For individual taxpayers, refunds are a common thing. But for small businesses, it depends on the type of entity you establish and the type of taxes you pay.
2018 Small Business Tax Refunds Survey
According to a report from OnDeck, 65% of the business owners received a tax refund in 2018. And while 75% said they were satisfied with the outcome, 1 in 4 weren’t.
The Impact of Tax Cuts and Jobs Act
The survey for the report looks to find out how small business owners feel about the tax changes resulting from the Tax Cuts and Jobs Act law of 2017. OnDeck surveyed 700 business owners from May 6 to May 8, 2019, to get the results. This survey is a follow up of another study the company carried out in April 2019 about the impact of the 2017 law.
In that particular survey, 37% of small business owners said they expect the tax changes in the law to have a positive impact on their businesses. This was followed by 47% who didn’t expect any change, and another 21% expecting a negative impact.
The overall tax cut package was $1.5 trillion. And it was the biggest overhaul of the U.S. tax code in more than 30 years. So, it goes without saying, it was bound to affect businesses across the board.
When it comes to small businesses and tax refunds it was mostly positive. This is what Andrea Gellert, Chief Revenue Officer, OnDeck, says in the press release for the survey. Gellert also pointed out the upcoming election and taxes. Adding, “Moving forward into an election year, OnDeck will continue to monitor the pulse of small businesses on the vital issue of tax changes and policy.”
In the survey, 35% of the respondents say they are very satisfied with their tax returns in 2018. This was followed by 40% stating they are satisfied, 17% not satisfied, and 8% very dissatisfied.
Across the country, small business owners in the West received the highest number of refunds (69%), followed by Northeast (67%), South (65%), and Midwest (59%).
Small Businesses and Tax Refund
The U.S. tax code is infamous for its complexity, but in this case, it is somewhat less complicated. Simply put, your business gets a refund when it pays more taxes than it was due.
That was the easy part, but the type of business you establish will determine your tax refund eligibility.
This includes whether it is a sole proprietorship, partnership, S-corporation, or a limited liability company (LLC). And the type of taxes you pay can also result in a tax refund for your business. This is why it is so important to find out how your business is being taxed.
Once you find out, you can take steps to maximize your tax refund.
Maximizing Your Tax Refund
As mentioned earlier, the U.S. tax code is extremely complicated. And if you want to maximize your tax refunds, you need an expert. Hiring the right person ensures your taxes are filed properly while maximizing your tax refund. At the same time, it eliminates or greatly reduces the chances of an audit by the IRS.
In addition to hiring the right person: check for available tax credits for your business; offer 401 (k) matching; provide bonuses for employees; don’t mix your personal and business finances; review your credit card statements; prepay upcoming expenses; track your mileage; and more.
These are just some of the steps you can take to maximize your tax refund, but you have more options. This will depend on the type of businesses you run, as well as how you spend your money throughout the year.