales tax tracking

If the business is involved in selling taxable goods or services, it may need to collect and remit sales tax. The tax account helps track the sales tax collected and owed to tax authorities.

Benefit #3: help with payroll tax obligations

For businesses with employees, payroll tax obligations are significant. The tax account may include records of employee wages, withholding for income and payroll taxes, and employer contributions.

Benefit #4: quarterly and annual reporting

Many businesses are required to file periodic reports and tax returns throughout the year. These returns summarize the business’s financial activities and calculate the taxes owed. The information in the tax account is crucial for preparing these reports accurately.

Benefit #5: record-keeping

Keeping thorough and organized records in the tax account is essential for complying with tax laws and regulations. It can also be helpful in case of audits or inquiries from tax authorities.

Benefit #6: estimated tax payments

Some businesses are required to make estimated tax payments throughout the year. The tax account keeps track of these payments and ensures that the business meets its tax obligations on time.

Benefit #7: tax deductions and credits

Businesses often use their tax accounts to track deductions and credits that can reduce their overall tax liability. This includes expenses that are deductible for tax purposes and any tax credits for which the business qualifies.

Benefit #8: financial planning

Business tax accounts can also be a valuable tool for financial planning. They help businesses understand their tax liability and can inform decisions on managing cash flow and minimizing tax exposure.

FAQs about small businesses and taxes

Whether you’re a seasoned business owner or are just starting out, understanding the nuances of your tax obligations is an essential ingredient to financial success. 

You should have a detailed list of questions to ask your financial advisor when meeting for the first time about your small business tax account, but some of the most high-level and common questions we get are as follows. 

Can you set up an IRS account for a business?

Setting up an IRS account for your business is a necessary early step towards ensuring compliance with tax regulations and streamlining your filing process. The IRS provides online tools and resources that allow businesses to manage their tax obligations efficiently.

To create an IRS account for your business, you can use the IRS’s online platform, which provides a secure and convenient way to access services. Having an IRS account for your business offers several benefits, like allowing you to e-file tax returns, make electronic payments, check the status of your refunds, and communicate with the IRS about any inquiries or concerns. 

Additionally, an online IRS account helps you stay organized by providing access to your tax history and documentation. Setting up an IRS account for your small business can help keep your business compliant with tax regulations, avoid potential penalties, and provide a centralized platform for managing your tax-related activities.

Can you get a tax refund if you own your own business?

Businesses don’t typically receive tax refunds in the traditional sense. Instead, they may benefit from tax credits, deductions, or carryovers that can reduce their overall tax liability.

You may qualify for a number of tax credits that exist at both federal and state levels, and can also utilize deductions for things like operating costs, equipment purchases, employee salaries, and other necessary spending. A combination of credits and deductions will ultimately go a long way in lowering your taxable income and, therefore, your overall tax liability.

Working closely with a small business CPA in Houston can help you to identify available credits and deductions, which can be difficult to find and apply without professional knowledge, and help keep you in compliance with complex tax laws and regulations. 

Do small businesses pay federal taxes?

All businesses (excluding partnerships, who file information returns) file annual income tax returns. The federal income tax is pay-as-you-go, which means that you pay the tax as you earn revenue throughout the year. If you don’t pay the federal income tax through withholding you may be required to pay estimated taxes.

Continue reading about unrealized gains and the capital gains tax in Texas

How do I know if my business owes taxes?

Even if you haven’t set up a small business tax account, there is a chance that you already owe the IRS. There are a few ways to find out how much. 

  1. You will receive written communication from the IRS in the form of a mailed notice. 
  2. You can log into your online tax account. If you have not set one up, you should do so (or have an accountant do so) as soon as possible. 
  3. You can file your tax return. The IRS will let you know what you owe them during the processing of your annual filing. 
  4. You can contact the IRS directly and ask. Although reaching a real person at the IRS is not always the easiest thing, they are available 24 hours a day by calling 800-829-1040.

If you’re not sure where your small business stands from a tax perspective, you should contact a tax professional who can assist you with small business tax account management. 

Your business could benefit from a small business tax account

Like running a business, maintaining and using small business tax accounts to the limits of their potential can involve a significant amount of work. However, utilizing your business tax account to the fullest extent can be necessary for keeping your small business organized, efficient, and in compliance with tax laws and regulations. 

If you’re curious about opening a business tax account, and what it would take to maintain it, Avidian Wealth Solutions offers tax planning in Houston, Austin, Sugar Land, and The Woodlands.

If you’re interested in hearing about what our wealth management for business owners services can offer for both your business and personal financial lives, schedule a conversation with one of our advisors today!

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