Filing made easier for small businesses
By Joyce M. Rosenberg
Associated Press
NEW YORK — As small-business owners start working on their 2002 taxes, the IRS is making it easier for them to file their returns and other tax documents online, and to make their payments over the Internet as well.
In mid-January, the IRS introduced a program called Free File, which allows individuals to electronically file their income tax returns for free through 17 services including H&R Block and Turbo Tax. That can be a big plus for business owners, because the majority of tax returns are filed through Schedule C or Schedule F along with the owners' 1040s, said Terry Lutes, the IRS' director of electronic tax administration.
The IRS benefits from the increased efficiency that comes along with e-filing, but Lutes noted that there are also advantages for small-business owners, including faster refunds. "There's also higher accuracy and less likelihood you'll have to communicate with IRS about your return," he said.
If you're interested in free filing, you can find the companies that are working with the IRS by first going to www.irs.gov, clicking on the Free File link at the top of the page and following the links on the next few pages, which include a frequently-asked-questions section.
Each of the 17 services has different requirements for free filing, including minimum or maximum adjusted gross income or ages. So business owners might find they don't qualify for some services.
But avoiding a fee should be just one factor in deciding whether to use one of these services. If, for example, you're looking for tax planning along with tax prep, you might find it's better to choose a service other than the 17 on the IRS site, or to consult an accountant or tax attorney.
Fee or not, if you're getting a big refund, you probably should e-file for the sake of improving your cash flow. Lutes said that if you e-file and have your refund deposited directly in your checking account, you can have your money in 14 days, perhaps less, compared to four to six weeks with a paper return and check from the government.
Tax prep aside, the IRS is making it easier to handle other business tax paperwork online, and to pay your taxes as well.
Similar to the system for filing 1040s, the IRS has partnerships with companies that will help small businesses file tax documents such as 1099s, W-2s and Forms 940 and 941, required for employment taxes. However, unlike Free File, these companies charge for their services.
To find them, start with the IRS home page and click on the e-file icon. The link "IRS e-file for Businesses" will take you to a page with information links and the link "IRS e-file for Business Partners."
The e-file icon on the IRS home page will also lead you to the link for the Electronic Federal Tax Payment System (look for the EFTPS logo), which allows small businesses to pay taxes online in much the same way bills are paid online.
Lutes said payments can be scheduled up to a year in advance, and it's possible to modify them. For example, you can schedule estimated tax payments for 2003 but adjust them to reflect changes in your business.
One of the most convenient aspects of electronic tax payment is that you can file your return, say, on March 1, but schedule your payment for April 15, the tax filing deadline, giving you a little extra time before you have to pay.
The system also allows businesses to research past payments as long as they were made electronically. Now, you can search for payments made in the past 120 days, but by midsummer, payments for the previous 16 months will be available, Lutes said.
It's not necessary for you to have online banking to take advantage of EFTPS. You can work through your bank, again, in much the same way you pay your bills online. Or, you can use what's called EFTPS-Direct, instructing the IRS to collect the tax payment from your bank.
Lutes noted that some taxpayers are nervous about the idea of the IRS being able to access a bank account, especially if they have a dispute over taxes with the government. He said the agency cannot just take money out of an account without having first gone through a legal process.
"We have no right under banking laws or any laws to do that," he said.
