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. 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, especially when you need to deal with all this manual data entry and reconcile the accounts without any discrepancies. But is there a way to escape tax filing season disturbance? The answer is ‘yes’ if you approach the upcoming 2023 tax filing deadline for the Tax Year 2022 preparation wisely.
The article below encompasses some tax tips and basic tax due preparation aspects that e-commerce businesses have to take into account while they’re getting ready for the 2022 tax season, in particular:
- Business taxes you need to pay as an SMB;
- Tax filing preparation in 5 steps;
- Small business tax due dates.
Read till the end to find a helpful table with all important 2023 Tax Deadlines for the Tax Year 2022!
- How to file income tax?
- How to file self-employment tax?
- How to file employment tax?
- How to file excise tax?
- How to file estimated tax?
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;
- 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’re unsure about how you need to file your income tax and how it works for your state in general, don’t hesitate to inquire with your state authorities or professional tax preparers to clarify the matter.
How to file self-employment tax?
Usually, when we speak about tax prep for 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 be filed before 2023 deadlines for the 2022 tax season, 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’re 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’re up to).
This isn’t 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 to file all the necessary taxes before the deadline.
Tax preparation tips: How to prepare 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 2023 taxes due dates, the process can be quite placid or turn your life into total mayhem. Here are some small business tax preparation tips that you can take to make all the tax calculations, filing, and payments loads easier for you and a tax preparer that may be helping you.
Tax preparation tip #1: 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 when working with money. 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.
Try Synder’s free trial without applying your credit card details or any additional costs to see how the workflow can be managed in just a few clicks. For example, you can connect Stripe with QuickBooks or get the advantage from Shopify QuickBooks integration (it can be any other source you use to handle your business transactions). With Synder’s easy cash flow management, you can connect all the sources you’re using when working with the customers so that there’s no mess with the money in your books at the end of the month.
It suits both:
- Accountants working with their clients;
- Business owners.
Tax preparation tip #2: Carefully categorize your expenses
Properly collecting and categorizing your business expenses is critical for your small business tax preparation, as it can significantly reduce your tax load with applied tax deductions.
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.
|Quick note: When working with Synder as a bridge between the platforms, you can utilize automated categorization rules that’ll do all the work for you. Particular transactions will go right by the path you’ve created in an easy-to-use block-chain system (Synder also has free templates) as soon as the sync is done. Check more about the categorization feature by reading our article 👉 Click here.|
Learn how Synder helps to record Canadian taxes correctly with the help of automatic categorization.
Tax preparation tip #3: 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 upcoming tax season.
Tax preparation tip #4: Gather all the needed documents
Like many e-commerce business owners, you can decide to entrust preparing and filing your tax return form to a tax preparer, 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 upcoming tax season in 2023 for the 2022 tax year at the end of the article! 👇👇👇
Tax preparation tip #5 for filing your tax return: Choose a tax preparer
Finally, geared with the up-to-date accounting data and necessary documents, it’s time to look for a tax professional to help you prepare and file your taxes. As you trust a preparer with your most sensitive information, your money, 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’re 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.
When you’re done with that, it’s time to calculate and file your taxes.
When are 2022 taxes due?
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 2023 tax season for the 2022 tax year, you need to keep in mind the key due dates. Let’s take a closer look at them.
Important deadlines for 2022 tax season in 2023
On the 1st of January 2023 2022 tax season begins for everyone. So here’s a list of the tax season calendar for 2023 based on the draft variant the IRS provided in September, 2022. Remember that these dates aren’t final, but you can keep them in mind to prepare for the upcoming tax season and plan when to file the taxes.
General Tax Calendar:
|January 17, 2023||— (individuals) Make a payment of your estimated tax for 2022 if you didn’t pay your income tax for the year through withholding (or didn’t pay enough tax that way). Use Form 1040-ES. |
* You don’t have to make this payment if you file your 2022 return (Form 1040 or Form 1040-SR) and pay all tax due by January 31, 2023.
|February 15, 2023||— (individuals) Refile your Form W-4 from the last year|
|March 15, 2023||— (partnerships) File a 2022 calendar year return (Form 1065). |
— (S corporations) File a 2022 calendar year income tax return (Form 1120-S) and pay any tax due.
|March 31, 2023||— Electronic filing of Forms 1097, 1098, 1099, 3921, 3922, and W-2G.|
|April 18, 2023||2022 Tax day|
— Q1: (individuals) File a 2022 Form 1040 or Form 1040-SR and pay any tax due.
* If you’re not paying your 2023 income tax through withholding (or won’t pay enough tax during the year that way), pay the first installment of your 2023 estimated tax. Use Form 1040-ES.
— (corporations) File a 2022 calendar year income tax return (Form 1120) and pay any tax due.
* Deposit the first installment of estimated income tax for 2023.
|June 15, 2023||— Q2: (individuals) Make a payment of your 2023 estimated tax if you’re not paying your income tax for the year through withholding (or won’t pay enough tax that way). Use Form 1040-ES. |
— (corporations) Deposit the second installment of estimated income tax for 2023.
|September 15, 2023||— Q3: (individuals) Make a payment of your 2023 estimated tax if you’re not paying your income tax for the year through withholding (or won’t pay enough tax that way). Use Form 1040-ES. |
— (partnerships) File a 2022 calendar year return (Form 1065).
— (S corporations) File a 2022 calendar year income tax return (Form 1120-S) and pay any tax, interest, and penalties due.
— (corporations) Deposit the third installment of estimated income tax for 2023.
|October 16, 2023||* — extension deadline for tax filing, after this date you can’t e-file a 2022 Tax Return|
— (individuals) If you have an automatic 6-month extension to file your income tax return for 2022, file Form 1040 or Form 1040-SR and pay any tax, interest, and penalties due.
— (corporations) File a 2022 calendar year income tax return (Form 1120).
|December 15, 2023||— (corporations) Deposit the fourth installment of estimated income tax for 2023.|
*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 2022 Tax Year you can e-file Form 1040X by mid 2023, but don’t use the same form for the IRS Tax Amendment. They usually have their own form.
You can look through the comprehensive version of the calendar by checking IRS publication 509 (Draft). We’ll update the dates as soon as the official calendar is released.
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 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 2022 tax returns!