Navigating the tax season is daunting for all organizations, regardless of size. Tax season marks a critical time of the year when two things can happen: proper planning can result in unexpected savings, or a failure to prepare can result in unnecessary payments, fines, and even legal issues. With that in mind, let’s examine a few relevant tax tips for B2B LLCs.
The tax planning process of a B2B LLC will vary based on many different factors, such as what they sell, where they sell it, and the nature of their business. But, in general, there are a few factors that almost all B2B LLCs need to watch for. To start, there are five common taxes that Wolter Kluwer recommends being prepared to pay:
Your company’s tax implications will vary greatly depending on which states/countries you operate in – an issue that has grown even more complex since the advent of the internet. This is why hiring a team of tax professionals to assist in your tax planning is always advisable. As experts in that field, tax professionals will be able to identify key ways to reduce your tax liability while still staying compliant with all tax regulations.
Businesses, unlike employees, must pay quarterly taxes – even if the business is a single-member LLC. Failure to pay your taxes each quarter can result in penalties and interest that add up with each subsequent quarter. According to Bank of America, there are two common types to calculating quarterly estimated tax payments:
To start, paying quarterly taxes can be a stressful process that makes it feel as though you’re paying a lot more in taxes. But, once you’ve gotten into the flow of paying, then this will just become another aspect of your business’s functions.
One of the most significant aspects of filing taxes for B2B LLCs is knowing expenses are deductible. By reducing applicable deductions from your revenue, you’ll be able to reduce your taxable income and lower the total amount that you pay in taxes. There are dozens of potential deductions that may apply to your business. But, you should always speak with a tax professional to ensure that certain deductions are legal for your business.
With that said, here are a few of the most common deductions to be aware of:
Business Expenses
Deductible business expenses include costs directly related to running the business, such as office supplies, rent, utilities, and insurance. This also includes costs associated with maintaining a physical business location, including lease payments and utilities.
Travel Expenses
Expenses related to business travel, such as airfare, lodging, meals, and transportation, may be deductible. Be sure to keep detailed records, including receipts and documentation of the business purpose for each trip.
Vehicle Expenses
LLCs may deduct expenses related to business use of vehicles, including mileage, fuel, maintenance, and insurance. Keep accurate records of business-related vehicle usage.
Professional Services
Fees paid to professionals, such as accountants, lawyers, and consultants, are generally deductible. However, these services must be directly related to the operation of the business.
Advertising and Marketing
Costs associated with advertising and marketing the business, including online ads, print materials, and promotional events, are deductible.
Employee Benefits
Contributions to employee benefit plans, such as health insurance and retirement plans, may be deductible. But, be sure to understand the rules and limits associated with these contributions.
Interest Expenses
Interest paid on business loans or credit cards used for business purposes is typically deductible. You’ll need to ensure that the debt is directly related to the business.
Depreciation
Depreciation allows businesses to deduct the cost of assets (such as equipment or property) over time. Consult with a tax professional to determine the appropriate depreciation method.
Home Office Deduction
If a portion of your home is used exclusively for business, some home-related expenses may be deductible, such as mortgage interest, property taxes, and utilities.
Legal and Professional Fees
Fees paid for legal advice, accounting services, and other professional services related to the business are deductible.
Research and Development Expenses
B2B LLCs involved in research and development activities may be eligible for tax credits or deductions related to these expenses.
Charitable Contributions
Contributions made to qualified charitable organizations may be deductible as business expenses.
To keep track of what you are deducting each year, it’s critical to maintain a complete and in-depth record of your operations. This will make your life much more manageable once tax season rolls around. A few of the most common ways to do that are: