Are You Overpaying on Your Corporate Tax?
The word corporate tax brings shudders to many people. But they are not necessarily a very good thing to be done practically. On some level, your Corporate Tax UAE funds services that benefit the public and you or which no one entity would otherwise like to pay, such as Social Security and Medicare. Paying too small amount, however, amounts to an interest-free loan over and above your calculated fair share. In this article below, we will highlight some of the reasons that can lead to an overpayment in corporate tax and how best to avoid them.
With inflation leading to price increases, many business owners worry about money long before the UAE tax season. Of course, when you have other things to worry about, the last thing you want to do is focus on corporate taxes, but it is simpler than you think.
Corporate tax can seem daunting, but they do not have to be. With these tips and some time, you will be well on your way to never overpaying corporate tax again.
Keep Reading on to learn everything you want to know about UAE tax.
Get Organized
It can be easy to forget about tracking your expenses or to throw away all your receipts throughout the year, but you will regret it once the UAE tax season rolls around. Staying on top of your finances will make life much easier when you file corporate taxes.
You should track down all of your receipts and any payments or expenses you have.
If you work with a finance UAE tax professional, they will have you send them your receipts throughout the year. But if you do, you can surely keep track of everything.
Understand Your Obligations
The more you understand local, state, and federal corporate tax obligations, the less likely you are to overpay.
You can find plenty of resources on the IRS and SBA websites, including due dates, relevant corporate tax forms, and corporate tax filing directions. However, it’s important to remember that your business can also be subject to an audit by the IRS in any given year. So missing a due date, not paying your corporate taxes on time, or neglecting to file at all could raise a red flag and ensure your business is scrutinized.
You will likely pick up tidbits on potential deductions and credits your business qualifies for.
Take Advantage of Deductions and Credits
The key to lowering your corporate tax bill is taking advantage of every credit or deduction available. It is extremely important to know the difference between the two, though.
A UAE tax credit decreases your payment by directly reducing the amount you owe. Some credits are even refundable, meaning that if you owe $300 but qualify for a $1000 credit, you will get a $700 refund. A corporate tax deduction, on the other hand, works to decrease your payment indirectly because you are taxed on a certain percentage rather than your dollar amount.
The government gives tax credits, as we saw during the pandemic. Keeping up with the government’s plans throughout the year can help you know what to expect when UAE tax season rolls around, but lists are also available.
Examples of corporate tax deductions for small businesses include office supplies, office decorations, business trips, and any technology or other equipment necessary for your business to run.
Know the Laws
Depending on the state your business is established in, you might be subject to some questionable laws. No matter how much they annoy you, they must be followed. Failure to comply can result in extra fees (or worse) on your part, but it is easy to avoid.
Laws differ for each state (some states do not have corporate taxes), so it’s important to know them before the UAE tax season. How complicated your taxes end up depends on your business structure, the number of employees, and the industry you’re in.
Working with a professional can help ensure you avoid any trouble, though.
Work With a Professional
While hiring a professional corporate tax sounds expensive initially, knowing they can help you save thousands in overpaid corporate taxes is important. It can also help you avoid penalties and fines caused by simple mistakes.
For that reason, many small-sized business owners turned to accountants, corporate tax attorneys, CPAs, or even specialized tax professionals who can help plan UAE taxes throughout the year rather than at the last minute.
While UAE tax planning services can cost more initially, they will help your business stay out of trouble and grow and thrive each year.
How Professionals Help
UAE tax planning professionals help your business by conducting a full analysis, including things like:
- Deduction review and strategy planning
- Insurance review
- Legal entity optimization for LLC, S Corp, C Corp, and partnership
- Retirement options
If there are ways you can reduce your corporate tax payment, we will help you find them. Our tax planning services also offer the essentials like quarterly estimated payments, quarterly 1-on-1s, and business and individual corporate tax preparation. We ensure everything is set and that your return is filed correctly.
So, not only will you not have to worry about your corporate taxes being prepared correctly, but making those quarterly payments will feel much less painful. You will know you’re paying the minimum based on your business’s actual activity rather than general estimates.
The pros and cons of overpaying your corporate taxes
“Wait,” you may want to ask, “how can there be any better side to giving the IRS more money than you actually have to pay?”
Pro: Paying extra corporate tax can make your next month less stressful
If you overpay your UAE tax now, you do not need to worry about a hefty corporate tax bill in the next quarter. You will even get a refund of the extra amount.
For self-employed people paying corporate tax quarterly, padding each payment with some extra amount is a way to frontload the stress. It can be more tempting if you can afford it.
Con: Extra corporate tax payments may not be affordable for your company
A lower corporate tax bill later means paying a higher tax bill now. Plenty of UAE taxpayers can not afford to wait for months to get their money back.
For people who pay estimated corporate taxes, overpaying in the first quarter means you will need to wait until the next quarter of your corporate tax season to get your excess payment back — not exactly ideal.
A Clear Sign You Are Overpaying Your Corporate Tax
The most significant sign that you are paying too much corporate tax is the size of your refund. The average refund amount early in the UAE tax filing season tends to be just under $2,000, as the people expecting to get their money back from the Internal Revenue Service tend to file their corporate tax returns early.
Filing UAE tax early (and getting a return) can be a boon, especially when other life events can take priority. For example, you may be expecting a new addition to the family, a job loss, or you may want to have a dependent move into your home. Unfortunately, any of these situations can occur well before you have time to adjust the corporate tax with your employer.
Is There Any Possibility That You will get in trouble for overpaying your UAE tax?
No, there are no legal penalties for overpaying your corporate taxes bill. But, if you overpaid, do not worry: You would not owe anything extra to the IRS. Instead, you will get a UAE tax refund for overpaying the corporate taxes amount.
This is true if you have overpaid estimated quarterly corporate taxes. And it is also true if you have too much money to withhold from your paycheck.
One downside to overpaying your corporate tax: it means you are letting the IRS hold onto your money for most of the year. In effect, you’re giving it a small loan.
What tax write-offs can I claim?
So when is there a likelihood that you will see penalties?
While overpaying is fine, underpayments are a completely different and opposite story. Unfortunately, that can mean some serious legal penalties, plus paying interest on the money you owe.
Stop Overpaying Corporate Taxes Today
While hiring a UAE tax professional might be an investment upfront, it will pay off in the long run. You will no longer be stuck overpaying taxes as a business owner, and you will have time to focus on the matters. Whether scaling your business or giving your website the overhauls you have been putting off forever, you will have time to finish it.