4 ways small business owners can help take the pain out of 2018 taxes.

Aug 21 2018 | Chase Jones, Content Marketing Manager, PayPal

Tax season. Every small business owner seems to wince, cringe, or flinch at those two words. Some even do all three. But, tax season doesn't have to be painful. 
Just imagine all those deductions you can get back for your business. Plus, with a few tips to streamline your taxes, you may even start to look forward to them. (Okay, that may be a stretch.)

1. Be best friends with your accountant year-round. 
Your accountant is actually your business advisor. You don’t have a full-time finance person. You don’t have a CFO. So, they’re the ones advising you about your business financials and the growth of the company. If you’re not already talking to them on a weekly basis, talk to them at least once a month. 
 
2. Streamline your financial data.

The best way to save money for taxes is by hooking up other business applications so you can get that data flowing into a cloud based accounting tool such as Xero. Then, work with your accountant or advisor throughout the entire year to help minimize your taxes, making sure that you have the right deductions all year long. So, by the time you get to the end of the year to file your taxes, it’s painless. It’s seamless.
 
3. Learn (some) accounting.
You don’t need to be a CPA, but any accounting knowledge you gain now can only benefit you. Ask your accountant questions, learn the ins and outs of your financial statements, and go through your tax forms. 
 
4. Give yourself plenty of time in advance to organize.
Know your filing due dates, and work backwards. Allow time to gather all your documents, especially the paper receipts. Hiring a bookkeeper can also help you organize documents easier, and save you time. 
 
For more helpful tips and resources on small business taxes, check out the related articles below.

 

PayPal and Xero do not provide tax, legal, or accounting advice. The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.
 

Frequently asked questions.

FATCA affects holders of accounts that are outside the United States, and it requires PayPal to collect tax documents or certifications from account holders stating whether they are US persons. This includes, but is not limited to, business entities, and some individuals that open accounts outside the United States.

Pursuant to FATCA, PayPal also reviews existing account holder records to ensure that the account holder’s status (as a US Person or a non-US Person) is properly documented for FATCA purposes. In some cases, as a result of this review PayPal may request additional documentation from the account holder.  

Situations where additional documentation may be required include:
  • If data previously collected about an account holder does not match the information provided in an account holder’s tax documentation / self-certification
  • If an account holder claims they are a non-US person but PayPal finds that US identifiers exist in the customer’s information.
The information that must be collected may include, but is not limited to, the account holder’s address and US TIN (if a US person) or other TIN.  

A business entity can be required to provide:
  • Its country of incorporation,
  • Its business type or classification under FATCA,
  • A certification stating, among other things, whether the entity is or is not considered a “Specified US Person” (as that term is defined by FATCA).
  • Whether it has or does not have substantial US owners or controlling persons.
  • If it does have substantial US owners or controlling persons, the names and addresses of those owners or persons.
PayPal must collect the necessary information through documentation such as a certification of non-U.S. status, a Form W-9 (Request for Taxpayer Identification Number and Certification), for US entities or persons, or a Form W-8 BEN/BEN-E (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting), for non-US entities or persons.

Here’s how to provide PayPal with your FATCA information.
  1. Log in to your PayPal account.
  2. Click on the notifications icon.
  3. Click on the FATCA notification.  
  4. Follow the instructions provided.
You should read and review the certification or form before signing it with either your electronic signature or written signature. False statements may lead to penalties under applicable law.  If you have any questions or concerns regarding the form, it may be beneficial to engage tax counsel.
 
IRS rules (IRC Section 6050W) require that all U.S. payment processors, including PayPal, report gross payment information to the IRS about certain customers who receive payments for the sale of goods or services.

We’re required to report gross payments received by our customers who:
  • Receive more than $20,000 in gross payment volume from sales of goods, services, or donations in a single year, AND
  • Receive more than 200 payments for goods or services in the same year.
To ensure payment information is accurately reported, please update your account information by providing a Tax Identification Number. This can be a Social Security Number (SSN), Employer Identification Number (EIN) or Individual Tax ID number (ITIN).

Here’s how to add your Tax Identification Number to your PayPal account:
  1. Click the Settings icon beside "Log Out.".
  2. Click Account owner information under "Profile" on the left of the page.
  3. Scroll down to “Tax ID number” and click Add SSN, Add EIN, or Add ITIN.
  4. Enter, and then re-enter your ID number.
  5. Click Add.
While we don't report this information unless required to by law, we may still require this information be provided to continue uninterrupted access to your account.

Tax information and FAQs
"FATCA" is the Foreign Account Tax Compliance Act, which is a United States law designed to combat tax evasion by US persons (individuals or entities) that fail to report income related to non-US accounts. FATCA requires some of PayPal's non-US subsidiaries to collect information from their account holders to determine whether accounts are held by US persons (as defined by FATCA).

Agreements between the US and many foreign jurisdictions govern the exchange of account holder information to address local bank secrecy and privacy issues that may be impacted as a result of the FATCA's requirements. Information provided to the U.S. Internal Revenue Service ("IRS") or local regulatory agencies pursuant to FATCA are also covered by PayPal's Privacy Statement.