Forum Posts

Boubou Diop
Jan 27, 2022
In Tax individual and business
Starting a business can evoke emotions like excitement and hope, but can also lead to feelings of overwhelm regarding the process. We’ve created a guide that will discuss how to register a business, the reasons to register, the benefits of registration, and the steps you need to take to help eliminate any sense of dread while going through this process. How to register a business 1: Choose a business structure 2. Find a location 3. Register your business name 4. Register with the IRS 5. Register with state and local agencies 6. Apply for a business license and permits Do you need to register your business? Why should you register your business? What to do next How to register a business Register your business by following this simple, six-step process: choose your business entity and a business location, register your business name, get registered with the IRS and local government agencies, and finally, apply for necessary licenses and permits. Learn more about the specifics of registering a business by reading the in-depth explanations of each step below. 1. Choose a business structure Your business structure is the foundation of your business, including how your taxes are filed, how personal assets are handled, and how day-to-day operations are controlled. It also impacts business registration, including how and who you register with. There are many types of business structures, so it’s important to choose the one that best suits your organization's needs. The most common business structures include: Sole proprietorship: This is the most common type of business designation. It doesn’t require formal registration, however, you may still need to obtain the necessary licenses and permits which can vary by industry and state. As a sole proprietor, you use your own name to conduct business and use your Social Security number as your tax ID number. Key takeaway: This is what your business structure will be considered by default if you don’t pick one of the other options. DBA: “Doing business as” simply allows sole proprietors to operate under a name other than their own. For example, if John Smith started a plumbing business, he could file to do business as Smith Plumbing. The DBA designation, like any sole proprietorship, doesn’t offer the liability protection of other business designations, but it’s still valuable for marketing and credibility purposes. Key takeaway: It’s similar to a sole proprietorship, however, operates under a name other than your own. Partnership: A partnership is a business with two or more owners. The most basic type of partnership is a general partnership, in which owners divide all profits and liabilities equally. In addition to a general partnership, other types of partnerships include: Limited partnership: In this type of partnership, one partner has liability exposure, while the other has limited liability. Limited liability partnership (LLP): In such a partnership, all business owners are safe from the debts of the business. Key takeaway: If you co-own a business, you’ll likely have a partnership business entity. Limited liability company (LLC): An LLC combines the simplistic tax laws of a partnership with the limited liability protection of a corporation. An LLC can have one or more owners, referred to as “members”. As a member of an LLC, you file taxes as if you were a sole proprietor or partner: All of your business income and deductions pass through to your personal tax return. However, the LLC is a separate entity, so members can’t be held personally responsible for the company’s debts or liabilities. Key takeaway: LLC status separates personal assets from business liability. C corporation: These are reserved for medium to large businesses. A C-corp’s income is reported on a separate tax return—and owners, or “shareholders,” are taxed separately. Shareholders hold stock in the company, and formal company proceedings (such as electing a board of directors and assigning board duties) are required. C-corps have tax advantages that other entities do not, but they are more expensive to set up and more complicated to run. Key takeaway: C-corps are more complicated to run and have different tax advantages than other types of business structures, making this a better option for larger businesses. S corporation: Like C-corps, S-corps offer limited liability protections, however, an S-corp is taxed more like a partnership or sole proprietorship. In other words, income passes through to the shareholders’ personal tax returns. However, the IRS is more likely to closely monitor S-corps’ taxes, and tax mistakes can even result in the termination of your S-corp. Key takeaway: S-corps are taxed in a similar fashion to sole proprietorships and partnerships, with the limited liability protection of a C-corp. 2. Find a location After choosing the structure, it’s time to settle on a location for your business. Even if your company operates mostly online, you still need to register a location for operations like receiving government documents, filing taxes, and more. You can use a PO Box to communicate with customers and suppliers, but some government agencies require a street address to do business. Many lenders and suppliers also prefer to work with businesses that have a street address. When researching potential locations, keep in mind the costs and taxes you’ll have to pay for filing at that address. If you work from home, ensure your business is allowed to register at your home address—some states won’t allow you to use your personal address as your business address. 3. Register your business name Next, you’ll want to register your business name to prevent other businesses from using it now or in the future. Here’s how to register a business name successfully: A separate entity, like an LLC or corporation: Registering your business name is part of the registration process. These entities can be registered through a lawyer or an online legal service. Operating under a name other than your legal name: You’ll need to file a DBA. In some states, business owners have to file DBA registrations with the state agency in charge of business filings (usually the Secretary of State’s office). 4. Register with the IRS Registering your business with the Internal Revenue Service will give you a federal EIN, or Employer Identification Number. This is essentially a Social Security number for businesses (sometimes referred to as a federal tax ID). EINs are necessary for things like filing taxes, opening business bank accounts, and hiring employees. Remember that if you file your business as a sole proprietorship, you’ll use your own Social Security number as the federal ID number. With IRS registration, you’ll be able to report income tax, sales tax, franchise tax, and other business taxes. 5. Register with state and local agencies You’ll need to register separately with some of your local and state agencies, such as: Department of Revenue Secretary of State Better Business Bureau Franchise Tax Board Each entity has its own requirements that must be followed, so it’s worth working with an attorney to get things done correctly and in a timely manner. 6. Apply for a business license and permits Specific licenses and permits are required to run different businesses, and they vary by industry and state. It’s a good idea to have any necessary licenses or permits before you start your business to avoid future problems. If you want to know what licenses and permits are needed for your business, you can contact your local branch of the Small Business Administration. Do you need to register your business? Ultimately, this depends on the type of business structure you’ve chosen. Existing businesses that are perhaps expanding should be aware of registration requirements, and new businesses should consider the following: Sole proprietorships: These generally are not required to be registered, though registering would likely be beneficial to you and your business. DBA: You may need to register your business with your state. This does vary state to state, so it is best to check with your state regulations. Partnership: It’s always best to register a partnership with both the IRS and the state. Why should you register your business? Registering a business isn’t difficult, and the benefits far outweigh the time and effort it may take to do so. Registering your business separates your personal assets from your business assets, so they’re protected if you’re sued or encounter financial difficulties. You’ll also be protected from personal liability, which means you won’t risk losing your personal assets if something goes wrong with your company. Furthermore, if you intend to open a business bank account, you’ll need to provide proof that your business is properly registered with the state. There are plenty of legal and tax reasons to officially register your business, but there are some real benefits for business owners as well: Registering helps you build your brand’s reputation because potential customers will see you as a legitimate organization. You can hire employees and pay them per your state’s laws. When you register your business with the state, you’ll receive a state EIN that allows you to collect state taxes for your employees. Registering comes with its share of financial benefits, including tax benefits and the ability to officially apply for loans and other funding. Investors prefer to work with registered businesses. Finally, registered businesses earn insurance premium deductions, deferred tax payments, and more. What to do next Now that you’ve followed the tips for how to register a business and you’ve successfully registered your new business, it’s time to get your operations off the ground. Get out there and bring your business to life! At this point, you’ll want to ensure you have digital and physical copies of your registration information. Work with a lawyer to collect all the information you need so that you can draw up contracts, begin marketing, and prepare for tax filings. For tax filing, work with a CPA and track your expenses and general bookkeeping with software like QuickBooks.
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Boubou Diop
Jan 27, 2022
In Tax individual and business
How to write a business plan in 10 steps + free template By Andrea Wahbe Tue Jan 11 2022 Whether you’re a seasoned business owner or just beginning to think about starting a business, demands come at you fast. Amidst the rush of to-do lists and meetings, determining how to write a business plan—much less following a business plan template—often feels time-consuming and intimidating. But nearly 70% of business owners who have been there and done that recommend writing a business plan before you start a business, according to a recent QuickBooks survey. After all, when done right, business plans have enormous payoffs. And yet, more than 10% of prospective business owners said they do not intend to write a business plan. Another 10% aren’t sure if they need a plan. It’s more than the old cliche: A failure to plan is a plan to fail. In fact, a wealth of data now exists on the difference a written business plan makes, especially for small or growing companies. In this post, we’ll cover everything you need to write a successful business plan, step-by-step, and turn your idea into a reality. Even better, if you’re pressed for time, we’ve compiled the 10 steps and examples into a downloadable (PDF) template. The 10 steps to write a business plan are: Create an executive summary Compose your company description Summarize market research and potential Conduct competitive analysis Describe your product or service Develop a marketing and sales strategy Compile your business financials Describe your organization and management Explain your funding request Compile an appendix for official documents But, first things first. What is a business plan? A business plan is a comprehensive road map for your small business’s growth and development. It communicates who you are, what you plan to do, and how you plan to do it. It also helps you attract talent and investors. But remember that a business idea or business concept is not a plan. Investors want to know you have: Product-market fit: Have you done the research to determine the demand for your product or service? A solid team in place: Do you have the people you need to support your goals and objectives? Scalability: Can you grow sales volume without proportional growth in headcount and fixed costs? A templated business plan gives investors a blueprint of what to expect from your company and tells them about you as an entrepreneur. Why do you need a business plan? You need a business plan because the majority of venture capitalists (VCs) and all banking institutions will not invest in a startup or small business without a solid, written plan. Not only does a business plan help you focus on concrete objectives, but it gives outside parties reassurance that you’ve thought ahead. In 2018, entrepreneurial resource center Bplans worked with the University of Oregon to compile and analyze research around the benefits of business planning. Here’s what they found: Businesses with a business plan grow 30% faster than those without. Owners with business plans are twice as likely to grow, get investments, or secure loans than those without. Entrepreneurs with a business plan have a 129% increased likelihood of growing beyond the startup phase and a 260% increased likelihood of growing from “idea” to “new business.” Perhaps the strongest evidence comes from the Journal of Business Venturing’s 2010 meta-analysis of 46 separate studies on 11,046 organizations: Its findings confirm that “business planning increases the performance of both new and established small firms.” When do you need a business plan? Before you leave a nine-to-five income, your business plan can tell you if you’re ready. Over the long term, it’ll keep you focused on what needs to be accomplished. It’s also smart to write a business plan when you’re: Seeking funding, investments, or loans Searching for a new partner or co-founder Attracting, hiring, and retaining top talent Experiencing slow growth and need a change How to write a business plan in 10 steps Start with a clear picture of the audience your plan will address. Is it a room full of angel investors? Your local bank’s venture funding department? Or is it you, your leaders, and your employees? Defining your audience helps you determine the language you’ll need to propose your ideas as well as the depth to which you need to go to help readers conduct due diligence. Now, let’s dive into the 10 key elements of your business plan. 1. Create an executive summary Even though it appears first in the plan, write your executive summary last so you can condense essential ideas from the other nine sections. For now, leave it as a placeholder. What is an executive summary? The executive summary lays out all the vital information about your business within a relatively short space. An executive summary is typically one page or less. It’s a high-level look at everything and summarizes the other sections of your plan. In short, it’s an overview of your business. How do I write an executive summary? Below, you’ll find an example from a fictional business, Laura’s Landscapers. (We’ll use that same company throughout this guide and within the downloadable template to make each step practical and easy to replicate.) This executive summary focuses on what’s often called the value proposition or unique selling point: an extended motto aimed at customers, investors, and employees. You can follow a straightforward “problem, solution” format, or a fill-in-the-blanks framework: For [target customers] Who are dissatisfied with [current solutions] Our [product or service] solves [key customer problems] Unlike [competing product], we have [differentiating key features] This framework isn’t meant to be rigid, but instead to serve as a jumping-off point. Example of an executive summary Market research indicates that an increasing number of wealthy consumers in Richmond are interested in landscape architecture based on sustainable design. However, high-end firms in the area are scarce. Currently, only two exist—neither of which focus on eco-friendly planning nor are certified by green organizations. Laura’s Landscapers provides a premium, sustainable service for customers with disposable incomes, large yards, and a love of nature. 2. Compose your company description Within a business plan, your company description contains three elements: Mission statement History Objectives These elements give context to the bigger picture in your business plan, letting investors know the purpose behind your company so the goals make sense as well. What is a mission statement? A mission statement is your business’s reason for existing. It’s more than what you do or what you sell, it’s about why exactly you do what you do. Effective mission statements should be: Inspirational to make others believe in your vision Emotional to captivate readers and grab their interest Throughout every part of your plan, less is more. Nowhere is that truer than your mission statement. Think about what motivates you, what causes and experiences led you to start the business, the problems you solve, the wider social issues you care about, and more. Tip: Review your mission statement often to make sure it matches your company’s purpose as it evolves. A statement that doesn’t fit your core values or what you actually do can undermine your marketing efforts and credibility. How do you describe a company’s history? Don’t worry about making your company history a dense narrative. Instead, write it like you would a profile: Founding date Major milestones Location(s) Number of employees Executive leadership roles Flagship products or services Then, translate that list into a few short paragraphs (like the example below). Why do business objectives matter? Business objectives give you clear goals to focus on, like the North Star. These goals must be SMART, which stands for: Specific Measurable Achievable Realistic Time-bound They must also be tied to key results. When your objectives aren’t clearly defined, it’s hard for employees and team members to work toward a common purpose. What’s worse, fuzzy goals won’t inspire confidence from investors, nor will they have a profitable impact on your business. Example of a company description Laura’s Landscapers’ mission is to change the face of our city through sustainable landscaping and help you create the outdoor living space of your dreams. Founded in 2021 by sisters Laura and Raquel Smith, we have over 25 years of combined landscape architecture experience. Our four employees work in teams of two and have already completed 10 projects for some of Richmond’s most influential business and community leaders. Our objectives over the next three years are to: Solidify a glowing reputation as a service-based business that always exceeds customers’ expectations and honors the environment Complete at least 18 projects during year one, 24 in year two, and 36 in year three generated through word of mouth, referrals, and home shows Increase revenue from $360,000 in FY2021 to $972,000 in FY2023 based upon 10 completed projects in the last nine months 3. Summarize market research and potential The next step is to outline your ideal potential customer as well as the actual and potential size of your market. Target markets—also known as personas—identify demographic information like: Location Income Age Gender Education Profession Hobbies By getting specific, you’ll illustrate expertise and generate confidence. If your target market is too broad, it can be a red flag for investors. Example: If your product is perfect for people with money to hire landscape architects, listing “anyone with a garden” as your target market might not go over so well. The same is true with your market analysis when you estimate its size and monetary value. In addition to big numbers that encompass the total market, drill down into your business’s addressable market—meaning, local numbers or numbers that apply the grand total to your specific segments. You may even map your customer’s journey to get a better understanding of their wants and needs. Example of market research and potential Laura’s Landscapers’ ideal customer is a wealthy baby boomer, a member of Gen X, or a millennial between the ages of 35 and 65 with a high disposable income. He or she—though primarily, she—is a homeowner. They’re a working professional or have recently retired. In love with the outdoors, they want to enjoy the beauty and serenity of nature in their own backyard, but don’t have the time or skill to do it for themselves. Market research shows the opportunity for Laura’s Landscapers has never been better: In the U.S., total revenue for landscaping services increased from $69.8 billion in 2013 to $99 billion in 2019. (1) Among landscaping contractors, designing and building is the second fastest growing service offering. (2) What’s more, landscape design and construction is the number one “new service” existing companies plan to add over the next year. (3) In Richmond, leading indicators for interest in green, eco-friendly, and sustainable landscaping have all increased exponentially over the last five years: Online search volume for those terms is up 467% 10 new community organizations have been formed 73 high-profile projects have been covered by local media And currently 13% of Richmond’s residents have a household income of $125,000 or more (compared to the U.S. average of 5%) 4. Conduct competitive analysis Competitive research begins with identifying other companies that currently sell in the market you’re looking to enter. The idea of carving out enough time to learn about every potential competitor you have may sound overwhelming, but it can be extremely useful. Answer these additional questions after you’ve identified your most significant competitors: Where do they invest in advertising? What kind of press coverage do they get? How good is their customer service? What are their sales and pricing strategies? How do they rank on third-party rating platforms? Spend some time thinking about what sets you apart. If your idea is truly novel, be prepared to explain the customer pain points you see your business solving. If your business doesn’t have any direct competition, research other companies that provide a similar product or service. Next, create a table or spreadsheet listing your competitors to include in your plan, often referred to as a competitor analysis table. Example of competitive analysis Within Richmond’s residential landscaping market, there are only two high-end architectural competitors: (1) Yukie’s Yards and (2) Dante’s Landscape Design. All other businesses focus solely on either industrial projects or residential maintenance. Yukie’s Yards Average cost per project: $12,000 Ongoing maintenance fee: $200 per month Google My Business: 3.1 stars from 163 reviews Environmental certifications: None Primary marketing channels: Google Ads Dante’s Landscape Design Average cost per project: $35,000 Ongoing maintenance fee: $500 per month Google My Business: 3.7 stars from 57 reviews Environmental certifications: None Primary marketing channels: Home shows 5. Describe your product or service This section describes the benefits, production process, and life cycle of your products or services, and how what your business offers is better than your competitors. When describing benefits, focus on: Unique features Translating features into benefits Emotional and practical payoffs to your customers Intellectual property rights or any patents that protect differentiation For the production process, answer how you: Create existing and new products or services Source raw materials or components Assemble them through manufacturing Maintain quality control and quality assurance Receive and deliver them (supply chain logistics) Manage your daily operations, like bookkeeping and inventory Within the product life cycle portion, map elements like: Time between purchases Up-sells, cross-sells, and down-sells Future plans for research and development Example of product or service description Laura’s Landscapers’ service—our competitive advantage—is differentiated by three core features. First, throughout their careers, Laura and Raquel Smith have worked at and with Richmond’s three leading industrial landscaping firms. This gives us unique access to the residents who are most likely to use our service. Second, we’re the only firm certified green by the Richmond Homeowners Association, the National Preservation Society, and Business Leaders for Greener Richmond. Third, of our 10 completed projects, seven have rated us a 5 out of 5 on Google My Business and our price points for those projects place us in a healthy middle ground between our two other competitors. Average cost per project: $20,000 Ongoing maintenance fee: $250 per month Google My Business: 5 stars from 7 reviews Environmental certifications: Three (see Appendix) Primary marketing channels: Word of mouth, referrals, and home shows 6. Develop a marketing and sales strategy Your marketing strategy or marketing plan can be the difference between selling so much that growth explodes or getting no business at all. Growth strategies are a critical part of your business plan. You should briefly reiterate topics such as your: Value proposition Ideal target markets Existing customer segments Then, add your: Launch plan to attract new business Growth tactics for established businesses to expand Retention strategies like customer loyalty or referral programs Advertising and promotion channels such as search engines, social media, print, television, YouTube, and word of mouth You can also use this section of your business plan to reinforce your strengths and what differentiates you from the competition. Be sure to show what you’ve already done, what you plan to do given your existing resources, and what results you expect from your efforts. Example of marketing and sales strategy Laura’s Landscapers’ marketing and sales strategy will leverage, in order of importance: Word of mouth Referrals Reviews and ratings Local Google Ads Social media Home shows Direct mail Reputation is the number one purchase influencer in high-end landscape design. As such, channels 1-4 will continue to be our top priority. Our social media strategy will involve YouTube videos of the design process as well as multiple Instagram accounts and Pinterest boards showcasing professional photography. Lastly, our direct mail campaigns will send carbon-neutral, glossy brochures to houses in wealthy neighborhoods. 7. Compile your business financials If you’re just starting out, your business may not yet have financial data, financial statements, or comprehensive reporting. However, you’ll still need to prepare a budget and a financial plan. If your company has been around for a while and you’re seeking investors, be sure to include: Income statements Profit and loss statements Cash flow statements Balance sheets Other figures that can be included are: How much of your revenue you retain as your net income Your ratio of liquidity to debt repayment ability How often you collect on your invoices Ideally, you should provide at least three years’ worth of reporting. Make sure your figures are accurate and don’t provide any profit or loss projections before carefully going over your past statements for justification. Avoid underestimating business costs Costs, profit margins, and sale prices are closely linked, and many business owners set sale prices without accounting for all costs. New business owners are particularly at risk for this mistake. The cost of your product or service must include all of your costs, including overhead. If it doesn’t, you can’t determine a sale price to generate the profit level you desire. Underestimating costs can catch you off guard and eat away at your business over time. Example: Insurance premiums tend to go up annually for most forms of coverage, and that’s especially true with business insurance. If an employee gets injured, Laura’s Landscapers’ workmen’s compensation insurance to cover this risk will increase. Example of business financials Given the high degree of specificity required to accurately represent your business’s financials, rather than create a fictional line item example for Laura’s Landscapers, we suggest using one of our free Excel templates and entering your own data: For new businesses: Start up budget template For existing businesses: Income statement template Once you’ve completed either one, then create a big picture representation to include here as well as in your objectives in step two. In the case of Laura’s Landscapers, this big picture would involve steadily increasing the number of annual projects and cost per project to offset lower margins: Current revenue for FY2022: $200,000 10 completed projects ~$20,000 per project 15% profit margins $30,000 net FY2022 projections: $360,000 18 completed projects ~$20,000 per project 15% profit margins $54,000 net FY2023 projections: $552,000 24 completed projects ~$23,000 per project 12% profit margins $66,240 net FY2024 projections: $972,000 36 completed projects ~$27,000 per project 10% profit margins $97,200 net 8. Describe your organization and management Your business is only as good as the team that runs it. Identify your team members and explain why they can either turn your business idea into a reality or continue to grow it. Highlight expertise and qualifications throughout—this section of your business plan should show off your management team superstars. You should also note: Roles you still need to hire to grow your company The cost of hiring experts to assist operations To make informed business decisions, you may need to budget for a bookkeeper, a CPA, and an attorney. CPAs can help you review your monthly accounting transactions and prepare your annual tax return. An attorney can help with client agreements, investor contracts (like shareholder agreements), and with any legal disputes that may arise. Ask your business contacts for referrals (and their fees), and be sure to include those costs in your business plan. Example of organization and management Laura Smith, Co-founder and CEO Education Professional background Awards and honors Notable clients Raquel Smith, Co-founder and Chief Design Officer Education Professional background Awards and honors Notable clients Laura’s Landscapers’ creative crews Number of employees Cumulative years of experience Awards and honors Notable clients 9. Explain your funding request When outlining how much money your small business needs, try to be as realistic as possible. You can provide a range of numbers if you don’t want to pinpoint an exact number. However, include a best-case scenario and a worst-case scenario. Since a new business doesn’t have a track record of generating profits, it’s likely that you’ll sell equity to raise capital in the early years of operation. Equity means ownership—when you sell equity to raise capital, you are selling a portion of your company. Remember: An equity owner may expect to have a voice in company decisions, even if they do not own a majority interest in the business. Most small business equity sales are private transactions. The investor may also expect to be paid a dividend, which is a share of company profits, and they’ll want to know how they can sell their ownership interest. Additionally, you can raise capital by borrowing money, but you’ll have to repay creditors both the principal amount borrowed and the interest on the debt. If you look at the capital structure of any large company, you’ll see that most firms issue both equity and debt. When drafting your business plan, decide if you’re willing to accept the trade-off of giving up total control and profits before you sell equity in your business. Tip: Put together a timeline so your potential investors have an idea of what to expect. Some customers may not pay for 30 days or longer, which means the business needs a cash balance to operate. The founder can access cash by contributing their own money into the business by securing a line of credit (LOC) at a bank or applying for QuickBooks Capital. If you raise cash through a LOC or some other type of loan, it needs to be paid off ASAP to reduce the interest cost on debt. Example of a funding request Laura’s Landscapers has already purchased all necessary permits, software, and equipment to serve our existing customers. Once scaled to $972,000 in annual revenue—over the next three years and at a 10% profit margin—our primary ongoing annual expenses (not including taxes) will total $874,800. While already profitable, we are requesting $100,000 in the form of either a business loan or in exchange for equity to purchase equipment necessary to outfit two additional creative crews. 10. Compile an appendix for official documents Finally, assemble a well-organized appendix for anything and everything readers will need to supplement the information in your plan. Consider any info that: Helps investors conduct due diligence Gives context and easy access to you or your employees Useful details to cover in an appendix include: Deeds, local permits, and legal documents Certifications that bolster your credibility Business registries and professional licenses pertaining to your legal structure or type of business Patents and intellectual properties Industry associations and memberships State and federal identification numbers or codes Key customer contracts and purchase orders Your appendix should be a living section of the business plan, whether the plan is a document for internal reference only or an external call for investors. Tip: As you include documents in the appendix, create a miniature table of contents and footnotes throughout the rest of the plan linking to or calling attention to them. How to make a business plan that stands out Investors have little patience for poorly written documents. You want your business plan to be as attractive and readable as possible. Keep it brief. A typical business plan can range from 10 to 20 pages. As long as you cover the essentials, less is more. Make it easy to read. Divide your document into distinct sections, so that investors can quickly flip between key pieces of information. Know your margins. List every cost your business incurs, and make sure that you’re assigning those costs to each product or service that you sell. Proofread. Double-check for typos and grammatical errors. Then, triple-check. Otherwise, you might risk your credibility. Invest in quality design and printing. Proper layout, branding, and decent printing or bookbinding give your business plan a professional feel. Be prepared in advance. Have everything ready to go at least two weeks ahead so you have time to make revisions in case of a last-minute change. 3 tips to update your business plan It’s a good idea to periodically revisit your business plan, especially if you are looking to expand. Conducting new research and updating your plan could also provide answers when you hit difficult questions. Mid-year is a good time to refocus and revise your original plans because it gives you the opportunity to refocus any goals for the second half of the year. Below are three ways to update your plan. 1. Refocus your productivity When you wrote your original business plan, you likely identified your specific business and personal goals. Take some time now to assess if you’ve hit your targets. Example: If you planned to launch a new tips and trends video series and it hasn’t happened yet, what’s stopping you? Put a timeline together and set a launch date. If you only want to work a set number of hours per week, you must identify the products and services that deliver the returns you need to make that a reality. Doing so helps you refocus your productivity on the most lucrative profit streams. Also, use what you’ve achieved and the hard lessons you’ve learned to help you re-evaluate what is and isn’t working. 2. Realign with your goals Do a gut check to determine whether all of your hard work is still aligned with your original goals and your mission statement. Ask yourself these questions: Are my goals still relevant? Am I still focused on the big picture? Where do I want to be a year from now? Will my existing plan still take me where I want to go? These questions may be tough to answer at first glance, but they reveal your ties to your goals and what most likely needs to change to achieve new wins. 3. Repurpose your offerings If your time has become more focused on small projects rather than tangible growth and building a valuable client list, consider packaging your existing products or services differently. Can you bundle a few things together? Example: Laura’s Landscapers might be able to offer a special pool and patio package. Doing so might help them bring in fewer yet higher-paying projects. Perhaps they can offer a maintenance package as well to keep that customer long term. You must deliberately manage your revenue streams, and that might require shuffling things around a little to focus on what is working for you. Business plan template Even if you don’t plan on seeking investments early on, there are other important reasons to use a business plan template to write a great business plan: Clarifies what you’re trying to accomplish Identifies opportunities to understand your market, like demographics and behaviors Establishes the role of each team member Gives team members a benchmark to reference and stay on track Helps catch errors to make sure financial projections are accurate You’ll see the holes and blind spots that could cause future issues Download the following template to build your business plan from the ground up, considering all the important questions that will help your investors and employees. The old cliche is still true today: A failure to plan is a plan to fail. Your business plan is crucial to the growth of your business, from giving direction, motivation, and context to employees, to providing thoughtful reassurance and risk mitigation to financers. Before you get your small business up and running, put down a plan that instills confidence and sets you up for success. Share Andrea Wahbe Andrea Wahbe is a freelance B2B marketing strategist and corporate storyteller who writes about Canadian SMEs, marketing, and digital media trends. Follow her on Twitter
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Boubou Diop
Jan 27, 2022
In Tax individual and business
How to start a business: A practical 22-step guide to success By Andrea Wahbe Wed Dec 15 2021 Creating your own business is a rewarding opportunity to achieve a work-life balance while pursuing your passions, but it isn’t easy. Many business owners agree that the first year is the toughest. However, if you’re diligent when starting your business, you’ll put yourself in a much better position for success. To help, QuickBooks asked 965 seasoned small business owners if they had any advice for people who are about to start their first business. These business owners recommended three things you should definitely do before you start, in this order: Write a business plan Research the competition Find a mentor Current small business owners say these three things can increase your chances of success. And yet, according to the survey, not all prospective business owners plan to follow this advice. Download the full report to find out what current business owners recommend for new business owners and what they wish they would have done differently. Prep work: 1 . Define your vision 2 . Research your market opportunity 3 . Research your competition 4 . Write a business plan 5 . Perfect your sales pitch 6 . Understand your startup cost 7 . Plan your starting finances 8 . Develop your product 9 . Determine your business structure 10 . Investigate your legal requirements Take action: 11 . Apply for permits and business licenses 12 . Create and register a business name 13 . Open a small business bank account 14 . Set up accounting and payment systems 15 . Keep your finances current 16 . Outsource essential functions early 17 . Learn how to hire and pay employees 18 . Find a business location 19 . Market your business and launch a website 20 . Explore business partnerships 21 . Drive customers to your business Don’t be afraid to ask questions 1. Define your vision A business without a vision is like a ship without a sail. Defining your business’s vision sets everything else in motion. Drafting a mission statement should serve as the foundation for your vision. In a few paragraphs, identify your company goals and the high-level strategies you’ll use to accomplish them. When writing your vision, be as clear and concise as possible. Make sure you include a compelling and motivational message that inspires you to work together towards your goal. Your statement should help convey your “why.” It answers, at the most basic level, why you got into business. 2. Research your market opportunity There’s a lot to consider when starting a new business, from developing your product to accounting and legal practices. That’s why you want to make sure you have a strong business opportunity before going too far. Select a product or service What will your business sell, and how do you plan to be different from competitors? In other words, what is your value proposition or unique selling proposition? Validate your product idea Before getting too into the weeds, it’s important to validate your product idea. This is done by: Conducting an experiment to generate leads Research the market to see what’s trending around your product Pitch to your target market to see what response you get Also by asking these questions: Is this an original idea or an improvement on an existing product? Is there a need for this product? Is the market already saturated? These are questions that you’ll need to seriously consider as you move into defining your target market. Define your target market Who will your business serve? Begin to identify your target market with demographics like age, gender, income, and location. Then go deeper through personas or create a customer journey map. Know your market size or opportunity In the end, market research means quantifying the opportunity your product or service represents. Take time to figure out the total addressable market (TAM) of your potential customer base. Estimating the current and future value of your business idea and setting reasonable goals can help you win a piece of the pie. 3. Research your competition Competitor analysis is one of the key ingredients to a successful business. It not only lets you see what’s out there to compare, but you can also see where your competition is lacking. This means finding the gaps, exploiting them, and reaping the benefits of your improvement on the market. 4. Write a business plan Nearly 70% of people who already own a small business recommend writing a business plan before moving forward with your business idea, but 13%of prospective business owners say writing a business plan isn’t among their priorities. Writing a business plan can be a daunting prospect. The good news is you’ve already done some of the work by tackling the steps above. Keep in mind that your first business plan isn’t final. Parts of it will most likely change as you learn more about your market and grow your company. Some experts recommend starting with a business model canvas: a one-page document that covers the critical information you need to get started. This option can save you time and get you up and running faster. Once you’ve been in business for a while or are ready to seek funding, you can build a more detailed plan. Your plan should cover: Your operating resources Your overall marketing plan Your cost and sales structure Your financial management and business growth 5. Perfect your sales pitch If you plan on going after investors or financing for your business, you’ll want to create an elevator pitch. An elevator pitch is three to four sentences that tell an investor: What your business does Why your business is unique How they will benefit How they can help your business through their investment On top of crafting a unique and optimized pitch, you may also want to include a pitch deck. This is a basic slideshow that gives your elevator pitch imagery and usually includes statistics and more in-depth information surrounding your business. 6. Understand your startup cost Even if you’re self-funded and have yet to work with angel investors, you still need to understand your startup costs. Start by mapping out all of your anticipated costs for the next year. Then determine how much money you need to earn every month to stay in business (for example, your operating income and salary), and be mindful of costs like business taxes. Additionally, consider a plan B. More than three-quarters (76%) of people who will start a business in the next 12 months said they “definitely” or “probably” have a contingency plan, according to QuickBooks’ research. It can take time to build up your revenue, so it’s critical that you recognize costs and cash flow management trends early on. 7. Plan your starting finances About 1 in 3 people who want to start a business admit that getting funding is one of their top three financial priorities. If you don’t have startup cash, you don’t have to seek angel investments or venture capital. You can turn to other methods instead, like personal savings, crowdfunding, or loans. Personal savings One of the best ways to fund your business is using your own capital. Using your savings can seem daunting, but there are some advantages to consider: You own your business outright You don’t have to give away ownership You eliminate the hassle of acquiring debt There’s no need to bring in additional partners Crowdfunding You’ve likely heard of the crowdfunding platforms Kickstarter or Indiegogo. Crowdfunding is a popular route for many new business owners. You can use it to seek funds from many people, rather than one major investor. Microloans These are small business loans, often less than $10,000, that you can use to get your business off the ground. You’ll have to research microloan options in your city, state, or country, as there are many different services to choose from. Personal loans If you have a good credit rating, you can take out a personal loan instead of a business loan. You can also borrow against credit cards or a personal line of credit. Just be aware of long-term interest and tax implications. Grants Depending on your country, you may be eligible for grants, either from your government or private organizations. Again, you’ll have to do some research to find out what you qualify for and how to apply. Friends and family Last but not least, plenty of businesses get their start through the help of friends and family. Don’t be embarrassed to reach out. But take those pitches seriously by outlining all the work you’ve done through your canvas or business plan. 8. Develop your product Next, you should be moving into the research and development phase if you haven’t started already. Since you’ve already validated your product, now it’s time to get some prototypes out for the world to see. This is done by creating a sample of your product to conduct research with. During the development stage, don’t be afraid to try several times until you get a version (or several versions) of your product that you feel confident in. 9. Determine your business structure Choose the legal structure of your business entity. Are you better off as a sole owner or proprietor? Do you have a partner? Do you plan to incorporate your business? If you’re not sure how to answer these questions, you’re not alone. Seasoned business owners strongly recommend getting help choosing a business structure, yet 50% of prospective business owners say they’ll be doing this on their own. Each business structure option has its advantages, as well as associated tax reporting responsibilities and regulatory requirements. You may also want to opt for a federal tax ID number or an Employer Identification Number (EIN) instead of using your Social Security number. This is the number that the IRS uses to associate you with your business. Sole proprietor or sole owner This is a popular option for anyone who doesn’t have a lot of liabilities (e.g., no employees or significant investments) when they start out. As your business grows, you may wish to change legal structures. Being a sole proprietor could be an excellent option for those with a small side-hustle or day job. Business partnership If you’re going into business with a partner, then you will need to register as a business partnership or limited partnership. Expect to work with a lawyer and a tax professional to layout your partnership type, terms, and tax implications. Incorporated business Some notable benefits of incorporating your business are tax breaks and liability protection. Due to upfront costs, many sole proprietors wait until they have earned enough funds and are at the right stage to incorporate. Limited Liability Company (LLC) An LLC is a U.S.-specific form of a private limited company. This structure safeguards business owners, managers, and the LLC itself against certain types of personal liability. If you plan to operate from a brick-and-mortar location, personal liability is an important consideration. Should someone get injured on your property, you may not be held personally liable for the damages. If your business is an LLC, corporation, or partnership, you’ll likely need to register your business with any state where you conduct business activities. There are several other business structures to choose from, depending on which country you live in. Speak with an accountant or bookkeeper to determine which option best suits your needs. 10. Investigate your legal requirements Complying with legal regulations is a top priority for current and prospective business owners, according to the QuickBooks survey. Before you launch your business, consult a lawyer to ensure you’ve considered all the legal requirements. A reliable lawyer can help you solve legal and contract disputes and give advice before you sign a new contract. Here are some essential questions to ask your lawyer: Should I trademark my company name or logo? Do I need a patent, copyright, or intellectual property protection? Can you create standard contracts for negotiating with other businesses and vendors? How do I form a sole proprietorship, partnership, or corporation? What’s the process for sharing equity when seeking private investors? Different laws apply to every type of business, product, or service. Every country, including the United States and regions within, will have its own set of rules. Your local and federal government websites are an excellent place to begin your research about legal requirements. You should also consult national consumer and privacy laws for collecting personal customer information. 11. Apply for permits and business licenses Visit your government services or the Small Business Administration (SBA) to determine whether your business requires any national or local licenses or permits. While you’re at it, check to see if you qualify for any tax deductions and credits. Many local governments design special credits to help small businesses grow faster. You will also need an EIN if you plan to hire employees or open a business bank account. This will also serve as your tax ID so that you can pay federal, state, and local taxes. Your accountant or bookkeeper can advise you on any other tax-related applications you may need to complete. Again, this process depends on where you live and the type of business you’re operating. 12. Create and register a business name After you’ve had a conversation with your accountant and lawyer, it’s time to register your “doing business as” name. The process may differ by country and region. Seasoned business owners recommend consulting an expert to help you choose your business name, create your logo, and register your business. But 76% of prospective business owners say they’ll be choosing their own name, and 53% will attempt to design their own logo. You can change your name and logo down the road, but try to start with a name and brand that you can stick with. Before you register your business name, you may run a few options past an expert. Here are a few things to keep in mind before finalizing your choice of business name: Web-friendly naming: Keep your URL less than three words if possible. Consistency: Use the same name across the board. Unique but not hard to spell or pronounce: You don’t want customers guessing what your name says. Once you’ve landed on a name you feel good about, make sure it’s available. The quickest way to find out is through an online search. Enter your desired name into Google and check social media platforms like Facebook, Instagram, LinkedIn, and Twitter. Then reference your local secretary of state’s office to ensure another company isn’t using the name. If you plan to conduct business in multiple countries, check for the name’s availability in those countries as well. You should register the name and ensure it’s valid before creating business cards, logos, websites, and other materials. Again, registration sites differ by region and country. Finally, if you decide to register your name as a trademark, you’ll need to do so at this point. Your lawyer can guide you through this process. Keep in mind that there are additional costs associated with every registration. 13. Open a small business bank account A business bank account can help you track business expenses and take advantage of tax deductions and credits available to small business owners. You might consider opening a business bank account as soon as you start making business transactions. If you’re an LLC or corporation, you must have a separate bank account for company finances. Arrange a meeting with a business banking specialist to determine which type of account is right for your business. Cross-reference the bank’s advice with your accountant to determine which savings bundles or special accounts will benefit you. You may be planning an international business strategy and expecting to generate a high sales volume in those overseas markets. In this case, opening a bank account in the local market makes even more sense. You’ll save money on bank transfer and currency exchange rate fees. Plus, establishing a financial presence by country will make it easier for your bookkeeper and accountant during tax season, as they’ll be able to see separate statements for country-specific revenue. There are other benefits to opening a business bank account including: Opens the possibility of lines of credit Credit card availability Access to in-house loans Customer payments can go straight to your account 14. Set up accounting and payment systems Current business owners say setting up financial systems is the first thing you should get help with when starting a new business. If your accounting system is set up correctly from the start—with future growth in mind—you’ll save yourself time and money in the long run. Many small business owners outsource their accounting to a bookkeeper or chartered accountant. While that can save you a lot of time, you still need access to tools to help you review your finances month to month. The top three financial processes current business owners say they wish they’d invested in sooner are expense tracking, inventory tracking, and invoicing. Since cash flow is critical in starting a business, don’t launch without a cash flow spreadsheet and a balance sheet. You might also consider accounting software that automates this process and can help you visualize the money coming in and going out. Regardless of your choice, maintain a complete record of all of your finances in one place. Every level of business has legal and record-keeping tax obligations. Nailing down your bookkeeping from day one frees you up to work on growing your business. 15. Keep your finances current For small business owners, tax time is all the time. Ultimately, small business owners claim tax breaks on their tax returns, but year-round tax planning is important to maximize tax benefits. In order to make the most of this tax season, keeping your finances current is imperative. No matter how you file taxes, small business owners need to keep an accurate record of financial activities throughout the year. If you’re not quite sure where to start, consider working with a tax professional. If you’d prefer to do your taxes on your own, you might invest in tax preparation classes to help you get it right. 16. Outsource essential functions early When starting a business, you might be tempted to do everything yourself to save money. But spending time on tasks that aren’t in your skill set can cost you even more time and money. Delegate or outsource tasks that aren’t your area of expertise, like accounting, administrative work, or public relations. If you have the funds and legalities worked out, you can hire a few employees to share the workload. In fact, new business owners plan to hire 10 employees and seven contractors on average within the next 12 months, according to the QuickBooks survey. It might be tough at first to trust other people with your business. But if you hire great employees, you’ll question why you didn’t hire them sooner. If money is tight but you still need help, you can enlist contractors or freelancers. Managing your sanity is just as important as managing your time. 17. Learn how to hire and pay employees If you decide to hire someone instead of outsourcing to a contractor, you’ll need to familiarize yourself with: Creating job postings Creating legal documents (NDAs, noncompetes, etc.) Where to post your job opportunities Business taxes You must withhold taxes from employee paychecks. Speak with your accountant to ensure you meet all your tax responsibilities. Ask common payroll questions to understand payroll basics. Digital payroll services offer both self-service and full-service options. Using payroll software can help you: Set up and track employee health insurance, retirement plans, deductions, and garnishments. Monitor employee payroll data and annual changes, like bonuses and salary bumps. Establish a digital process to deposit your taxes automatically. Add new employees to your payroll system automatically. Enable automatic online direct deposits, which transfer funds into your employees’ accounts worldwide. Overall, payroll software can help you manage payroll effectively and better understand how to process payroll. 18. Find a business location Nearly 1 in 4 small businesses starting soon will have a 100% remote workforce. The majority of small businesses will still operate from a business location to some extent. If you’re preparing to open a brick-and-mortar food or retail business, picking the right location is extremely important. As you scout locations, there are a few things you need to keep in mind: Online only: Many small business owners have gone totally virtual. If your business is online, you need to consider where you will host your site as well as the design and speed to handle web traffic. Demographics: Consider who your customers are and how they’ll interact with your location. Does your target demographic frequent this potential location? Make sure your location reflects the image you’re trying to project. Foot traffic: Before you sign a lease, monitor the foot traffic outside a potential location throughout the day. Is it tucked away, or does it see plenty of passersby? Does the location have suitable parking for your future customers? Is it accessible? Competition: Having competitors nearby isn’t always a bad thing. Either way, you’ll want to be aware of them before you decide on a location. Business community: Are their other businesses nearby? You may benefit from their foot traffic. Are there restaurants nearby? Your customers (and your employees) might enjoy a bite to eat after shopping at your store. Look for a location where you can benefit from other businesses—and they can benefit from you. History: Research the history of the location. If other businesses have tried and failed in a space, you might want to know why. No matter what type of business you plan to start, make sure your location can meet your present and future needs. Look for adequate electrical wiring and utilities, space for your employees or any special equipment, and even zoning ordinances. Finally, keep the cost in mind. Rent is a major monthly expense for many small businesses, and there may be other location-related expenses like insurance, cleaning services, and parking fees. 19. Market your business and launch a website New small business owners say building a business website is their top marketing priority. In an increasingly digital world, it’s a smart move. In fact, 28% of small businesses say they are selling more products and services online than last year. The majority of them are doing so as a direct result of the COVID-19 pandemic. And experts predict that this shift to e-commerce is here to stay. Whether you run an online business or a brick-and-mortar location, you must include a website as part of your marketing strategy. Fortunately, you don’t have to spend a ton of money to set up your business for online sales. There are lots of easy-to-build, affordable website options. A few things to think about are: Creating your website layout/theme Picking your color scheme Hosting for your website Marketing for traffic When you have the time and resources, you can begin creating social media profiles to boost your social media presence and bring in new customers. From there, consider investing in digital marketing tactics like paid ads, reviews, and search engine optimization. As your business grows, you can budget for a stronger, more impactful digital marketing strategy. 20. Explore business partnerships We discussed reasons to enter a business partnership, but we should also address partnering with other companies for collective growth. There are several ways to form partnerships, like using referrals or joint ventures. Referrals and revenue share Some work with partners to help them sell services in exchange for a commission or revenue share wherein one business gives a percentage of a sale. Revenue shares are common for small sales teams and business owners who want to expand without hiring more full-time employees. With referrals, you might offer a commission to a partner who helps introduce and assist you in closing a prospective customer. Revenue sharing is usually better for businesses that help a customer use your product or service better. For example, software vendors have expert partners who might help a mutual customer use the software more effectively. As a result, the customer may spend more money with the software vendor. And the expert partner would get a percentage of sales based on agreeable terms. Joint ventures If you plan to build a tower for office space or make a movie, consider forming a joint venture with another business or group of companies. Let’s say you have all the equipment and staff to film the story but want to add computer graphics. That’s where a partnership with another production company with those capabilities makes sense. Cross-promotions If two businesses have similar target customers, it often makes sense to partner on a cross-promotion. Spend some time thinking about whether there are businesses in your community you can partner with. When approaching them: Be honest and clear about what you want and what’s in it for them. Be patient and willing to negotiate to ensure both parties are happy with the deal. Be ready to walk away if you can’t arrange a fair and mutually profitable opportunity. Just like when you’re hiring employees, place trust at a premium. You can always ask their existing or past partners whether they were happy with a recent joint venture or cross-promotional experience. 21. Drive customers to your business While creating a website can be made simple with plenty of online tools to assist you in your journey, driving customers to your business can be much more tricky. Depending on your type of business you’ll need: Online ads: Ad placement on a popular website and social media Print advertising: Ad placement in a magazine or newspaper Networking opportunities: Attend business events in your community Referrals: Ask for referrals from your customers either through word of mouth or sharing on their social media Even with these tools, both time and commitment are required to build brand reputation and customer loyalty. Don’t be afraid to ask questions Asking for help may sometimes be a challenge, but don’t underestimate the power of utilizing your network or teaming up with a mentor for help. Take advantage of your social and business circle of friends for better insight. How much does it cost to start a business? There’s no easy answer. The cost of starting a new business varies by business type, industry, and location. Estimate your startup costs on the SBA website before starting your business to determine how much you’ll need and whether you should apply for funding. There are a few costs every business can expect to incur upon startup. These include things like: Licenses Permits Registration fees Insurance If you plan to open a brick-and-mortar business, you’ll need to pay for office space, equipment and supplies, and utilities. Regardless of your business structure, you still need to pay for things like: Marketing Advertising A website Market research It’s a good idea for every new business owner to invest in an accountant or legal professional. And if you plan to hire employees or contractors, they’ll expect to be paid too. If you work in a trade, you may need to purchase special equipment or machinery to get started, or you may need to outsource your production. Start by identifying all your business expenses and how much they’ll cost. Some will have well-defined costs. You’ll have to estimate others to the best of your ability. From there, organize your expenses into one-time expenses and ongoing expenses. Track these expenses carefully because they may be tax-deductible. The SBA recommends counting at least one year of monthly expenses in your startup costs. When should you start a business? There’s never going to be a perfect time to start a business. Unless you have a crystal ball, you can’t predict what’s in store for the economy or your life. So the best time to start a business is when you feel you have the time and energy to devote to it. You’re passionate about your idea, and you’re ready to take the leap. But there are a few other indicators that you might be ready. You’ve done your market research. You know there’s a space for your new business in the market. You know who your competitors are and how you’re going to stand out. You have a business plan. Remember, seasoned business owners recommend starting with a business plan. You’re OK with the risk. If you’re terrified to fail—too terrified to take some risks—you might not be ready to start a business. You have some cash saved. You’ll likely need at least some access to money during your startup phase. If you have some cash stored away, you may be better positioned than someone paying off large debts. You can dedicate your energy. If you’re already experiencing a lot of stress in your personal life, it might not be the best time. Of course, these are no hard and fast rules. Many would argue that a pandemic isn’t a great time to start a business. But 28% of people say that the coronavirus only accelerated their plans to start a business within the next 12 months. And 72% of prospective business owners feel optimistic about the road ahead. They affirm that the best time to start a business is when you feel ready. Is starting a business difficult? Starting a business can be difficult, but it’s easier with help. Seasoned business owners recommend getting help setting up financial systems, choosing a business structure, registering your new business, and even choosing a business name. But prospective entrepreneurs aren’t totally eager to follow that advice. Nearly half of prospective business owners say they plan to set up their financial systems on their own. Another 50% say they’re going to choose their own business structure and hope for the best. And 76% say they don’t need help choosing a business name. It might seem like a frivolous cost to invest in help in these areas. But current business owners emphasize the importance of getting these things right the first time. Many said they wish they would have invested in financial management sooner, including expense tracking and invoicing solutions. And while registering your business might seem simple, structuring a business incorrectly can have costly consequences. There are lots of steps you must take when starting a new business, but no one expects you to be an expert right off the bat. Finding a mentor or investing in outside help increases your odds of success. How to start a business with confidence This article outlines the necessary steps you must follow to launch a new business, but we’ve only scratched the surface. You will need to chart your own course. Remember to start with your vision, research your opportunities, and record it all in a business plan or journal. It’s critical to understand and manage your startup costs and cash flow wisely. If you aren’t self-funded, find out which investment options make the most sense for your business. Outsourcing or hiring employees who are experts in their field can free up your time to focus on what you do best and drive growth. Plus, you can utilize services to automate processes, like accounting software to help with your books and closing. You can also lean on business partners in your community to support and grow your customer base collectively. When in doubt, ask for help. Expert advice can take your business to greater heights. And remember that fortune favors the bold, but it smiles on the prepared.
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Boubou Diop
Jan 26, 2022
In Tax individual and business
Issue Number: IR-2022-19 Inside This Issue All third Economic Impact Payments issued; Parents of children born in 2021, guardians and other eligible people who did not receive all of their third-round EIPs can claim up to $1,400 per person through the 2021 Recovery Rebate Credit WASHINGTON – The Internal Revenue Service announced today that all third-round Economic Impact Payments have been issued and reminds people how to claim any remaining stimulus payment they’re entitled to on their 2021 income tax return as part of the 2021 Recovery Rebate Credit. Parents of a child born in 2021 – or parents and guardians who added a new child to their family in 2021 – did not receive a third-round Economic Impact Payment for that child and may be eligible to receive up to $1,400 for the child by claiming the Recovery Rebate Credit. While some third-round Economic Impact Payments may still be in the mail, the IRS is no longer issuing first-, second-, or third-round Economic Impact Payments. Through December 31, the IRS issued more than 175 million third-round payments totaling over $400 billion to individuals and families across the country while simultaneously managing an extended filing season in 2021. Third-round Economic Impact Payments were advance payments of the 2021 Recovery Rebate Credit. In late January, the IRS began issuing Letter 6475, Your Third Economic Impact Payment, to recipients of the third-round Economic Impact Payment. This letter will help Economic Impact Payment recipients determine if they are entitled to and should claim the Recovery Rebate Credit on their 2021 tax returns when they file in 2022. The American Rescue Plan Act of 2021, signed into law on March 11, 2021, authorized a third round of Economic Impact Payments and required them to be issued by Dec. 31, 2021. The IRS began issuing these payments on March 12, 2021, and continued through the end of the year. Eligible parents of children born in 2021 and families that added dependents in 2021 should claim the 2021 Recovery Rebate Credit; most other eligible people already received the full amount and won’t need to claim a credit on their tax return The third-round Economic Impact Payment was an advance payment of the tax year 2021 Recovery Rebate Credit. The amount of the third-round Economic Impact Payment was based on the income and number of dependents listed on an individual’s 2019 or 2020 income tax return. The amount of the 2021 Recovery Rebate Credit is based on the income and number of dependents listed on an individual’s 2021 income tax return. Families and individuals in the following circumstances, among others, may not have received the full amount of their third-round Economic Impact Payment because their circumstances in 2021 were different than they were in 2020. These families and individuals may be eligible to receive more money by claiming the 2021 Recovery Rebate Credit on their 2021 income tax return: • Parents of a child born in 2021 who claim the child as a dependent on their 2021 income tax return may be eligible to receive a 2021 Recovery Rebate Credit of up to $1,400 for this child. o All eligible parents of qualifying children born in 2021 are also encouraged to claim the child tax credit—worth up to $3,600 per child born in 2021—on their 2021 income tax return. • Families who added a dependent – such as a parent, a nephew or niece, or a grandchild – on their 2021 income tax return who was not listed as a dependent on their 2020 income tax return may be eligible to receive a 2021 Recovery Rebate Credit of up to $1,400 for this dependent. • Single filers who had incomes above $80,000 in 2020 but less than this amount in 2021; married couples who filed a joint return and had incomes above $160,000 in 2020 but less than this amount in 2021; and head of household filers who had incomes above $120,000 in 2020 but less than this amount in 2021 may be eligible for a 2021 Recovery Rebate Credit of up to $1,400 per person. • Single filers who had incomes between $75,000 and $80,000 in 2020 but had lower incomes in 2021; married couples who filed a joint return and had incomes between $150,000 and $160,000 in 2020 but had lower incomes in 2021; and head of household filers who had incomes between $112,500 and $120,000 in 2020 but had lower incomes in 2021 may be eligible for a 2021 Recovery Rebate Credit. Individuals must claim the 2021 Recovery Rebate Credit on their 2021 income tax return in order to get this money; the IRS will not automatically calculate the 2021 Recovery Rebate Credit. The IRS began accepting 2021 income tax returns on January 24. Most other eligible people already received the full amount of their credit in advance and don't need to include any information about this payment when they file their 2021 tax return. The IRS issued additional payments – called “Plus-Up” Payments – to individuals who initially received a third-round Economic Impact Payment based on information on their 2019 tax return and were eligible for a larger amount based on information on their 2020 tax return. Avoid processing delays when claiming the 2021 Recovery Rebate Credit The IRS strongly encourages people to have all the information they need to file an accurate return to avoid processing delays. If the return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. To claim the 2021 Recovery Rebate Credit, individuals will need to know the total amount of their third-round Economic Impact Payment, including any Plus-Up Payments, they received. People can view the total amount of their third-round Economic Impact Payments through their individual Online Account. The IRS will also send Letter 6475 through March to those who were issued third-round payments confirming the total amount for tax year 2021. For married individuals filing a joint return with their spouse, each spouse will need to log into their own Online Account or review their own letter for their portion of their couple’s total payment. The IRS urges recipients of stimulus payments to carefully review their tax return before filing. Having this payment information available while preparing the tax return will help individuals determine if they are eligible to claim the 2021 Recovery Rebate Credit for missing third-round stimulus payments. If eligible for the credit, they must file a 2021 tax return. Using the total amount of the third payments from the individual’s online account or Letter 6475 when filing a tax return can reduce errors and avoid delays in processing while the IRS corrects the tax return. The Get My Payment application will no longer be available as of Jan. 29, 2022, and individuals are encouraged to access Online Account to view their first-, second-, and third-round Economic Impact Payment amounts under the related tax year tab. File electronically, and choose direct deposit The amount of the 2021 Recovery Rebate Credit will reduce the amount of tax owed for 2021, or, if it’s more than the tax owed, it will be included as part of the individual’s 2021 tax refund. Individuals will receive their 2021 Recovery Rebate Credit included in their refund after the 2021 tax return is processed. The 2021 Recovery Rebate Credit will not be issued separately from the tax refund. To avoid processing delays, the IRS urges people to file a complete and accurate tax return. Filing electronically allows tax software to figure credits and deductions, including the 2021 Recovery Rebate Credit. The 2021 Recovery Rebate Credit Worksheet on Form 1040 and Form 1040-SR instructions can also help. The fastest and most secure way for eligible individuals to get their 2021 tax refund that will include their allowable 2021 Recovery Rebate Credit is by filing electronically and choosing direct deposit. Anyone with income of $73,000 or less, including those who don't have a tax return filing requirement, can file their federal tax return electronically for free through the IRS Free File program. The fastest and most secure way to get a tax refund is to file electronically and have it direct deposited - contactless and free - into the individual's financial account. Bank accounts, many prepaid debit cards, and several mobile apps can be used for direct deposit when taxpayers provide a routing and account number. IRS.gov/filing has details about IRS Free File, Free File Fillable Forms, free VITA or TCE tax preparation sites in communities or finding a trusted tax professional. Claim 2020 Recovery Rebate Credit for missing first- or second-round Economic Impact Payments All first- and second-round Economic Impact Payments have been issued. The first- and second-round Economic Impact Payments were an advance payment of tax year 2020 Recovery Rebate Credit. People who didn't qualify for a first- and second- Economic Impact Payment or got less than the full amounts may be eligible to claim the 2020 Recovery Rebate Credit on a 2020 income tax return. Individuals will need to file a 2020 tax return if they have not filed yet or amend their 2020 income tax return if it's already been processed. If the individual’s 2020 income tax return has not yet been fully processed, the individual should not file a second return. Some returns need special handling to correct errors or credit amounts, which can delay processing. The IRS is having to correct significantly more errors on 2020 tax returns than in previous years. If the IRS corrects the credit claimed on the return, the IRS will send a letter with an explanation. More information Online Account Information Recovery Rebate Credit 2021 Recovery Rebate Credit Frequently Asked Questions 2020 Recovery Rebate Credit Frequently Asked Questions Back to Top Thank you for subscribing to the IRS Newswire, an IRS e-mail service. If you know someone who might want to subscribe to this mailing list, please forward this message to them so they can subscribe.
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Boubou Diop
Jan 26, 2022
In Tax individual and business
What items do I need to file my taxes? Make sure you bring: Whether you choose to have us prepare your tax return remotely with a Peoples Tax Virtual Tax Pro℠, or you meet with a Peoples Tax Professionals live in one of our RVA tax offices, here is a detailed list of items that will be important when we complete your tax return. Call (804) 204-1040 today to schedule an appointment or just stop by one of our convenient locations. Printable Version Please Note: For virtual tax clients, we can accept a scan or image of these items Personal Information Your driver’s license or other federal ID with picture Your social security card with your number or tax ID number Your spouse’s full name and social security number or tax ID number Your spouse’s driver’s license or other federal ID with picture Dependent(s) Information Dates of birth Social security numbers or tax ID numbers (cards must be provided if this is your first year with us or if this is a new child) Childcare records, including the provider’s tax ID number, if applicable Income of other adults in your home Form 8332 showing that the child’s custodial parent is releasing their right to claim a child to you, the noncustodial parent (if applicable) Income Sources Employed Forms W-2 or pay-stub for W-2 download Unemployed Unemployment income, state tax refund (1099-G) Self-Employed Forms 1099-MISC, Schedules K-1, income records to verify amounts not reported on 1099s Records of all expenses – check registers or credit card statements, and receipts Business-use asset information (cost, date placed in service, etc.) for depreciation Office in home information, if applicable Record of estimated tax payments made (Form 1040ES) Auto loan or lease if vehicle used for business Rental Income Records of income and expenses Rental asset information (cost, date placed in service, etc.) for depreciation Record of estimated tax payments made (Form 1040ES) Retirement Income Pension or Retirement income/IRA/annuity income (1099-R) Traditional IRA basis (i.e. amounts you contributed to the IRA that were already taxed) Social security/RRB income (1099-SSA, RRB-1099) Savings & Investments or Dividends Interest, dividend income (1099-INT, 1099-OID, 1099-DIV) Income from sales of stock or other property (1099-B, 1099-S) Any cryptotax currency transaction information (purchase or redemption) Dates of acquisition and records of your cost or other basis in property you sold (if basis is not reported on 1099-B) Health Savings Account (HSA) and long-term care reimbursements (1099-SA or 1099-LTC) Health Savings Account (HSA) or Medical Savings Account (MSA) distributions – 1099-SA Expenses related to your investments Record of estimated tax payments made (Form 1040ES) Other Income & Losses Lottery or Gambling income/losses (W-2G or records showing income, as well as expense records) Jury duty records Hobby income and expenses Prizes and awards Trusts Royalty Income 1099 Misc. Any other 1099s received Record of alimony paid/received with Ex-spouse’s name and SSN Deductions Real Estate/Home Ownership Forms 1098 or other mortgage interest statements Real estate and personal property tax records Receipts for energy-saving home improvements Repayment of the First-Time Home-buyer Credit – Form 5405 All other 1098 series forms Charitable Donations Cash amounts donated to houses of worship, schools, other charitable organizations Records of non-cash charitable donations Amounts of miles driven for charitable or medical purposes Medical Expenses Amounts paid for healthcare insurance and to doctors, dentists, hospitals Health Insurance Form 1095-A if you enrolled in an insurance plan through the Marketplace (Exchange) Form 1095-B and/or 1095-C if you had insurance coverage through any other source (i.e. an employer, insurance company, government health plan such as Medicare, Medicaid, CHIP, TRICARE, VA, etc.) Marketplace exemption certificate (ECN) if you applied for and received an exemption from the Marketplace (Exchange) Childcare Expenses Fees paid to a licensed day care center or family day care for care of an infant or preschooler Wages paid to a baby-sitter Don’t include expenses paid through a flexible spending account at work Educational Expenses Forms 1098-T from educational institutions Receipts that itemize qualified educational expenses Records of any scholarships or fellowships you received Form1098-E if you paid student loan interest Job Expenses & Tax Prep Fees Employment related vehicle expenses (tolls, mileage, gas, maintenance, license, property tax, interest expense, parking) Receipts for classroom expenses (for educators in grades K-12) Employment-related expenses (dues, education, publications, tools, uniform cost and cleaning, travel) Job-hunting expenses Record of moving expenses not reimbursed by employer Amount paid for preparation of last year’s tax return State & Local Taxes or Sales Tax Amount of state/local income tax paid (other than wage withholding), or amount of state and local sales tax paid State refund amount – 1099-G Invoice showing amount of vehicle sales tax paid Retirement & Other Savings Form 5498-SA showing HSA contributions Form 5498 showing IRA contributions All other 5498 series forms (5498-QA, 5498-ESA) Federally Declared Disaster City/county you lived/worked/had property in Records to support property losses (appraisal, clean-up costs, etc.) Records of rebuilding/repair costs Insurance reimbursements/claims to be paid FEMA assistance information Check FEMA site to see if my county has been declared a federal disaster area Last Year’s Federal and State Tax Returns
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Boubou Diop
Jan 26, 2022
In Tax individual and business
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Boubou Diop
Jan 26, 2022
In Tax individual and business
One year ago this week, President Biden was sworn in. Under the Biden-Harris Administration, the SBA continued scaling up to meet extraordinary challenges and deliver remarkable results for small businesses across America. Despite the odds, President Biden’s leadership has added 6.4 million jobs – the most in any year in U.S. history – and managed the fastest growing economy in decades while cutting unemployment to near historic lows. Learn more In celebration of National Mentoring Month, join Associate Administrator for the SBA Office of Entrepreneurial Development, Mark Madrid, and CEO of the SCORE Association, Bridget Weston for a webinar about the benefits of a business mentor in January 27, 2022, at 1:00 p.m. EST. During the webinar, you will learn: Who needs a mentor and specifically how they can help start or grow your business How to find the right mentor for you How to utilize SCORE’s extensive, nationwide network of business experts to assist you in navigating different aspects of your business How experienced business people can become involved in mentoring others through SCORE How SCORE mentorship plays out in the real world of starting and growing a business (as illustrated by a client case study) Register In case you missed it! This week, Administrator Isabella Casillas Guzman spoke at the 90th Winter Meeting of The United States Conference of Mayors. Administrator Guzman discussed how the SBA is filling gaps in relief and helping to ensure an equitable recovery for all entrepreneurs. Watch SBA and Business Forward Announce Launch of the “Small Business Digital Alliance” Today, the SBA and Business Forward, Inc., a non-profit organization working with small business leaders in support of policies promoting America’s economic competitiveness, announced the launch of the Small Business Digital Alliance. A joint public-private co-sponsorship, the SBDA will connect small businesses with critical tech resources to start and expand their e-commerce business to scale for success. The new initiative will also feature a series of free briefings and training to help small businesses access and utilize these digital tools to reach new markets, find diverse talent, improve operations, and raise capital. Learn more Over the past year, cyber incidents have impacted many companies, non-profits, and other organizations, large and small, across multiple sectors of the economy. Most recently, public and private entities in Ukraine have suffered a series of malicious cyber incidents, including website defacement and private-sector reports of potentially destructive malware on their systems that could result in severe harm to critical functions. All organizations, regardless of sector or size, should immediately: Reduce the likelihood of a damaging cyber intrusion Take steps to quickly detect a potential intrusion Ensure your business is prepared to respond if an intrusion occurs Maximize business's resilience to a destructive cyber incident Report incidents and anomalous activity to CISA and/or the FBI via your local FBI field office, FBI’s 24/7 CyWatch at (855) 292-3937 or CyWatch@fbi.gov. Learn more Did you know that nearly 96% of consumers live outside the U.S., and two-thirds of the world’s purchasing power is in foreign countries? The SBA has resources to help you export your products or services. Learn more Paycheck Protection Program borrowers: If your loan is $150,000 or less, you may be eligible to apply for direct forgiveness through SBA using our online portal. Follow the steps below. Find out if your lender is participating. Watch a video about how to use the portal. Apply for forgiveness. For additional information, visit the SBA website. Need Help with Your Business Goals? Consider a Mentor Whether you are new to business ownership, or a seasoned entrepreneur, a mentor can help you navigate the challenges of starting or managing a business. Most entrepreneurs agree that every business owner could use a mentor. In fact, according to a Sage survey, 93% of small and medium-sized businesses see the value of business mentors. And yet, in the same survey, only 28% of those businesses report using mentoring services. Learn more Thanks to vaccines, small businesses across America have opened back up. Keep the momentum going by getting vaccinated. Find a vaccine provider near you.
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Boubou Diop
Jan 26, 2022
In Tax individual and business
Issue Number: Tax Tip 2022-13 How a taxpayer’s filing status affects their tax return A taxpayer’s filing status tells the IRS about them and their tax situation. This is just one reason taxpayers should familiarize themselves with each option and know their correct filing status. The IRS Interactive Tax Assistant can help them determine their filing status. A taxpayer's filing status typically depends on whether they are considered unmarried or married on Dec. 31, which determines their filing status for that entire year. More than one filing status may apply in certain situations. If this is the case, taxpayers can usually choose the filing status that allows them to owe the least amount of tax. When preparing and filing a tax return, filing status determines: If the taxpayer is required to file a federal tax return If they should file a return to receive a refund Their standard deduction amount If they can claim certain tax credits The amount of tax they owe Here are the five filing statuses: Single. Normally, this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law. Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. If one spouse died in 2021, the surviving spouse can use married filing jointly as their filing status for 2021 if they otherwise qualify to use that status. Married filing separately. Married couples can choose to file separate tax returns. This may benefit taxpayers who want to be responsible only for their own tax or if it results in less tax than filing a joint return. Head of household. Unmarried taxpayers may be able to file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year. Qualifying widow or widower with dependent child. This status may apply to a taxpayer filing a 2021 tax return if their spouse died in 2019 or 2020, and they didn't remarry before the end of 2021 and have a dependent child. Other conditions also apply. More Information: Publication 501, Dependents, Standard Deduction, and Filling Information Publication 17, Your Federal Income Tax Share this tip on social media -- #IRSTaxTip: How a taxpayer’s filing status affects their tax return. https://go.usa.gov/xtKXz
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2
Boubou Diop
Jan 19, 2022
In Tax individual and business
Issue Number: CL-2022-03 Inside This Issue The IRS published the latest executive column, “A Closer Look,” which features Ken Corbin, Commissioner, Wage and Investment Division, providing an overview of the 2022 filing season and tips to help file an accurate return. “It’s important to all of us at the IRS that each taxpayer’s experience is one that meets their needs and preferences,” said Corbin. “We want to ensure that everyone understands the importance of filing electronically and choosing direct deposit, and we want people to know what they need to claim credits and deductions they may be eligible for when they file.” Read more here. Read the Spanish version here. “A Closer Look” is a column from IRS executives that covers a variety of timely issues of interest to taxpayers and the tax community. It also provides a detailed look at key issues affecting everything from IRS operations and employees to issues involving taxpayers and tax professionals. Check here for prior posts and new updates. Back to Top Thank you for subscribing to the IRS Newswire, an IRS e-mail service. If you know someone who might want to subscribe to this mailing list, please forward this message to them so they can subscribe. This message was distributed automatically from the mailing list IRS
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Boubou Diop
Jan 19, 2022
In Tax individual and business
Issue Number: IR-2022-18 Inside This Issue IRS begins 2022 tax season; urges extra caution for taxpayers to file accurate tax returns electronically to speed refunds, avoid delays IR-2022-18, Jan. 24, 2022 WASHINGTON – The Internal Revenue Service today kicked off the 2022 tax filing season with an urgent reminder to taxpayers to take extra precautions this year to file an accurate tax return electronically to help speed refunds. The start of this year’s tax season – which takes place earlier than last year’s February 12 opening – signals the IRS is now accepting and processing 2021 tax returns. More than 160 million individual tax returns for the 2021 tax year are expected to be filed, with most before the April 18 tax deadline. Most taxpayers face an April 18 deadline this year due to the Emancipation Day holiday in Washington, D.C falling on April 15. Taxpayers in Massachusetts and Maine will have an April 19 deadline due to Patriots Day; disaster victims have later filing deadlines in some locations. IRS Commissioner Chuck Rettig noted that taxpayers need to take special care this year due to several critical tax law changes that took place in 2021 and ongoing challenges related to the pandemic. “IRS employees are working hard to deliver a successful 2022 tax season while facing enormous challenges related to the pandemic,” Rettig said. “There are important steps people can take to ensure they avoid processing delays and get their tax refund as quickly as possible. We urge people to carefully review their taxes for accuracy before filing. And they should file electronically with direct deposit if at all possible; filing a paper tax return this year means an extended refund delay.” For most taxpayers who file a tax return with no issues, the IRS anticipates they will receive their refund within 21 days of when they file electronically if they choose direct deposit – similar to previous years. Last year's average tax refund was more than $2,800. “There are simple steps that people can take that will help them navigate this challenging tax season,” Rettig said. “Filing electronically and using online resources instead of calling are just some of the steps that can help people avoid delays.” “IRS employees will do everything possible with the available resources to serve taxpayers this year,” Rettig said. “We will work hard to deliver refunds quickly, serve as many people as possible and work to catch up on past tax returns affected by the pandemic. The IRS thanks you for filing your taxes, a critical part of helping our great nation.” IRS tips for a smooth filing season: Fastest refunds by e-filing, avoiding paper returns: Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year to avoid refund delays. If you need a tax refund quickly, do not file on paper – use software, a trusted tax professional or Free File on IRS.gov. Avoid delays; file an accurate tax return: More than ever this year, the IRS urges people to make sure they’re ready to file an accurate tax return. An accurate tax return can avoid processing delays, extensive refund delays and later IRS notices. Special care for EIP, advance Child Tax Credit recipients: The IRS also encourages caution to those people who received a third Economic Impact Payment or advance Child Tax Credit in 2021. Taxpayers should ensure the amounts they’ve received are entered correctly on the tax return. Incorrect entries when reporting these payments mean the IRS will need to further review the tax return, creating an extensive delay. To help taxpayers, the IRS is mailing special letters about the stimulus payments and advance Child Tax Credit payment amounts. People can also check the amount of their payments in their Online Account available on IRS.gov. Earned Income Tax Credit or Additional Child Tax Credit refunds: By law, the IRS cannot issue a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February, though eligible people may file their returns beginning on January 24. The law provides this additional time to help the IRS stop fraudulent refunds from being issued. Avoid phone delays; online resources best option for help: IRS.gov is the quickest and easiest option for help. IRS assisted phone lines continue to receive record numbers of calls, more than the agency can handle with its limited resources. Avoid delays: Check IRS.gov first for refund information and answers to tax questions. Establishing an Online Account on IRS.gov can also help taxpayers get information quickly. The Online Account feature has recently been expanded to allow more people to gain access. Don’t normally file a return? Consider filing for CTC, other valuable credits: For people who don’t normally file a tax return and didn’t file a 2020 return or use the Non-Filers tool, they can still qualify for important credits they’re eligible for, including the Recovery Rebate Credit (stimulus payment), advance Child Tax Credit or the Earned Income Tax Credit. The IRS encourages people in this group to file a 2021 tax return so they can receive all the credits for which they’re eligible. Online options for free help; answers to common questions: Use IRS.gov to get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed — online tools and resources are available 24 hours a day. Other free options for help: IRS Free File is available to any person or family who earned $73,000 or less in 2021. Qualified taxpayers can also find free one-on-one tax preparation help around the nation through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. 2020 tax return still being processed? Tips to help with filing 2021 tax return: For people whose tax returns from 2020 have not yet been processed, they can still file their 2021 tax returns. For those filing electronically in this group, here’s a critical point. Taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return when they file electronically. For those waiting on their 2020 tax return to be processed, make sure to enter $0 (zero dollars) for last year’s AGI on the 2021 tax return. Visit IRS.gov for more details. April 18 tax deadline: The filing deadline is April 18 for most taxpayers; automatic six-month extensions of time to file are available for anyone by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Back to Top
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2
Boubou Diop
Jan 19, 2022
In General Discussion
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