Paying taxes is one of your responsibilities as a business owner. In addition to your other taxes, you are accountable for paying property taxes if your business owns a building or land. If you don’t file or pay your taxes, you could face some serious and costly consequences. In the worst scenario, your property could be seized, or you could go to jail.
Businesses’ property taxes can be tough to get your mind around, but it’s crucial to understand them. However, with so many deadlines, bills, and tasks to think about, it can be overwhelming to keep tabs on your taxes’ critical aspects. Chances are, you would miss opportunities to do more worthwhile tasks that could supposedly reduce your tax bills.
If you’re interested in managing your business property tax more efficiently, read on to learn the proper ways to make it possible.
Understand Your Business Property Tax
First and foremost, it is important to understand a business property tax and how it works. It would be impossible to manage something you knew nothing about properly. If you want to make better decisions when dealing with your business property tax and other taxes, you must start by understanding the basics.
The same way a homeowner pays property tax on a home, your business also needs to pay tax on its property, such as land or real estate. It isn’t very easy to calculate your business property as it may vary due to certain factors. But it will generally be based on the assessed value of your property against the fair market value.
If your property’s appraised value is higher, you can expect to pay more in your business property tax. Get an accurate picture of the amount you would pay by doing the following:
1. Familiarize Yourself With Local Tax Laws
Your property’s location plays a great role in how and when you pay your business property tax. It is usually your local authority that will assess the value of your business property and the amount of tax you must pay every year.
Your property’s location plays a great role in how and when you pay your business property tax. It is usually your local authority that will assess your business property’s value and the amount of tax you must pay every year.
2. Research Tax Deductions
Although you are required to pay your property taxes, you can also claim a tax deduction out of it. However, the Internal Revenue Service (IRS) put some restrictions on what portion of your property tax is deductible as a business expense.
Typically, you cannot deduct property taxes levied on local benefits and improvements that increase the property’s value. However, if they are for maintenance, repairs, or interest charges, they can be considered tax-deductible.
Just to be certain, take the time to check with your local taxing authority to know more about potential tax deductions.
3. Keep Comprehensive Records
Detailed record keeping makes your tax filing easier. You have to closely monitor all your business expenses, revenue, and deductions through the year. Otherwise, tax time will be more challenging and frustrating.
Keeping comprehensive records is essential, especially if you want to qualify for all of your eligible tax benefits. It also prevents you from having to pay additional taxes and penalties for unsupported items.
Here are the different records you must keep that are relevant to your business property taxes.
- Gross Receipts
- Employment Tax Records
Note that such records are your defenses if there’s a specific item on your return that the IRS may question. They are typically the same records you use to keep track of your business and prepare your financial statement.
4. Carefully Review Property Forms and Bills
Once you receive your business property tax bill, it’s essential to review them carefully, especially if there are changes in your property. You might have a property that is included in the listing form but is no longer in service. There might also be assets that should not be on your property form.
Overlooking such details can have consequences, like excessive tax bills. You would not want to pay more than you ought to on your taxes. Thus, make sure to review everything that is listed on the listing forms. See to it that they are updated and indicated accurately on your property tax bill.
5. Work with a Tax Professional
Managing all your business taxes can be a complex job despite understanding the basics and having good record-keeping skills. That’s why working with a tax professional is significant. However, it’s even more so when it comes to your business property since it is specific and localized.
With that, you would most likely need property tax consultants knowledgeable about the tax laws in your particular location. They won’t only help you complete and file any necessary tax forms. But they also find ways to reduce your tax burdens as they are familiar with potential tax breaks and usually know what to do if you’re audited.
6. Utilize Property Tax Management Software
Dealing with different property tax assessments every year can be pretty overwhelming. It’s typical for mid-to-large-sized businesses to experience challenges keeping track of due dates, filing paperwork, and managing business property taxes. But utilizing property tax management software can make the task easier and quicker.
Even if you’re working with a tax professional, it would be beneficial to have that tax software at your disposal. It can expedite your business’s tax process and even help you complete tax forms or file taxes on your behalf. With a local-specific business property tax, property tax management software is a great addition.
It may require time, effort, and financial discipline to manage your business property tax properly. If you don’t want to encounter any unnecessary trouble, it’s important to keep your taxes in mind, not only during tax season but throughout the year. Note that your financial decisions can somehow affect what you’ll be paying on your taxes.