<p>Choosing between a member-managed and a manager-managed LLC is a pivotal decision in forming your business. In this blog post, we'll break down these structures, guiding you to make the choice that best aligns with your business's needs and objectives.</p>



<p>This read will highlight the benefits of a manager-managed LLC, the nuances of LLC taxation, and how your business size impacts your choice. You'll learn how expert assistance can ease these complexities, allowing you to focus on your core business. Continue reading to uncover insights that could transform your business's future.</p>



<h2>What is a Manager-Managed LLC?</h2>



<p>There are two management structures you can choose when forming an LLC: member-managed LLC or manager-managed LLC.</p>



<p>With a member-managed LLC, all members – or owners – equally participate in the daily operations of the company.</p>



<p>On the other hand, a manager-managed LLC enables only certain members or even third-party non-members to have the authority to operate the business. Unless your state has restrictions, a manager can be an entity such as a corporation or another LLC.</p>



<p>If you want your business to become a manager-managed LLC, you must explicitly state your selection in your <a class="link" href="https://1800accountant.com/blog/operating-agreement">operating agreement</a>. Otherwise, the state will classify your business as a member-managed LLC by default.</p>



<h2>Reasons for Choosing a Manager-Managed LLC.</h2>



<p>Among small businesses, a member-managed LLC is a more popular choice over a manager-managed LLC. There are situations, though, where a manager-managed LLC may be more suitable. Two main reasons for forming a manager-managed LLC are:</p>



<h3>Passive Members </h3>



<p>Passive Members who lack management experience or wish to solely be an investor are considered passive members because they do not engage in day-to-day business duties. Since passive members are not a part of the decision-making process, they have less liability than active members. Therefore, if your business includes passive members, then choosing a managing member or third-party non-member to run the entity might be the best option.</p>



<h3>Size of Your Business</h3>



<p>If your business is too large or complex, sharing management responsibilities among all members can be impractical. By selecting one or more members or non-members to perform day-to-day operations, you can allow your business to run more efficiently. Also, this lets all members focus on their specific areas of expertise and the responsibilities that matter to them.</p>



<h2>Manager-Managed LLC Taxes</h2>



<p>Taxation for your business depends on how many members you have in your LLC.</p>



<p>If you operate a single-member LLC, then you are not required to file a separate tax return for your LLC. Instead, you report your business’ profits and pay taxes on your personal tax return, which is <a class="link" href="https://1800accountant.com/blog/how-to-fill-out-form-1040">Form 1040</a> with <a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank" rel="noreferrer noopener">Schedule C</a> attached.</p>



<p>For a multi-member LLC, you must report your business’ income on&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1065.pdf" target="_blank" rel="noreferrer noopener">Form 1065</a>. Then, you and each member of your LLC need to fill out Schedule K-1, which reports each member’s share of income, losses, deductions, and credits. The amounts on&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf" target="_blank" rel="noreferrer noopener">Schedule K-1</a>&nbsp;are taxed and paid on each member’s personal tax return.</p>



<p>For both single-member and multi-member LLCs, you have the option to be taxed as a C corporation or S corporation. First, you must elect to be taxed as a corporation via&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f8832.pdf" target="_blank" rel="noreferrer noopener">Form 8832</a>. Once you complete that form, you must report your income on Form 1120 or Form 1120S.</p>



<p>Managing members of your LLC are required to pay self-employment tax. However, passive members are not subject to this tax. This law is a bit complicated, but if you are an active member, you can expect to pay self-employment tax.</p>



<p>If you hire a non-member to manage your business, that person is considered an employee. This means payroll taxes must be withheld from his or her wage.</p>



<h2>Work with the Experts</h2>



<p>Choosing the right LLC structure is critical to your business's success. Understanding the complexities of member-managed and manager-managed LLCs, and how each can impact your business operationally and tax-wise, can feel overwhelming. Our <a class="link" href="https://1800accountant.com/services/small-business-taxes">business tax</a> and <a class="link" href="https://1800accountant.com/services/entity-formation">entity formation services</a> at 1-800Accountant are here to help you navigate these decisions. This ensures your business starts on a path to success. Let us handle the complexities, so you can focus on growing your business.</p>

Choosing between a member-managed and a manager-managed LLC is a pivotal decision in forming your business. In this blog post, we&#8217;ll break down these structures, guiding you to make the choice that best aligns with your business&#8217;s needs and objectives. This read will highlight the benefits of a manager-managed LLC, the nuances of LLC taxation, [&hellip;]

Everything you need to know about Manager-Member LLCs.

manager-member-llc

Everything You Need to Know About Manager-Member LLC

<h2>What is a State Tax ID Number?</h2>



<p>A state tax ID number (also referred to as a state EIN, a state employer ID, or a state tax registration) is the unique number the state will assign to a business entity or organization. The state tax ID is associated with the state in which the business operates.&nbsp;</p>



<h2>What is the purpose of State Tax IDs?</h2>



<p><a class="link" href="https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers" target="_blank" rel="noreferrer noopener">State tax IDs </a>serve a couple of main purposes, mainly related to how they’re used to file business taxes and hire employees. State tax ID numbers are used by the state and local tax authorities to identify tax reporting entities and to facilitate accurate tax administration.&nbsp;</p>



<p>State tax ID numbers also allow businesses to apply for Resale Certificates (also referred to as Sales Tax Permits or Seller’s Permits), which allows for tax-exempt status. This tax exemption allows a business entity to purchase goods and products for the purpose of resale at retail. When those goods and products are sold to the final customer, the retailer collects the sales tax.</p>



<p>State tax ID numbers can also be useful for sole proprietors who wish to protect themselves against identity theft.</p>



<h2>How are State Tax ID Numbers different from EINs?</h2>



<p>State tax ID numbers are very similar to federal employer identification numbers (EINs) in that they are assigned to businesses by a government entity, and they allow businesses to employ workers.&nbsp;</p>



<p>However, federal EINs are used by the Internal Revenue Service (IRS). At the same time, state tax ID numbers are utilized by that specific state for tax administration purposes, typically by that state’s Department of Revenue or other similar agencies.&nbsp;</p>



<p>State tax ID numbers only serve their purpose in your specific state and are meaningless outside of the state. So, if you were to relocate your business to a new state, you would need to register for a state tax ID number with the new state, while your federal <a class="link" href="https://1800accountant.com/blog/ein">Employer Identification Number</a> (EIN) could remain the same. Agencies and reporting administrations outside of your state will rarely request your state tax ID number.&nbsp;</p>



<p>EINs can also be assigned even if the company has no workers. Unless your work involves processing business documents, such as business loans or license applications, in most cases, these identification numbers won’t mean much to you until you prepare your income tax return at the end of the year.&nbsp;</p>



<h2>What Kinds of Businesses Need State Tax IDs?</h2>



<p>If your business plans to hire employees or sell goods and services, you will likely need to register for a state tax identification number. It’s critical that you understand your state’s laws and requirements, so you remain in compliance with your local and state tax laws.&nbsp;</p>



<p>Similarly, any small business that hires employees as a partnership or corporation or sells goods will need an EIN. However, sole proprietors and single-member LLCs that do not have any employees can use their Social Security Numbers (they can choose to obtain an EIN if they want, but it is not required.)</p>



<h2>How To Apply For a State Tax ID?</h2>



<p>Check with your state government’s Department of Revenue website for more information on how to obtain a state tax identification number. Applications and processes may vary by state but should be a relatively simple process.&nbsp;</p>



<p>If you’re seeking more guidance and support in <a class="link" href="https://1800accountant.com/services/entity-formation">establishing your small business</a>, check out 1-800Accountant’s entity formation services. We help entrepreneurs and small business owners get started on the right foot. By taking care of the accounting and entity formation, you can focus on what matters—running and growing your business.&nbsp;</p>



<h2>FAQs About State Tax IDs</h2>



<h3>Is the employer's state id number the same as EIN?</h3>



<p>The Employer's State ID number and the Employer Identification Number (EIN) are not the same.</p>



<p>The <strong>Employer Identification Number (EIN)</strong> is a federal tax identification number for businesses. It is issued by the Internal Revenue Service (IRS).</p>



<p>The <strong>Employer's State ID number</strong>, also known as the state tax ID number, is a unique identifier assigned by a state to a business for tax purposes. This number is issued by the state where the business operates.</p>



<h3>Do all businesses need a state tax ID number?</h3>



<p>Not all businesses need a State Tax ID Number. It's typically required for companies with employees, that sell goods or services subject to sales tax, or owe excise taxes. You can check with your state tax department to see if your business needs one.</p>



<h3>What happens if I don't get a State Tax ID Number for my business?</h3>



<p>If your business is required to have a State Tax ID Number and doesn't obtain one, it could face penalties and fines from the state. Your business might not be able to legally operate within the state.</p>

What is a State Tax ID Number? A state tax ID number (also referred to as a state EIN, a state employer ID, or a state tax registration) is the unique number the state will assign to a business entity or organization. The state tax ID is associated with the state in which the business [&hellip;]

Person at a desk reviewing a document with the text "everything to know about state tax id numbers" displayed.

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Everything You Need to Know About State Tax ID Numbers

What is sole proprietorship accounting? Click to learn everything you need to know about sole proprietorship and Schedule C.

<h2>What is a Sole Proprietorship?</h2>
<p>A sole proprietorship is an unincorporated business entity that you own and control by yourself. What makes a sole proprietorship an appealing business structure is its simplicity, easy setup, and inexpensive cost. When starting a sole proprietorship, you do not have to fill out formal paperwork or register with your state. However, you must obtain licenses and permits just like any other business.</p>
<p>As a self-employed individual and small business owner, a sole proprietorship means there is no legal separation between your personal and business income. The business income, business expenses, and losses from your business entity are taxed on your personal tax return.</p>
<p>Also, as a sole proprietor, you are personally accountable for any of your business’s debts, losses, and liabilities. If your business is in legal trouble, you do not have liability protection, and your personal assets are unprotected and potentially jeopardized.</p>
<div class="rte-table-container">
  <table>
    <thead>
      <tr class="table-data-container">
        <td class="cell-0">Pros</td>
        <td class="cell-0">Cons</td>
      </tr>
    </thead>
    <tbody>
      <tr class="table-data-container">
        <td>Easy to start and establish because of the lack of government regulation</td>
        <td>No separation of business income and personal income</td>
      </tr>
      <tr class="table-data-container">
        <td>Inexpensive</td>
        <td>You still need to obtain licenses and permits like any business</td>
      </tr>
      <tr class="table-data-container">
        <td>Most small businesses start as a sole proprietorship but transition to LLCs or <a class="link" href="https://1800accountant.com/blog/form-c-corp">set up a C Corporation</a> as they grow</td>
        <td>No liability protection of personal assets</td>
      </tr>
      <tr class="table-data-container">
        <td>Easy to dissolve and dismantle</td>
        <td>You are personally accountable for business debts, liabilities, etc.</td>
      </tr>
    </tbody>
  </table>
</div>
<h2>How to File A Schedule C</h2>
<p>Along with&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040.pdf" target="_blank" rel="noreferrer noopener">Form 1040</a>, your main individual income tax return form, you must also complete and attach&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank" rel="noreferrer noopener">Schedule C</a>. The purpose of this form is to report how much money your business made or lost during the tax year.</p>
<p>Schedule C consists of the following five sections:</p>
<div class="rte-table-container">
  <table>
    <thead>
      <tr class="table-data-container">
        <td class="cell-0">Schedule C Sections</td>
        <td class="cell-0">Purpose</td>
      </tr>
    </thead>
    <tbody>
      <tr class="table-data-container">
        <td>Part 1: Income</td>
        <td>List all business income including gross receipts or sales, returns and allowances, and federal and state fuel tax credits. This calculates your gross profit and gross income.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 2: Expenses</td>
        <td>Report business expenses like costs for travel, utilities, insurance, and advertising. Subtract your total expenses from your gross income to find your net profit or loss. Report this result on Form 1040.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 3: Cost of Goods Sold</td>
        <td>For the costs of goods sold. If your business doesn't require you to purchase inventory or sell products, this section doesn't apply to you.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 4: Vehicle Expenses</td>
        <td>If claiming deductions for <a class="link" href="https://1800accountant.com/blog/small-business-tax-deductions-checklist">car or truck expenses</a>, complete this section. Keep detailed records of your mileage and vehicle expenses during the tax year.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 5: Other Expenses</td>
        <td>Report any expenses that weren't listed in Part 2. Some of these expenses might include education or costs specifically related to your industry.</td>
      </tr>
    </tbody>
  </table>
</div>
<h2>Schedule C-EZ and Self-Employment Tax</h2>
<p>Starting from the tax year 2019, the Schedule C-EZ will no longer be used. You will now need to file the Schedule C form instead.</p>
<p>If you operate more than one sole proprietorship, each one is considered a separate business. Therefore, you'll need to file a separate Schedule C for each of your businesses.</p>
<p>If your net earnings from self-employment were $400 or more during the tax year, you are responsible for paying self-employment tax and filling out Form <a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040sse.pdf">Schedule SE</a>. However, if your net earnings are less than $400, you are typically not required to file Schedule SE or pay self-employment tax.</p>
<h2>Work with the Experts</h2>
<p>1-800Accountant is a virtual accounting firm merging the convenience of technology with live support from real professionals, making taxes easy and personable for individuals and small businesses. As a small business owner, you can focus on growing your bottom line while our team of accountants, certified public accountants, and enrolled agents perform the heavy lifting – tax advisory and preparation, payroll, bookkeeping, financial statements, and audit defense. For professional, year-round <a class="link" href="https://1800accountant.com/services/small-business-taxes">small business tax accounting</a> services at an affordable price,&nbsp;get in touch&nbsp;with our certified public accountant and schedule your consultation with America’s leading small business accounting firm.</p>

What is a Sole Proprietorship? A sole proprietorship is an unincorporated business entity that you own and control by yourself. What makes a sole proprietorship an appealing business structure is its simplicity, easy setup, and inexpensive cost. When starting a sole proprietorship, you do not have to fill out formal paperwork or register with your [&hellip;]

sole-props-schedule-c-min

Sole Proprietorships and Schedule C

<p>Being a commercial truck driver isn't just about the open road. It also involves handling tax responsibilities. Balancing the demands of the job, including tracking miles, logging hours, and meeting deadlines can get even further complicated by taxes.</p><iframe width="560" height="315" src="https://www.youtube.com/embed/LkS4i7Mp-6s?si=dJezhSdMvAKU2GXm" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen=""></iframe><p>Commercial truck taxes require an understanding of the various taxes that apply to you. This knowledge is critical for maintaining financial stability and avoiding penalties from the IRS. Despite its complexity, understanding these obligations can simplify your tax process and contribute to a more successful trucking career. Continue reading to determine the types of commercial truck taxes you are obligated to pay as a truck driver.</p><h2 class="wp-block-heading">What's Considered a Commercial Truck?</h2><p>Commercial trucks cover a wide range of <a class="link" href="https://www.thebalancesmb.com/commercial-motor-vehicle-classification-2221025" target="_blank" rel="noreferrer noopener">commercial vehicles</a>, arranged by their gross vehicle weight rating (GVWR). There are three categories of commercial trucks and they are organized into eight classes:&nbsp;</p><h3 class="wp-block-heading">Light-duty trucks</h3><p>Light-duty trucks include class 1, class 2, and class 3 commercial trucks:</p><ul><li>Class 1: Trucks in this class have a GVWR of 0-6,000 pounds.&nbsp;</li><li>Class 2: Trucks in this class have a GVWR of 6,001-10,000 pounds.</li><li>Class 3: Trucks in this class have a GVWR of 10,001-14,000 pounds.</li></ul><h3 class="wp-block-heading">Medium duty trucks</h3><p>Medium duty trucks include class 4, class 5, and class 6 commercial trucks:</p><ul><li>Class 4: Trucks in this class have a GVWR of 14,401-16,000 pounds.</li><li>Class 5: Trucks in this class have a GVWR of 16,001-19,500 pounds.</li><li>Class 6: Trucks in this class have a GVWR of 19,501-26,000 pounds.</li></ul><h3 class="wp-block-heading">Heavy-duty trucks</h3><p>Heavy-duty trucks include class 7 and class 8 commercial trucks:</p><ul><li>Class 7: Trucks in this class have a GVWR of 26,001 to 33,000 pounds.</li><li>Class 8: Trucks in this class have a GVWR of 33,001 pounds or more.</li></ul><h2 class="wp-block-heading">What Taxes Do Commercial Truckers Pay?</h2><p>Commercial truckers pay <a class="link" href="https://truckstop.com/blog/owner-operators-quick-guide-taxes/" target="_blank" rel="noreferrer noopener">several taxes</a> according to federal and state requirements. Some of the most common taxes for commercial truckers are:&nbsp;</p><ul><li><a class="link" href="https://1800accountant.com/blog/quarterly-estimated-taxes">Estimated tax</a></li><li><a class="link" href="https://1800accountant.com/blog/trucker-taxes-excise-tax">Excise tax&nbsp;</a></li><li>Federal income tax</li><li><a class="link" href="https://1800accountant.com/blog/form-2290">Heavy Vehicle Usage Tax</a></li><li>Self-employment tax</li><li>State income tax</li></ul><p>It's possible to use <a class="link" href="https://1800accountant.com/blog/truck-driver-tax-deductions">tax deductions</a> to decrease your tax liability and the amount you'll pay.</p><h2 class="wp-block-heading">Federal Excise Tax</h2><p>The <a class="link" href="https://1800accountant.com/blog/trucker-taxes-excise-tax">federal excise tax</a> is one that truckers may pay for their work. It is a tax that the <a class="link" href="https://www.irs.gov/newsroom/an-overview-of-excise-tax">government</a> can impose for:&nbsp;</p><ul><li>Import&nbsp;</li><li>Sale by the manufacturer</li><li>Sale by the retailer&nbsp;</li><li>Use by the consumer or manufacturer</li></ul><p>Federal excise taxes are always due on a quarterly basis.</p><h3 class="wp-block-heading"><strong>When Do You Pay?</strong></h3><p>If you file federal excise taxes, you'll pay quarterly, according to these deadlines:</p><div class="rte-table-container"><p></p></div><table><thead><tr><th><strong>Quarter</strong></th><th><strong>Dates</strong></th><th><strong>Deadline</strong></th></tr></thead><tbody><tr><td>Quarter 1</td><td>January - March</td><td>April 30</td></tr><tr><td>Quarter 2</td><td>April - June</td><td>July 31</td></tr><tr><td>Quarter 3</td><td>July - September</td><td>October 31</td></tr><tr><td>Quarter 4</td><td>October - December</td><td>January 31</td></tr></tbody></table><p></p><p>If your due date for federal excise tax falls on a Saturday, Sunday, or holiday, the due date will be the next business day.</p><h3 class="wp-block-heading"><strong>How Much Do You Pay?</strong></h3><p>To determine the amount of excise tax you'll pay, you'll use <a class="link" href="https://www.irs.gov/pub/irs-pdf/f720.pdf" target="_blank" rel="noreferrer noopener">Form 720.</a> It consists of three parts and various taxes for you to complete where applicable:</p><h3 class="wp-block-heading">Part 1&nbsp;</h3><ul><li>Communication and Air Transportation Taxes&nbsp;</li><li>Environmental Taxes&nbsp;</li><li>Foreign Fuel Taxes&nbsp;</li><li>Foreign Insurance Taxes</li><li>Manufacturers Taxes</li><li>Other Excise Tax</li><li>Retail Tax&nbsp;</li><li>Ship Passenger Tax</li></ul><h3 class="wp-block-heading">Part II</h3><ul><li>Patient-Centered Outcomes Research Fee&nbsp;</li><li>Floor Stocks Tax</li></ul><p>At the end of Part I and Part II, you'll total each at the last line of the section.&nbsp;</p><h3 class="wp-block-heading">Part III</h3><p>You'll determine the amount of excise tax you'll pay in Part III of Form 720 by:</p><ul><li>Totaling the tax from Part I and Part II, on line 3</li><li>Entering claims, from Schedule C, on line 4</li><li>Entering deposits made for the quarter, on line 5</li><li>Entering overpayment from previous quarters, on line 6</li><li>Entering the amount from line 6 of Form 720-X on line 7 (if any)</li><li>Adding lines 5 and 6; you'll write this on line 8</li><li>Adding lines 4 and 8; you'll write this on line 9</li></ul><p>Line 10 of Part III will provide the amount of the amount that's due. You'll pay the total amount with your Form 720.</p><p>Finally, if you overpaid, you'll choose whether you want the difference applied to your next return or refunded to you.</p><h2 class="wp-block-heading">Heavy Vehicle Use Tax</h2><p>A second tax you'll pay as a trucker is the Heavy Vehicle Use Tax. You'll use <a class="link" href="https://1800accountant.com/blog/form-2290">Form 2290</a> to file and pay the Heavy Vehicle Use Tax.&nbsp;&nbsp;</p><p>While the form to determine your excise tax amount doesn't have additional requirements, the heavy vehicle use tax form does. You must already have an <a class="link" href="https://1800accountant.com/blog/ein">employer identification number (EIN)</a> to file Form 2290. If you don't have one, don't worry we can help with <a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">filing for your EIN</a>.&nbsp;</p><h3 class="wp-block-heading"><strong>When Do You Pay?</strong></h3><p>The heavy vehicle use tax has a filing season from July 1 through June 30. If you used your truck during any of these months, you'd have until the end of the following month to file and make your payment.&nbsp;</p><p>Heavy Vehicle Use Taxes have an alternating deadline, depending on when you've used your vehicle. For example, if you've driven your truck in August, you'll have until September 30 to file Form 2290 and pay taxes.</p><h3 class="wp-block-heading"><strong>How Much Do You Pay?</strong></h3><p>To determine the amount of heavy vehicle use tax you'll pay, you'll use <a class="link" href="https://www.irs.gov/pub/irs-pdf/f2290.pdf" target="_blank" rel="noreferrer noopener">Form 2290</a>. You'll go to the second page, where there are four columns.&nbsp;</p><p>If you only used your truck in July, Column (1), Annual tax, is already completed. Columns (2) to (4) will require additional information.&nbsp;</p><p>For these columns, you'll provide:&nbsp;</p><ul><li>Partial-period tax (for vehicle use after July) in column 2: You'll provide information in section (2)(a), Vehicles except logging, and (2)(b), Logging Vehicles</li><li>Number of vehicles in column 3: You'll provide information in sections (3)(a), Vehicles except logging, and (3)(b), Logging Vehicles</li></ul><p>After you complete columns (2) and (3), you'll proceed to column (4). This is where you'll multiply the numbers from column (1) or column (2) by the numbers in column (3).</p><p>You'll enter the amount from the Totals section near the bottom of the page.&nbsp;</p><p>After figuring out the total, you'll return to the first page. On line 2 of Part 1. You'll enter the Total from column (4) on page 2. Then, you'll:&nbsp;</p><ul><li>Add any national tax from an increase in taxable gross weight on line 3.</li><li>Determine the total tax on line 4</li><li>Enter any credits, if applicable, on line 5</li></ul><p>Line 6 is where you'll determine the balance due. You'll subtract the total on line 5 from the total on line 4 to determine the amount.</p><h2 class="wp-block-heading">Commercial Truck Taxes Simplified</h2><p>Commercial truck taxes require quite a few details to figure out. The details may be overwhelming, but it doesn't have to be. As a trucker, you can focus on your day-to-day responsibilities and turn to the pros for a stress-free tax season. Work with <a class="link" href="https://1800accountant.com/services/industry/trucking">tax professionals for truck drivers</a> at 1-800Accountant for your commercial truck tax needs.</p>

Being a commercial truck driver isn&#8217;t just about the open road. It also involves handling tax responsibilities. Balancing the demands of the job, including tracking miles, logging hours, and meeting deadlines can get even further complicated by taxes. Commercial truck taxes require an understanding of the various taxes that apply to you. This knowledge is [&hellip;]

Everything you need to know about commercial truck taxes.

commercial-truck-taxes

Everything You Should Know About Commercial Truck Taxes

<p>Understanding Form 1023 is a crucial for non-profits seeking tax-exempt status. It can be tricky to fill out accurately and ontime. When successfully filed and accepted, Form 1023 grants exemption from federal income tax, which is crucial for <a class="link" href="https://1800accountant.com/blog/4-types-of-non-profit-organizations">nonprofit organizations</a> success. This blog simplifies Form 1023, clarifying eligibility and the filing process with step-by-step guidance. Continue reading to learn everything you need to know about Form 1023 for non-profits.</p>



<h2>What Is Form 1023?</h2>



<p><a class="link" href="https://www.irs.gov/uac/about-form-1023" target="_blank" rel="noreferrer noopener">Form 1023</a>&nbsp;is a form used to request tax-exempt status for your organization. When filling out this form, you’re essentially explaining to the IRS your organization’s business plan and reasoning for seeking tax exemption.</p>



<p>Form 1023 qualifies organizations for federal tax exemption. If you live in a place where you pay state taxes, you need to register your organization with the state to obtain state tax exemption.</p>



<p>Boasting multiple pages and schedules, Form 1023 is a long, arduous document. If your organization is eligible, you may be able to file&nbsp;<a class="link" href="https://www.irs.gov/uac/about-form-1023ez" target="_blank" rel="noreferrer noopener">Form 1023-EZ,</a>&nbsp;which is a much shorter and simpler version. This form is geared toward smaller non profit organizations.</p>



<p>Your organization may qualify for Form 1023-EZ if it meets the following requirements:&nbsp;</p>



<ul>
<li>Projected annual gross receipts&nbsp; do not exceed $50,000 in any of the next 3 years</li>



<li>Actual annual gross receipts have not exceeded $50,000 in any of the past 3 years</li>



<li>Total assets do not exceed $250,000</li>



<li>The organization must not be a foreign organization, LLC, a successor to a for-profit entity, church, school, or hospital</li>



<li>The organization must not request classification as a supporting organization or a private operating foundation</li>



<li>The organization must not maintain or plan to maintain one or more donor-advised funds</li>
</ul>



<h2>Who Can File Form 1023?</h2>



<p>There are numerous types of&nbsp;<a class="link" href="https://1800accountant.com/blog/having-a-509a-status">501(c) organizations</a>, the most common types of nonprofits. To be a 501(c)(3) organization, your nonprofit must:</p>



<ul>
<li>Be organized as a trust, an unincorporated association or a corporation</li>



<li>Operate exclusively for a purpose established under section 501(c)(3), which includes charitable, scientific, educational, and religious purposes, among others</li>
</ul>



<p>501(c)(3) organizations are prohibited from participating in political campaigns, unfairly dispersing the organization’s earnings among board members and managers, and engaging in opportunities unrelated to the organization’s mission statement.</p>



<p>Houses of worship, such as churches, synagogues, and mosques, are not technically required to file Form 1023, but it is recommended because it guarantees that the donations they receive are tax-deductible for donors.</p>



<h2>How to Fill Out Form 1023</h2>



<p>Before starting your Form 1023, make sure to look at the&nbsp;<a class="link" href="http://form1023.org/wp-content/uploads/form-1023-checklist.pdf" target="_blank" rel="noreferrer noopener">Form 1023 checklist</a>&nbsp;to find out what information and materials you will need to successfully complete the form. Some of this information includes your <a class="link" href="https://1800accountant.com/blog/ein">Employer Identification Number (EIN)</a> and articles of organization. If you need to <a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">file for your EIN</a>, we can assist you with that.</p>



<p>Form 1023 sections explained:</p>



<ul>
<li>Part I – Identification information. Fill in your name, address, EIN, date of organization formation, etc.</li>



<li>Part II – State your organization’s structure (trust, limited liability company, etc.)</li>



<li>Part III – This section verifies if your organization meets the criteria of section 501(c)(3).</li>



<li>Part IV – Describe your organization’s past, present, and future activities.</li>



<li>Part V – This section is where you put information regarding compensation for employees, officers, directors, trustees, and independent contractors.</li>



<li>Part VI – Write down groups and other organizations that benefit from your nonprofit.</li>



<li>Part VII – This section asks if you are a successor to another organization and if you are submitting this form 27 months after your organization’s formation.</li>



<li>Part VIII – This section asks about your organization’s activities including fundraising, political affiliations and relationships with other organizations.</li>



<li>Part IX – Input financial data, investment income, and contributions and grants you received.</li>



<li>Part X – Classify whether your organization is a public charity, private foundation, or private operating foundation.</li>



<li>Part XI – User fee information. You will have to pay either $400 or $850. If your annual gross receipts exceed $10,000 over a four-year period, you will need to pay the $850 fee.</li>
</ul>



<p>Depending on the type of organization you are operating, you will need to complete one or more of the following schedules:</p>



<ul>
<li>Schedule A – Churches.</li>



<li>Schedule B – Schools, colleges, and universities.</li>



<li>Schedule C – Hospitals and medical research organizations.</li>



<li>Schedule D – Section 509(a)(3) supporting organizations.</li>



<li>Schedule E – Organizations not filing Form 1023 within 27 months of formation.</li>



<li>Schedule F – Homes for the elderly or handicapped and low-income housing.</li>



<li>Schedule G – Successors to other organizations.</li>



<li>Schedule H – Organizations providing scholarships, fellowships, educational loans or other education grants to individuals and private foundations requesting advance approval of individual grant procedures.</li>
</ul>



<h2>Work with the Experts</h2>



<p>Working with 1-800Accountant can significantly streamline the process of filling out complex forms like IRS Form 1023. Our team of expert accountants offers a wealth of knowledge and experience in <a class="link" href="https://1800accountant.com/services/industry/nonprofit">non-profit tax and financial matters</a>, which helps to ensure accuracy and compliance. </p>



<p>We can handle complex tasks such as filing for your <a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">Employer Identification Number (EIN</a>) or completing Form 1023, saving you time and effort. By entrusting your accounting and tax needs to 1-800Accountant, you free up more time to focus on your organization's mission.</p>



<p>You can also learn more about the unique and complicated landscape of <a class="link" href="https://1800accountant.com/blog/nonprofit-taxes">non-profit taxes</a> with this helpful guide.</p>

Understanding Form 1023 is a crucial for non-profits seeking tax-exempt status. It can be tricky to fill out accurately and ontime. When successfully filed and accepted, Form 1023 grants exemption from federal income tax, which is crucial for nonprofit organizations success. This blog simplifies Form 1023, clarifying eligibility and the filing process with step-by-step guidance. [&hellip;]

Group of professionals in a blue-tinted office discussing, with text overlay reading "form 1023 the key to becoming a tax-exempt organization".

form-1023

Form 1023: The Key to Becoming a Tax-Exempt Organization

<p>The complexity of the Internal Revenue Code can be intimidating, especially when dealing with IRS section 4947(a). This is a crucial provision that governs nonexempt trusts and split-interest trusts. You need to understand its implications for a smooth tax filing experience. </p>



<p>In this blog article, we will discuss this complex tax code provision in detail. You'll learn the definition of nonexempt charitable trusts (4947(a)(1) trusts), split-interest trusts (4947(a)(2) trusts), as well as the tax obligations associated with each of them. We'll also guide you through the necessary tax forms these trusts need to file, and how to potentially avoid unnecessary excise taxes. </p>



<h2>What is 4947(a)?</h2>



<p><a class="link" href="https://www.law.cornell.edu/uscode/text/26/4947" target="_blank" rel="noreferrer noopener">4947(a)</a>&nbsp;refers to a section in the Internal Revenue Code regarding the application of tax to certain nonexempt trusts – charitable trusts and split-interest trusts. These trusts are treated as&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/charitable-organizations/private-foundations" target="_blank" rel="noreferrer noopener">private foundations</a>&nbsp;unless they meet the requirements of a&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/charitable-organizations/public-charities" target="_blank" rel="noreferrer noopener">public charity</a>. 4947(a) was created so these types of trusts could not avoid private foundation restrictions, which include&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/private-foundations/private-foundation-excise-taxes" target="_blank" rel="noreferrer noopener">private foundation excise taxes</a>, termination provisions of section 507, and governing instrument requirements under section 508(e).</p>



<h2>Different Types of section 4947(a) Trusts</h2>



<h3>Nonexempt Charitable Trusts – or 4947(a)(1) Trusts</h3>



<p>According to the Internal Revenue Code, a nonexempt charitable trust is a trust:</p>



<ul>
<li>Not exempt from tax under section 501(a).</li>



<li>In which all the unexpired interests are devoted to one or more charitable purposes.</li>



<li>Eligible for a charitable contribution deduction.</li>
</ul>



<p>A nonexempt charitable trust may not have any taxable income if it truly pays or uses all of its income for charitable purposes. Otherwise, if these trusts fail to use all income for charitable purposes, they must file <a class="link" href="https://www.irs.gov/uac/about-form-1041" target="_blank" rel="noreferrer noopener">Form 1041</a>. Any trusts created before October 9, 1969, may not have to file this return.</p>



<p>Along with Form 1041, nonexempt charitable trusts must also file&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f990pf.pdf" target="_blank" rel="noreferrer noopener">Form 990-PF</a>. Additionally, this includes a 1 or 2 percent excise tax on investment income. If your nonexempt charitable trust is eligible, you may file&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f990.pdf" target="_blank" rel="noreferrer noopener">Form 990</a>, which would alleviate the excise tax.</p>



<h3>Split-Interest Trusts – or 4947(a)(2) Trusts</h3>



<p>According to the Internal Revenue Code, a&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/private-foundations/split-interest-trusts" target="_blank" rel="noreferrer noopener">split-interest trust</a>&nbsp;is a trust:</p>



<ul>
<li>Not exempt from tax under section 501(a).</li>



<li>With some unexpired interests that are devoted to purposes unrelated to charity.</li>



<li>That has amounts transferred in trust in which a charitable deduction was allowed under section 170 and similar sections of the Internal Revenue Code.</li>
</ul>



<p>Any amounts transferred in trust before May 27, 1969, are not subject to the same provisions as private foundations.</p>



<p>To report financial activities and calculate deductions, split-interest trusts must file&nbsp;<a class="link" href="https://www.irs.gov/uac/form-5227-split-interest-trust-information-return" target="_blank" rel="noreferrer noopener">Form 5227</a>.</p>



<h2>Work With Experts Who Understand Trusts Under Section 4947(a)</h2>



<p>If you're feeling overwhelmed by these complex tax provisions, get in touch with our experts at 1-800Accountant. We're a virtual accounting firm that specializes in <a class="link" href="https://1800accountant.com/services/business-tax-advisory">tax advisory</a>, <a class="link" href="https://1800accountant.com/services/small-business-taxes">preparation</a>, <a class="link" href="https://1800accountant.com/services/payroll">payroll</a>, <a class="link" href="https://1800accountant.com/services/bookkeeping">bookkeeping</a>, <a class="link" href="https://1800accountant.com/services/audit-defense">audit defense</a>, and much more. By leveraging our tax professionals you're able to focus on what truly matters – growing your bottom line.</p>

The complexity of the Internal Revenue Code can be intimidating, especially when dealing with IRS section 4947(a). This is a crucial provision that governs nonexempt trusts and split-interest trusts. You need to understand its implications for a smooth tax filing experience. In this blog article, we will discuss this complex tax code provision in detail. [&hellip;]

Group of men and women standing in a circle with their arms around each other.

trusts-under-4947-a

Trusts Under Section 4947(a)

<span style="font-weight: 400;">If you own a small business or you’re otherwise self-employed, you have to take responsibility for yourself in many different ways. No one else is going to withhold taxes from your salary, so you have to make</span><span style="font-weight: 400;"> <a class="link" href="https://1800accountant.com/blog/quarterly-estimated-taxes">estimated tax payments</a></span><span style="font-weight: 400;"> for yourself. No company is going to put you on their group health insurance plan, so you have to set it up for yourself. </span>

<span style="font-weight: 400;">While it can be a lot of work to have to keep everything in order, there are perks to being self-employed as well. Not only do you get the freedom of being your own boss and making these decisions for yourself, but there are all kinds of incentives and <a class="link" href="https://1800accountant.com/blog/self-employed-tax-write-offs">tax deductions</a> you can take advantage of to lower your costs. </span>

<span style="font-weight: 400;">One of these perks is the </span><a class="link" href="https://www.thebalancesmb.com/self-employment-health-insurance-deduction-3193015"><span style="font-weight: 400;">self-employment health insurance tax deduction</span></a><span style="font-weight: 400;">. This is a deduction that encourages you to get effective health care by giving you a chance to decrease your tax liability. Find out all about it and make sure you know what you’re doing when it’s time to file your taxes.   </span>
<h2><span style="font-weight: 400;">1. It Reduces Your Taxable Income</span></h2>
<span style="font-weight: 400;">This health insurance deduction is one of many tax deductions for small business owners that should be common knowledge. If you are self-employed, it allows you to deduct your health insurance premiums from </span><a class="link" href="https://1800accountant.com/blog/everything-need-know-adjusted-gross-income-tax-time"><span style="font-weight: 400;">your adjusted gross income</span></a><span style="font-weight: 400;">, which means you have less taxable income.</span>

<span style="font-weight: 400;">Any kind of self-employment health insurance, dental insurance, or qualified long-term care insurance should qualify. This benefit is an above-the-line deduction, which means that the money you use to pay those premiums is essentially tax-free.</span>

<span style="font-weight: 400;">With a lower AGI, you may be more likely to qualify for other helpful tax credits and benefits. You might even drop to a lower tax bracket if you were on the fence between the two. </span>
<h2><span style="font-weight: 400;">2. You Must be Self-Employed Without Another Option</span></h2>
<span style="font-weight: 400;">The primary requirement for eligibility for this benefit is to be self-employed. You can be the sole proprietor or a partner in a small business, an independent contractor, or even a wage-earning partial owner of an S-corporation. </span>

<span style="font-weight: 400;">This benefit is meant to support </span><a class="link" href="https://www.inc.com/heather-wilde/the-6-best-ways-to-get-health-insurance-when-youre-self-employed.html"><span style="font-weight: 400;">health insurance when you’re self-employed</span></a><span style="font-weight: 400;">, for those that don’t have access to employer-sponsored health insurance plans. Therefore, if either you or your spouse are able to participate in an employer-based plan, then you shouldn’t be able to get this benefit. </span>

<span style="font-weight: 400;">If you can get health insurance through an employer, they will take the premiums out of your pay. This deduction essentially allows you to do the same thing as your own employer. You are taking the premiums out of your pre-tax pay. </span>
<h2><span style="font-weight: 400;">3. The Deduction Can’t be Greater Than Your Income</span></h2>
<span style="font-weight: 400;">One small loophole is that you can’t deduct your healthcare premiums from your income if you have premium expenses exceeding the income you earned through self-employment. </span>

<span style="font-weight: 400;">Your health care premiums are supposed to be taken out of your self-employment income, so if your business reports a loss or you don’t have enough income to pay your premiums, then it doesn’t make sense for you to be able to claim the deduction on </span><span style="font-weight: 400;">your <a class="link" href="https://1800accountant.com/blog/self-employment-tax-2">self-employment tax return</a></span><span style="font-weight: 400;">. Your income from self-employment must be equal to or greater than your health insurance deduction. </span>
<h2><span style="font-weight: 400;">4. Medical Expenses May be Deductible</span></h2>
<span style="font-weight: 400;">While your health insurance premiums are deducted from your income pre-tax, qualifying medical expenses can also be deducted from your final tax bill. You will have to file for these costs as itemized deductions.</span>

<span style="font-weight: 400;"> Medical bills deductible from your tax liability have to add up to more than 10% of your adjusted gross income. (Before 2019 the requirement was only 7.5% of AGI.) You can receive </span><a class="link" href="https://www.irs.gov/pub/irs-prior/p502--2018.pdf"><span style="font-weight: 400;">medical and dental expense deductions</span></a><span style="font-weight: 400;"> for many different services and treatments received and paid for within the last tax year. Here are just a few of the medical expenses you can count: </span>
<ul>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Diagnosis, cure, treatment, and prevention of disease </span></li>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Fees paid to medical professionals, including psychiatrists, chiropractors, and nontraditional medical practitioners</span></li>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Prescription medications and Insulin</span></li>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Inpatient or residential care</span></li>
 	<li>Cost of transportation to medical care, such as ambulance services or travel to receive medical care</li>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Dental care treatments</span></li>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Vision care expenses including glasses or contacts</span></li>
 	<li style="font-weight: 400;"><span style="font-weight: 400;">Medicare premiums reported with Social Security benefits</span></li>
</ul>
<h2>Partner With A Tax Professional Who Specializes in Self-Employed Taxes</h2>
The self-employment health insurance deduction encourages more individuals to sign up for health insurance for those without employer-sponsored plans. Having insurance is crucial, as the costs of going without can be much higher if something unfortunate were to happen. Once insured, it's important to claim your premium deductions and itemize medical expenses if you will benefit.

Working with 1-800Accountants, experts who specialize in <a class="link" href="https://1800accountant.com/services/industry/freelancer-self-employed">self-employed taxes</a> can help you navigate the process with ease. They'll assist you in ensuring you claim all your potential tax benefits and deductions, even if you don't qualify for self-employment deductions or itemization. This includes exploring options like flexible spending or health savings accounts. Don't delay securing your health insurance and taking full advantage of available tax savings for those who are self-employed. Learn more about the <a class="link" href="https://1800accountant.com/blog/reasons-you-need-accountant-self-employment">top reasons you need an accountant</a> if you're self-employed.

If you own a small business or you’re otherwise self-employed, you have to take responsibility for yourself in many different ways. No one else is going to withhold taxes from your salary, so you have to make estimated tax payments for yourself. No company is going to put you on their group health insurance plan, so [&hellip;]

Woman filling out paperwork about self employment health insurance tax deductions.

4-things-to-know-about-claiming-the-self-employment-health-insurance-tax-deduction

Self-Employment Health Insurance Deduction: A Guide

<p>If you're a freelancer or independent contractor receiving a <a class="link" href="https://1800accountant.com/blog/what-is-a-1099">Form 1099</a> instead of a W-2 at the end of the year. You need to be aware of key tax issues related to 1099 income reporting. 1099 professionals can work for one employer or multiple companies. They can also work from home or at the company's office, similar to full or part-time W2 employees. However, their income is reported differently to the IRS and state tax authorities, specifically via <a class="link" href="https://1800accountant.com/blog/1099-vs-w2">Form 1099 instead of a W-2</a>, which reflects significant legal distinctions.</p>



<p>The main difference lies in how the taxes are managed. W2 employees receive a paycheck with deductions already made for income taxes, social security, Medicare, and other necessary payments. Independent contractors, on the other hand, don't have these taxes withheld from their earnings. Instead, they're responsible for the entirety of these payments, including <a class="link" href="https://1800accountant.com/blog/self-employment-tax-2">self-employment taxes</a>, which apply to all local, state, and federal taxes owed. Keep reading as we discuss 5 common tax mistakes 1099 workers make. </p>



<h2>Mistake #1: Not Setting Aside Enough Money</h2>



<p>The major mistake that independent contractors and freelancers make is forgetting to set aside enough money to pay self-employment taxes. If you’re an independent contractor who works exclusively or primarily for one employer for months at a time, it can be easy to forget that you are basically self-employed. <a class="link" href="https://1800accountant.com/blog/how-to-file-taxes-independent-contractor">Taxes for independent contractors</a> seem higher than taxes for employees because the self-employed person is paying both the employer and employee portions of the taxes.</p>



<p>In addition to any state and federal income taxes, freelancers and independent contractors must pay self-employment taxes to help finance Social Security for retirement and Medicare for health-related benefits. Some states also require payments for other things that are withheld from employee paychecks. For details about calculating what you owe to the IRS, start with the <a class="link" title="IRS.gov self employed individuals tax center " href="http://www.irs.gov/Businesses/Small-Businesses-&amp;-Self-Employed/Self-Employed-Individuals-Tax-Center" target="_blank" rel="noopener noreferrer">IRS Self Employed Individuals Tax Center </a>website.</p>



<p>It’s important to set aside money from every check you receive to cover your taxes. Because self-employed independent contractors are responsible for the employer and employee portion of federal taxes, you must set aside more than an employer would have withheld from a paycheck. For example, independent contractors pay a social security tax rate of 12.4%, while employees pay only half that and their employers cover the other half.</p>



<h2>Mistake #2: Not Paying&nbsp;Quarterly</h2>



<p>Think of your <a class="link" href="https://1800accountant.com/blog/quarterly-estimated-taxes">quarterly tax payments</a> as a kind of “pay as you go” system that lets the IRS and your state’s treasury department collect taxes almost as quickly as the businesses and individuals earn the money.</p>



<p>You will have to make estimated tax payments to the IRS if you are:</p>



<ul>
<li>A freelancer, independent contractor, or self-employed individual who expects to owe $1,000 or more when you file your annual return.</li>



<li>A corporation that expects to owe $500 or more.</li>
</ul>



<p>Estimated tax payments must be made at least four times a year (quarterly) to the IRS, including income tax and self-employment tax (Social Security and Medicare) payments.</p>



<p>The rules for estimated tax payments for sales taxes, business, and franchise taxes (note that you don’t have to own a franchised business in order to owe a state franchise tax – it’s what some states call the business tax charged to all businesses), and local and state income taxes in your home state may be different.</p>



<p>There is a penalty for underpaying the estimated tax. But the IRS has a safe harbor rule: if you pay at least as much as your previous year’s liability or pay within 90 percent of your actual tax liability, there is no penalty for underpayment. You can learn more about the importance of <a class="link" href="https://1800accountant.com/blog/small-businesses-pay-attention-quarterly-tax-payments">paying attention to quarterly tax payments</a> here.</p>



<h2>Mistake #3: Missing a Filing Deadline</h2>



<p>Quarterly estimated tax forms and full payment of your estimated taxes are due every year on the following dates. If these dates happen to fall on a Saturday, Sunday, or holiday your payment will be due on the next business day.</p>



<ul>
<li>January 15</li>



<li>April 15</li>



<li>June 15</li>



<li>September 15</li>
</ul>



<p>Missing a filing deadline is a short trip to IRS trouble. The only exception is if you expect to owe less than $1,000 in taxes for the year. </p>



<h2>Mistake #4: Overlooking Deductions</h2>



<p>Independent contractors can deduct relevant business expenses unavailable to regular employees. There are limits and rules, but the deductions can help you hold on to more of what you earn if you keep the proper records.</p>



<p>For example, independent contractors can deduct:</p>



<ul>
<li>Auto expenses</li>



<li>Home office deduction</li>



<li>Health insurance</li>



<li>Legal and professional services</li>



<li>Office equipment and supplies</li>



<li>Meals</li>



<li>Marketing and advertising costs</li>



<li>Retirement contributions</li>



<li>Supplies and equipment</li>
</ul>



<p>The IRS loves to flag tax returns from freelancers and independent contractors for audit, so be sure you can back up your deductions with evidence such as receipts, dates, and business purposes. Here's more info about <a class="link" href="https://1800accountant.com/blog/missed-deductions-freelancers">8 commonly missed tax deductions for independent contractors</a>. </p>



<p>As a sole proprietor and independent contractor, you have unique tax advantages. Firstly, if you hire your child, you can deduct up to $5,000 from your earnings. This also remains tax-free for your child due to the <a class="link" href="https://1800accountant.com/blog/standard-deduction-2021-2022">standard deduction</a>. Secondly, you can provide your employees, including family, with a health care reimbursement account. While you can't deduct this for yourself, it's a substantial tax-saving benefit for families with high healthcare costs.</p>



<h2>Mistake #5: Not Becoming a “Real Business”</h2>



<p>Are you really a freelancer – or are you actually running a small business? Depending on your circumstances, income, and state of residence, that answer can make a big difference in how much you pay in taxes each year.</p>



<p>For instance, independent contractors can subcontract work to other independent contractors, or even hire someone to work for them. But once your workload expands to the point that you need to hire help, it might be time to consider <a class="link" href="https://1800accountant.com/blog/6-tricks-to-choosing-the-best-entity-for-your-small-business">creating a business structure</a> that offers some legal protections.</p>



<h2>Partner With Tax Professionals Who Specialize in 1099 Taxes</h2>



<p>Working with a tax professional specializing in <a class="link" href="https://1800accountant.com/services/industry/freelancer-self-employed">independent contractor taxes</a> offers significant benefits. They can help navigate complex tax laws, ensure compliance, and optimize deductions, saving you time and potential financial pitfalls. Their expertise can lead to significant tax savings and peace of mind, freeing you to focus more on your work.</p>

If you&#8217;re a freelancer or independent contractor receiving a Form 1099 instead of a W-2 at the end of the year. You need to be aware of key tax issues related to 1099 income reporting. 1099 professionals can work for one employer or multiple companies. They can also work from home or at the company&#8217;s [&hellip;]

1099 Taxes: 5 issues that can cause trouble with the IRS.

1099-taxes

1099 Taxes: 5 Issues That Can Cause IRS Trouble

<p>Operating a small business is a challenging but thrilling endeavor, with many businesses barely staying afloat. In such a tight budgetary environment, where every dollar is pivotal, mastering small business taxes is essential. There are many <a class="link" href="https://1800accountant.com/blog/small-business-tax-deductions-checklist">deductions exclusive to businesses</a> that can help lessen your income tax burden. If you neglect claiming these benefits you're leaving money on the table.</p>



<p>The U.S. tax system's complexity often leads to many small business owners paying more than they have to in taxes. However, the larger, more resource-rich corporations end up paying less. The IRS does provide tax deductions for small businesses to decrease their taxable income, recognizing that business expenses should not be taxed as profit. As we delve into some of the most potent and often overlooked tax deductions, remember to leverage all applicable deductions when <a class="link" href="https://1800accountant.com/blog/prepare-file-small-business-tax-return">preparing your small business tax return</a>.</p>



<h2>Top Small Business Tax Deductions&nbsp;Owners Forget to Claim</h2>



<h3>1. Marketing Costs</h3>



<p>Whatever you spend as a business owner on advertising and marketing should be fully deductible. If you were an employee, you wouldn't be responsible for making those expenses so you can deduct the costs of that advertising from your income.&nbsp;</p>



<p>Here are a few of the marketing costs you may be able to deduct:&nbsp;</p>



<ul>
<li>The cost of a public event set up for advertising purposes</li>



<li>Print advertising</li>



<li>Paid social media marketing</li>



<li>Services contracted from a marketing professional&nbsp;</li>



<li>Website administration and design costs&nbsp;</li>
</ul>



<h3>2. Utilities and Other Workspace Costs</h3>



<p>More and more people are working from home these days, which means more and more home offices. If you're renting a workspace, that rent counts as a business expense.&nbsp;</p>



<p>Suppose you're a business owner working from home. In that case, a portion of your rent costs, mortgage interest, and even your utilities can be claimed as business expenses through&nbsp;the <a class="link" href="https://1800accountant.com/blog/home-office-deduction">home office deduction</a>.&nbsp;&nbsp;</p>



<h3>3. Qualified Business Income</h3>



<p>Since the 2017 Tax Cuts and Jobs Act, the IRS has allowed&nbsp;<a class="link" target="_blank" href="https://www.irs.gov/newsroom/qualified-business-income-deduction" rel="noreferrer noopener">small business owners to claim the Qualified Business Income Deduction</a>, which will enable you to deduct up to 20 percent of your qualified business income from your taxable income.&nbsp;</p>



<p>This is a general deduction you can claim in addition to specific expense deductions, but it is only available to pass-through businesses. This means that only business owners that file their personal and business income together are eligible. It is intended to help reduce the tax burden on small businesses and encourage growth.&nbsp;</p>



<h3>4. Vehicle Use</h3>



<p>Some self-employed people use their vehicles for business purposes. If you do, you may be able to deduct your vehicle expenses based on how much you use it for your business.&nbsp;</p>



<p>Instead of keeping track of individual expenses, you could also record the miles you drive for work. Then you can deduct those miles from your taxes based on the&nbsp;<a class="link" target="_blank" href="https://www.irs.gov/tax-professionals/standard-mileage-rates" rel="noreferrer noopener">standard mileage rates set annually by the IRS</a>.&nbsp;</p>



<h3>5. Travel Expenses</h3>



<p>If you do any overnight travel entirely for valid business purposes, you may be able to deduct the money you spend on transportation and lodging. This includes conferences or seminars out of town, or possibly visits to distant clients.&nbsp;</p>



<h3>6. Meals</h3>



<p>While&nbsp;<a class="link" target="_blank" href="https://www.thebalancesmb.com/deducting-business-meals-and-entertainment-expenses-398956" rel="noreferrer noopener">business meals and entertainment expenses</a>&nbsp;are no longer fully deductible as they used to be, you can still deduct 50 percent of the cost of meals you provide for customers or employees under certain circumstances.&nbsp;</p>



<p>If you are present, and the meal isn't overly extravagant, you can deduct half of the cost of meals you provide for a valid business need, whether it's for employees or clients while working or traveling.&nbsp;</p>



<h3>7. Employee Benefits</h3>



<p>The IRS also encourages business owners to save for retirement by offering deductions on contributions to certain retirement accounts. You can deduct contributions to retirement plans up to a set amount each tax year. Here are some of your options for tax-deductible&nbsp;<a class="link" target="_blank" href="https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people" rel="noreferrer noopener">retirement savings plans for the self-employed</a>:</p>



<ul>
<li>A simplified employee pension (SEP)&nbsp;</li>



<li>A 401(k)</li>



<li>A savings incentive match plan for employers (SIMPLE IRA)&nbsp;</li>
</ul>



<h3>8. Insurance</h3>



<p>If you are self-employed and don't qualify for health insurance through your spouse's employer, you can deduct your insurance premiums from your taxable income. That is a cost you are taking on because you are a business owner, and therefore it is a business expense.</p>



<p>Premiums for most other insurance policies related to your business should also be deductible.&nbsp;</p>



<h3>9. Necessary Fees and Subscriptions</h3>



<p>Any regular fees you have to pay related to your business might be tax-deductible. Regular&nbsp;<a class="link" target="_blank" href="https://www.investopedia.com/ask/answers/102814/what-credit-card-fees-are-tax-deductible.asp" rel="noreferrer noopener">credit card fees are tax-deductible</a>&nbsp;if the credit cards are not for personal use. Credit card interest on business purchases is also eligible as a business expense.&nbsp;</p>



<p>Other deductible fees include subscriptions for business software or trade publications. If you can justify the expense as necessary for your business operations, the cost is likely fully deductible.</p>



<h2>Prepare for Tax Preparation</h2>



<p>The less money you spend on taxes, the more you have to keep investing in your business's future. However, to get the most out of these deductions, you'll need to keep track of your expenses during the year.&nbsp;</p>



<p>That's why&nbsp;<a class="link" target="_blank" href="https://1800accountant.com/blog/bookkeeping-101-crash-course-record-keeping-small-businesses" rel="noreferrer noopener">effective record-keeping for small businesses</a>&nbsp;is so essential.</p>



<p>As a business owner facing numerous challenges, partnering with a <a class="link" href="https://1800accountant.com/services/small-business-taxes">business tax professional</a> at 1-800Accountant can be a game-changer. They can help create a <a class="link" href="https://1800accountant.com/services/business-tax-advisory">strategic tax plan</a> ensuring you capitalize fully on tax benefits and minimize your tax liability. This partnership not only maximizes your financial resources but also provides peace of mind, knowing your taxes are handled by experts.</p>

Operating a small business is a challenging but thrilling endeavor, with many businesses barely staying afloat. In such a tight budgetary environment, where every dollar is pivotal, mastering small business taxes is essential. There are many deductions exclusive to businesses that can help lessen your income tax burden. If you neglect claiming these benefits you&#8217;re [&hellip;]

9 tax deductions business owners forget to claim on their taxes.

deductions-business-owners-forget

9 Deductions Business Owners Forget to Claim on Their Taxes

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