Statistics hint that small businesses outsource tasks like accounting 24% of the time to increase efficiency and 18% of the time to augment available expertise - which holds true for design firms as well.
The taxation process, due to its nature, has been stereotyped to be complicated and time-consuming. And tax season is even more daunting for a business in the design industry, where proficiency is focused on creativity more than numbers.
The last-minute rush and burning the midnight oil the hour before taxation deadlines will get the job done, but just about. This method increases the chances of inaccuracies, tallying mistakes, discrepancies, and missing documents.
To avoid getting flagged by the IRS and ensure that your taxation regime is streamlined, follow this guideline on tax filing for design firms.
Filing your returns on time not only prevents last-minute mayhem but also helps your design company reap various benefits. Here are a few compelling reasons to have a taxation regime to file tax returns for your firm:
Leaving enough time between preparing your tax statement and the filing deadline leaves some wiggle room to check for mistakes and make corrections.
It is important to submit an accurate statement to ensure your returns are initiated without any flags or hold-ups - because amended returns may attract audits.
Filing your taxes later than the due date accrues penalties on late payment and late filing. In essence, your design firm would get charged two late fees. So, to avoid paying more than what is necessary, filing taxes on time is important.
If your interior design or architecture firm is entitled to receiving refunds on tax, filing your returns on time will help you receive refunds sooner.
Tax season demands close attention from the IRS, which may cause delays in releasing refunds. But you can avoid this by sending in your paperwork before it is due.
Accountants, bookkeepers, and other tax professionals would be readily able to accommodate your request before the tax season begins, as they won't be held up with other companies' returns.
Getting a head start on filing taxes is possible with a premier bookkeeping service like Fincent.
Preparing your tax statements early gives you the opportunity to look at deductibles such as property taxes, business expenses, etc. This way, you can adjust those taxes in your statements and maximize your savings.
In light of the 2020 pandemic, the incomes of many businesses were impacted adversely. The American Rescue Plan was brought into law on May 11, 2021, to help these companies stay afloat.
The plan included provisions of tax exemptions (in unemployment compensations) and a reduction in insurance premiums of Affordable Care, triggering certain changes in the final tax filings for many businesses.
As a result, the deadline for filing federal income tax returns was moved to May 17, 2021. For S and C corporations, this deadline remained unchanged at March 15, 2021, and April 15, 2021, respectively.
Keep the following tax due dates in mind to ensure your design firm is filing taxes before they are due.
Estimated tax payments are supposed to be submitted quarterly for most businesses and self-employed persons. An income tax return is submitted annually, and the dates depend on the type of corporation or firm your design company is registered as.
March 15, June 15, September 15, and December 15, 2021, are the quarterly due dates for submitting income tax returns and subsequent quarterly estimated installments for corporations and S corporations.
If your firm withholds payroll taxes, you are required to submit documents semi-weekly or monthly. This includes federal income tax, federal unemployment tax, and Medicare withholdings, all of which need to be reported quarterly or annually.
Documenting these deposits is necessary, along with distributing year-end tax documents to the employees of your design firm. The key dates to remember are April 30, July 30, October 29, 2021, and January 31, 2022.
Efficiency in filing taxes translates into savings in terms of time and effort. Here are some handy tips to employ so you always submit accurate returns.
On the day that you submit your statement, all the bank or card accounts of your business must be checked and tallied. If you miss out on something, it may need to be adjusted later, which isn't favorable in terms of IRS standards.
The most accurate tax documentation reflects accounts receivable as the invoices actually cleared (and payment received) and accounts payable as money actually paid.
Deferring accounts must not be shown on a statement to avoid incurring surplus taxes or benefits. Therefore, ensure that all the dues are cleared at both ends before a tax form is filled up and submitted.
All the line items in your income tax returns form need to be double-checked and cross-checked to make sure that every little expense is accounted for.
In some cases, certain expenses get missed on the records due to the misplacement or loss of receipts. This can cause discrepancies in the filings, so always stay on top of your books.
About a fortnight before the due date, present your prepared statement to a tax professional or an accountant to check and review. In case something was missed or incorrectly filled, the professional will point it out for you, giving you enough time to make the corrections.
For C corporations and S corporations, income tax return forms differ slightly:
- If your design firm is classified as a C corporation, you will need Forms 1120 and 1120-W for filing returns and quarterly tax estimates.
- If you are an S Corporation, you will need Form 1120-S for income tax returns. Should your firm need an extension, fill out Form 7004.
For Employer's Taxes, you need to fill out the following forms:
- Form 941, FUTA return
- Form 943 Employer’s Annual Federal Tax Return for Agricultural Employees
- Form 944 Employer’s Annual Federal Tax Return
- Form 945 Annual Return of Withheld Federal Income Tax
You may need a tax professional to guide you if there are any more forms to be filled out based on sales taxes or any other charges.
While taxation is complicated, it isn't necessarily difficult. If a firm is ready to keep the threads sorted from the get-go, the tax season becomes easier to handle. Use these handy tips to make sure that your design firm tax return follows a healthy regimen.
Apart from these basics, the bookkeepers at Fincent can help you further. Crafted for companies in the design industry, we collaborate closely with you to manage your books, make important financial decisions for your business, and file your returns on time.
Learn how our modern bookkeeping services take the stress out of accounting and empower you to create and thrive.