Are credit unions good for a small business?

Are credit unions good for small business?

Using a credit union for your small business can be a big decision with far-reaching effects. There are lots of factors to consider with this decision, but the first thing you need to ensure is you understand exactly what a credit union is.

The entire concept of a credit union is to serve a community and give them the best service possible to aid and grow that community. This means a lot of differences from other financial institutions, but the most significant one of these is that credit unions are non-profit. This means, unlike traditional banks, credit unions are not concerned with making the most money possible or increasing revenue streams. It will instead mean ensuring the services provided are the best serving and most valuable ones possible.

This will mean that if you work with a credit union, you will be getting very high interest rates, because they are going to offer you terms that will earn you the most money and benefit you the most, as they are not concerned with making money from you. As well as the interest rates being high, the other significant financial benefit is the loan rates being low, so you will not feel under the same level of pressure to pay your loan down as quickly as possible.

Credit unions contrast most with banks and other finance companies with their size. Being smaller and more community-driven means that credit unions will be able to give more focus to their customers, as well as understand and care for them on a more personalized level. Being so local will mean that a small business that wishes to expand, particularly to new locations, does need to consider if the credit union will be able to handle this as well since they are generally intended for local customers.

Credit unions give you a more personalized and valuable experience, though it works best if you remain local to its area.

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What are the types of business taxes?

What are the types of business taxes?

The Types of Business Taxes

When running a business, it’s best to keep up with your taxes to avoid penalties. Throughout the year, a business can pay the taxes that they owe from their annual income quarterly or yearly. In many cases, a business chooses to pay yearly, it’s usually during tax season. There are four types of ways a business can file their taxes. With that being said, those ways are employment taxes, income tax filing, self-employment taxes, and excise taxes.

Employment Taxes

If you have employees, you have to pay taxes involving Medicare and Social Security. These employment taxes are required to be paid every quarter. The latest that you can pay them is a month after each quarter is gone. The federal unemployment taxes have to be paid during this time as well. Income tax filing is also included in this category.

Self-Employment Taxes

Self-employment taxes are also a part of business taxes. This comes into play when a person has a legally binding contract with another corporation but are held responsible for paying their own taxes. In some instances, the self-employed will name their business another name beside their government name. Nonetheless, they still have to pay taxes quarterly or annually. When filing their taxes, they can choose the standard deductions where the Internal Revenue Service gives you a standard amount of money that you can file for your business supplies and relationship status.

Excise Taxes

Businesses that own convenience stores or grocery stores have to pay taxes on products and firearm sales. This tax is usually up to 12%. The best part about owning a store is that you can buy your items in bulk and pay the taxes all at one time. When filing with the IRS, there are 4 different forms used. In particular, they are forms 720, 730, 2290, and 11-c.

To be a successful business, it’s best to ask the Internal Revenue Service for any help. In addition to that, there are classes that business owners can take to ensure that they understand how to file their business taxes. With the knowledge of understanding how to file your taxes, your business will be in a better position for years to come.

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Why does my bank need a 4506-T?

Why does my bank need a 4506-T?

A 4506-T is an IRS form also known as a “Request for Transcript of Tax Return.” This form requests that the IRS send you a copy of the tax return information they have on record, up to ten years prior. You can specify a third party to receive your transcript instead with line 5a.

So why is the bank asking for this?

If you’ve applied for a loan, your lender may use this transcript to confirm that the information you give them about your income matches what the IRS has on file. A lender might request this form for any loan, but it’s mostly used for mortgages. This is because, after the 2008 housing crash, lenders are required by law to verify the ability of a potential borrower to pay said mortgages. VA home loans (for veterans) are the exception, though lenders may still ask for a 4506-T.

If you work for a company, the lender may confirm your ability to pay by checking in with your employer. If you’re self-employed, however, the lender will likely wish to check your income history. They’ll be looking to see that you’ve consistently made enough to pay the mortgage and that your income isn’t in decline. The 4506-T helps them to determine this and to verify that the information you’ve provided is correct.

Should I be worried about security?

A year after launching the transcript delivery system in 2014, the IRS noticed a security breach and took the system offline. An audit by the Treasury Department’s TIGTA found that over 350,000 accounts were subject to identity theft thanks to the security breach, and still more were at risk.

In May 2018, another audit by TIGTA was reported, and of the nine recommendations, the IRS addressed six. You can read the details here.

The greatest danger is not following instructions or filling out all relevant items. See how the form looks here.

 

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What happens if you get audited?

What happens if you get audited?

There is a five-letter word most of us fear: audit. Movies and television shows have portrayed being audited as a scary experience with men in suits coming to your home and grilling you like a common criminal. The good news is that audits are not like this. Generally, they are much simpler affairs. So, if you are being audited, here is what happens.

The Most Common Audit

One unknown fact is that over 75 percent of IRS audits are done through the mail. With mail audits, the IRS is seeking clarifications or further documentation for your return. This can happen for simple mistakes, such as a transposed digit, or for larger issues such as a confusing itemized deduction. Generally, if you send back what they need from you the matter will be closed with no further action.

Heading for the Office

The next audit level is an in-office audit. In this case, you should go to your local IRS office. In this case, you may want your accountant or lawyer to attend the meeting with you. You will also want any pertinent documentation pertaining to the issue they want to discuss.

They Come to You

When an IRS agent comes directly to your home or business, this is called a field audit. While this may feel overwhelming, stay calm. They generally reserve a field audit for when a lot of questions arise over an audit, or a lot of red flags appear. In this case, you will want to be prepared with your lawyer, accountant, and documentation.

After the Audit

In many cases, once the audit is over the IRS will accept your documentation and move on. If the IRS finds changes that need to be made in your return, you can either agree to these changes or contest them. If you do contest the changes, be prepared for more meetings and a formal appeals conference. If you are audited, you can likely expect a change to your taxes since around 90 percent of audits result in a change.

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What are the chances of being audited?

What are the chances of being audited?

The Average American Has a Smaller Chance of Being Audited by the IRS

It’s official: taxpayers today have a much smaller chance of being audited by the Internal Revenue Service (IRS).

Budget cuts, staff reductions, and changes to collection policies have dramatically reduced the number of IRS audits that are issued annually. The first factor—a reduced budget—has, per experts, played the largest role in reducing the frequency of audits. In 2018, the government entity’s budget, $11.2 billion, was nearly one billion dollars less than it was in 2010.

But experts have also indicated that reductions in audits and budget shouldn’t be viewed as an indication that the IRS has ceased pursuing tax evaders. On the contrary, the average American has a 1-in-160 chance of being audited; those who earn more than $200,000 annually have a 1-in-80 chance of being audited. Both rates are notably lower than their 2010 counterparts, but they are nevertheless considerable in the context of a nation with more than 325 million citizens.

Moreover, it’s also been noted that IRS agents still target questionable tax returns, even if they don’t issue an official audit when they do so.

When something on a return “doesn’t seem right”—charitable deductions, property valuations, dependents, income, and more—an IRS employee will usually investigate and inquire about the nature of the anomaly. Inaccuracies are frequently corrected, and corresponding fines are paid, all without the issuance of a traditional audit. In this way, smaller-scale errors and mistakes—not extensive efforts to avoid paying taxes outright—can be corrected in a way that saves the individual and the IRS time.

Experts have stated that the best way to avoid being audited and/or questioned by the IRS is by being honest and accurate when filing tax returns. Income, deductions, and technical information should all be double checked, and in the instance that a component of a return is unclear, an expert should be consulted. (Many banks and some grocery stores offer tax-preparation services, which cost as little as $10.) Additionally, tax-filing software helps individuals to accurately and expediently complete returns. Tax-filing software is generally inexpensive.

So long as major inaccuracies and changes in financial status are avoided, the chances of being audited are lower today than they have been in many years. With that said, tax filers still need to be vigilant and focused when paying their due to the government.

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