Filing Your Business Taxes Electronically

Don't wait in line at the post office on April 15 — click and file your taxes
By W. Eric Martin, Keyboard pounder & synonym selecter TwoWriters.net The big push for electronic tax filing started in 1996 when the IRS began requiring businesses that pay more than $47 million in payroll taxes to file by phone or computer. By 2006, the threshold for required electronic filing had dropped all the way to $200,000 of combined federal tax deposits. Over the past decade, the process has become easy enough that millions of individuals and small businesses have joined in. Both taxpayers and the government prefer electronic filing because it:

1. Dramatically reduces the error rate on returns, thanks to built-in calculators and error-detection checkpoints
2. Allows the IRS and state tax agencies to process refunds more quickly
3. Provides taxpayers with a delivery-date receipt

 

Find out what's required

Whether you're a business newcomer or a seasoned pro, you may still be in the dark as to what's required when filing your taxes.
Try: Small business tax workshops are available in some states — and if your state doesn't list one now, check back closer to tax filing time. The IRS also offers a virtual small business tax workshop, both as sound files and as text. Lesson 3 shows sole proprietors, partners, and corporations how to file taxes electronically.

Apply for an Employee Identification Number (EIN)

If you have employees or file as a corporation or partnership, you need to include an EIN on your business' tax filings.
Try: The IRS website tells you far more than you'll ever need to know about EINs, or you can skip the wordy intro and go straight to the online EIN application.

Whip out the W-2s

If you've withheld income, Social Security, or Medicare taxes from an employee, then you must file a W-2 form with the Social Security Administration (SSA).
Try: Filing W-2s online with the SSA gives you more time to file (end of March versus end of February), provides you with an electronic receipt, and reduces the amount of paper you need to handle. You'll need to set up an account on the SSA site first, but in future years, the account will be there waiting for you.

Outsource the paperwork

If you'd rather have an accountant do the drudgery for you, there are numerous ways to find accountants who provide electronic filing services. Alternatively, use the Web to find tax software that will help you file your taxes online.
Try: The IRS maintains a list of business providers that provide electronic filing services, such as Paycycle, Perquest, and Corporate Payroll Services (which do the work for you) and TaxExact, Taxsoftware.com, and Drake Software (which provide you with forms where you input your own data).

Pay the piper

Filing electronically can be fast and easy, but you still have to suffer the most painful aspect of tax filing: paying the bill.
Try: You can pay current bills by credit card or direct withdrawal from your checking account. Another option is to sign up for the Electronic Federal Tax Payment System (EFTPS); through the EFTPS, you can pay current bills in addition to scheduling future payments that are automatically withdrawn on the date and time that you set. The IRS receives notice of these payments, so your tax records are always up to date.

• Although electronic filing is supposed to do away with paperwork, consider printing out a hard copy of all returns you file, just in case your computer goes kablooey.
• You can deduct the cost of electronic tax filing software or services as a business expense, saving you money on those very same taxes.
• Money management programs like Quicken can transfer data directly into your tax returns.
• If you go the EFTPS route, sign up for an account well in advance of when taxes are due because the government can take weeks to process your application.
• Getting a refund? Choose direct deposit into your bank account rather than a physical check — the money will get into your hands much more quickly.