Whether you’re a Portland startup working on the next big app or a small business in Alberta, here are our top 5 Oregon business tax preparation tips that make filing easier.
As all Oregonians know, the Pacific Northwest is a highly sought-after place to live and work. In the U.S., Portland is now the 25th largest city, with Bend becoming the third fastest-growing city overall. Unsurprisingly, Oregon has also become a hub for startups.
If you’re an entrepreneur in the Beaver State, you might be wondering how to file taxes in Oregon as a small business. As the premier Portland credit union for individuals and businesses, CCCU has you covered. Check out our top five Oregon business tax preparation tips for startups.
1. Track everything
The most important thing you need to do as a small business owner is to track everything throughout the entire year. This includes all earnings, purchases, merchant services, accounts payable, and accounts receivable. Be sure to indicate the date and purpose for all receipts, invoices, bills, payments, and other records.
When it comes to keeping track of your business records, spreadsheets are one of the most useful tools. You might also try using an accounting software program like QuickBooks, FreshBooks, or Wave.
2. Figure out your business deductions
The next tip for preparing your Oregon business taxes is to figure out which expenses you can deduct. Business deductions will vary depending on a variety of factors such as your industry, how many employees you have, and whether you rent or own commercial property.
Some of the most common business deductions for small businesses include:
- Lease or mortgage payments for your home office, external office, or other commercial space
- Employee wages or salaries
- Repairs, maintenance, and cleaning services
- Office supplies and snacks
- Machinery and other business equipment
- Electronics and software
- Phone and internet
- Electric, water, waste management, and other utilities
- Mileage, parking, and some auto expenses
- A company car
- Airfare, lodging, travel meals, car rental, and other travel expenses
- Marketing and business meals
- Insurance premiums
- Corporate donations
- Retirement contributions
If your business is new, you can also deduct up to $5,000 in startup costs for your first operational year. Additionally, startups can deduct organizational expenses for their first year. This might include business licensing, legal fees, and other costs associated with forming a company.
3. Know which forms you need
As a small business owner, knowing which tax forms you need is critical. All startups must report their total earnings each year, but the form you use will depend on the nature of your business.
If you operate as a sole proprietorship or an LLC (limited liability company), you’ll use Form 1040 (Schedule C), which is filed as an attachment to your personal income tax return. Businesses that operate as corporations have to use Form 1120 (U.S. Corporation Income Tax Return).
The Oregon Department of Revenue has its own tax forms for sole proprietorships, LLCs, and corporations. If you file your Oregon business taxes with an online tool like TurboTax or H&R Block, the proper forms will be selected for you as a part of the service. You can also file your taxes for free through Free Tax USA.
4. Check for tax credits
Both business deductions and tax credits can reduce the amount of taxes you pay. While deducting business expenses can lower your total taxable income, tax credits directly decrease the amount of taxes you owe, dollar-for-dollar.
Common tax credits for small businesses include:
- Research and development
- Federal Research & Experimentation Tax Credit
- Energy conservation
- Oregon Business Energy Tax Credit (BETC)
- Federal energy-efficiency tax credits
- Improving accessibility for disabled individuals
- Disabled Access Credit
- Hiring and retaining employees with employment barriers
- Work Opportunity Tax Credit (WOTC)
- Offering health insurance to employees
- Small Business Healthcare Tax Credit
How do tax credits work? For example, let’s say your small business made $200,000 last year but is only taxed on $150,000 after deductions. If your business owes $45,000 in taxes based on $150,000 of taxable income, a tax credit would be subtracted from the actual amount you owe in taxes. So, if you get a tax credit of $10,000, you would only owe $35,000 for the year.
5. Avoid missing deadlines
Our last tax preparation tip for small businesses in Oregon is to make sure you don’t miss deadlines. The annual deadline for most businesses in the U.S. is the same date for filing individual tax returns: April 15. However, for S-Corps (S Corporations), the deadline is March 15.
If you’re operating as a sole proprietor or LLC, you’ll file your business taxes along with your personal income taxes. Corporations will file separate tax returns. Also, most businesses are required to pay estimated quarterly taxes, which are usually due by April 15, June 15, September 15, and January 15. For S-Corps, the due dates are April 30, July 31, October 31, and January 31.
Why entrepreneurs should partner with a Portland credit union
For many startups, figuring out how to file taxes can be a learning curve. One of the best ways to set up your small business for success come tax season is to separate all your business expenses from your personal finances. That’s why we recommend Oregon entrepreneurs partner with a credit union to open a business checking, savings, and credit card accounts where they can keep their money in one secure place.
As one of the best credit unions in Portland, CCCU offers its members a wide range of business banking tools. From business checking and savings accounts to low-interest loans and company credit cards, we have it all.
Apply for a business membership today, or stop by one of our conveniently located Portland branches to talk to an expert about the benefits of banking with a credit union.