According to the U.S. Census Bureau, 5.4 Million Americans applied for new business licenses in 2021 amid the continuing pandemic, “Great Resignation” and other crises.

Many new business owners will be facing their first tax season. Tax experts recommend that tax professionals be consulted by business owners.

Adam Markowitz is an agent in good standing and vice president of Howard L Markowitz PA CPA, Leesburg. “There is simply too much.”

This is what experts in tax say business owners need to know before filing 2021 taxes.

Learn more about Invest in You
When markets fall, investors should focus on what they can control: experts
How to rethink your budget to combat rising inflation
The American dream of the middle class isn’t what it used to be

Understanding your structure

New business owners must know how their company structure is before filing.

“A lot of” [the]Entrepreneurs don’t always understand how their businesses are taxed,” stated Sheneya Wilson (CPA) founder of Fola Financial, New York.

It is crucial because how your company structure affects the way you file. While most entrepreneurs are aware of whether they own a limited liability corporation, or LLC, they don’t always know if the company is a partnership, which means multiple owners, if there’s a single owner, and if it was previously an S corp.

Markowitz said that, “If you are a single member of a corporation you must file on Schedule C. If you are a multi-member you need to file as a partnership.” You should have made an election for Form 2553 and been confirmed by the IRS if you feel you are an S-corporation.

He said, “If they do not have IRS confirmation they are not an S Corporation.”

Scorporations that often include “Inc.” and “Corp.” must also file Forms 1120 or 1120-S. They can’t file Schedule C.

Because of the possibility that your company’s structure could impact your filing deadline, it is vital to remember this. Corporation returns must be filed by March 15, even though many return are due April 18.

Look for a professional who is experienced in your area.

This may all sound confusing. Most business owners — and especially new ones — should take the time to find a tax professional to guide them through this process.

However, it is not easy to find the right tax professional. Wilson advises entrepreneurs to narrow down their search for a tax professional by seeking out someone with expertise in their area of business.

She said that a tax professional with experience in the niche you are in will provide better services to help you maximize your tax profile. You can claim credit that could be used to get a refund and deduct your expenses properly.

Markowitz stated that it is possible to have a partner who is familiar with the laws of the particular state in which your company is located.

Markowitz suggests that you check with the local chamber of commerce and any CPA associations if it hasn’t been possible to find someone online.

After you have found professionals you are interested in working alongside, you need to thoroughly vet them. That includes looking at their education and experience — you should gravitate towards people who have earned either a CPA designation or are so-called enrolled agents.

To avoid any penalties, it is important to accurately file your business returns. The penalty for not filing a partnership return for a tax year is $210 per monthly multiplied times the number of partners for that year.

Markowitz said that this can easily add up to thousands. Markowitz says that if it is your first mistake like this, the penalty may not be applicable.

Make sure you have all your documents ready for when you need them

There are several things you’ll need to prepare your taxes once you have found a qualified professional.

This includes the Employer Identification Number (EIN), Articles of Incorporation, and Operating Agreement. Also, bring your financial documentation for your business including balance sheets and bookkeeping.