Doing business taxes correctly is a vital step for growth. In the first place, it is an obligation of every entrepreneur to make corporate and personal taxes. This way you comply with the government and you can sleep more peacefully. The last thing you want is to be audited one bad day and find out that you owe thousands of dollars to the government. On the other hand, if you need to grow or expand your business, banks or lenders will usually ask for copies of your federal taxes to verify your income and to verify that you are current. Without this report or without doing it well, you will undoubtedly be denied the capital you need.
Access to business capital through your federal tax returns. The vast majority of institutions that lend money for businesses require business and personal tax reports as a basic requirement. This is a very important requirement because it proves a couple of things: 1) that you are a person of good moral character (because you fulfill your obligations) and 2) as proof of verification of your income.
Remember that the basic formula for whether you can qualify for a business loan has a lot to do with your income. In other words, what the bank is most interested in reducing the risk of the loan (by nature a business loan is high risk) is to make sure that you will have a way to make the payments on said loan. You will make these payments only if you have money available to do so. This is determined by your income minus your debts and obligations. The heart of the matter is that the bank does not believe you without corroborating it. If you say you earn $60,000 a year, the bank will surely ask for proof. The strongest test is your federal income taxes.
The 6 C’s that a bank reviews to grant or deny a loan
- Moral Character
- Payment Capacity
- (TAX BASED)
- Existing Capital
- Collateral or Guarantees
- Existing Conditions
- Trust
