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Did you start your own business in 2021? Here's what you need to know before you file your taxes

2022-03-09T13:52:15.148Z


The US received a record 5.4 million applications to start a company last year. Experts advise that these new entrepreneurs seek professional help.


Carmen Reinicke -

CNBC + Acorns

In 2021, amid the pandemic and the Great Resignation, Americans filed a record 5.4 million applications to start new businesses, according to data from the US Census Bureau.

That means many new business owners are facing their first tax filing season.

Although many people can file their personal returns on their own, tax experts strongly advise that business owners seek professional help.

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"Don't go it alone," suggested Adam Markowitz, a registered agent and vice president of Howard L Markowitz PA, CPA in Leesburg, Florida.

"There is too much to do," he said.

Here's what tax experts think new business owners should know before filing their 2021 taxes.

Understand your business structure

One of the first things new entrepreneurs should know before filing is how their business is structured.

“A lot of times, entrepreneurs don't understand the default taxation of their business,” said Sheneya Wilson, an accountant and founder of Fola Financial in New York.

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This is important because the structure of the company determines how it is declared.

Most entrepreneurs know if they have a limited liability company, or LLC, but they don't know if their business is a partnership (meaning multiple people own the business), if they are a single member, or if they previously chose to be a partnership.

S Corporation

(small business).

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March 8, 202201:34

“If you are a single member, it is presented in an Annex C;

if you're a multiple member, you show up in a partnership,” Markowitz explained.

If you're an

S Corporation

, you should have made an election on Form 2553 and received confirmation from the IRS, he added.

“If they don't have confirmation from the IRS, they're not an

S Corporation

,” he recalled.

Also, companies created as

S Corporations

, which often have “Inc.”

or “Corp.”

on their behalf, they need to file Form 1120 or Form 1120-S;

they cannot file a Schedule C.

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This is important because the way you have structured your business may change the filing deadline.

While most filings are due April 18, corporate filings are due March 15.

Find a professional in your area

If all of this sounds confusing, it is.

Most business owners - and especially new ones - should take the time to find a tax advisor to guide them through this process.

However, finding it can be overwhelming.

Wilson recommends that entrepreneurs narrow their search to people who have experience in their area of ​​business.

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“A tax advisor who has business area experience will serve you best to make sure you are maximizing your tax profile,” he says.

That includes helping you correctly deduct expenses and claim credits that could get your business reimbursed.

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You may also want to work with someone who has experience in the state where your business is located, because sometimes there are local regulations.

If you haven't had any luck finding someone online, Markowitz recommends checking with your local chamber of commerce or any local CPA organization.

This article is part of the 

Invest in You Ready series.

Set.

Grow

 (Invest in you: Ready. Ready. Grow), an initiative of CNBC and Acorns, the micro-investing app.

NBC Universal and Comcast Ventures are investors in 

Acorns

.

Source: telemundo

All news articles on 2022-03-09

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