Can a Small Business Get a Tax Refund?


January 11, 2022

As a small business owner, keeping track of your funds – and taxes – is critical. One thing to consider is under which circumstance(s) your business might receive a tax refund from the IRS. But before we can do this, it’s first important to understand what a tax refund is, exactly, and when they occur.

Generally speaking, tax refunds result from overpayments. In the event of an overpayment, the IRS sends a check for the amount an individual has overpaid.

For business owners, a common question is “How and when do tax returns occur for businesses?” and, “Can my small business even get a tax return?” Several factors play a role in this process. Here, we will discuss how tax returns work for small businesses.

Type of Business Entity

You may be wondering, do small businesses get tax refunds? Or, what about large corporations? Some small businesses can elect to become an entity that allows for them to pass their income through the owner of the company, like sole proprietorships, partnerships, S-corporations, and limited liability companies. The owner then is taxed on their income.

In this situation, the business does not pay taxes directly to the IRS. Rather, it goes through the owner’s taxes. In the event of this, a small business would not qualify to receive a tax refund directly.

When it comes to tax returns for a small business, your accounting team will help to determine the best way to submit taxes and how to claim deductions. In short, there are some situations where you may not be paying through the owner – and in those cases, you may see the average tax refund for businesses.

How Do Tax Returns Work for Business in Other Cases?

One thing to consider is how much small businesses pay in taxes. This can vary depending on the size and type of business. However, it can also be determined by the type of tax.

For example, C-corporations may receive a refund from income taxes they have paid. In this situation, the owners of the business, the partners, and the shareholders may be able to receive a refund on their returns based on the total income paid.

Payroll taxes are another situation that affects tax returns. When you learn how to file taxes for a small business, you may find that payroll taxes are one of the more complex forms of taxation. However, regardless of the type of business, you may receive a refund if you overpaid on your payroll tax account. Some restaurants, for example, may receive a tip credit, which is much like a refund. It is used to reduce the income tax owed by the company owner.

Another situation involves the sales or excise taxes you may pay. These are assessed by the state or the municipality. An overpayment of these taxes may lead to a refund. If you have a reassessment of the property value, this could also result in a refund.

How to Pay the Right Taxes

New Valley Bank strives to help ensure our customers have access to the funds they need to manage their business. Our expert team is here to support our client’s needs, as we are collaborators and partners, first, and bankers, second.

We encourage you to turn to small business tax preparation services that can help you manage everything from LLC tax deductions to estimating payroll taxes – to avoid overpaying them. In other words, don’t go it alone!

When it comes to loans for small businesses (or large corporations) trust our team to deliver the help you need. Our community bank in Springfield is dedicated to making it easier for you to run your business. You can trust our experienced team for services that cover everything from setting up business bank accounts to helping you find business loans to cover those expenses. Contact us to learn more about our services and expertise.

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Can a Small Business Get a Tax Refund?