In most cases, no, small businesses do not get tax returns. While individuals filing their taxes are eligible for a tax return when overpaying on their taxes throughout the year, a small business receiving a tax return is very rare. This typically depends on your business entity type and whether your small business pays federal and state taxes directly.
Please note that there is a difference between receiving a tax return as a business vs. receiving a tax return as a business owner (individual). You, as an individual, may still receive a tax return even if your business does not.
Most small businesses do not pay federal and state taxes directly even when filing a business tax return, instead they have their income “pass-through” to their owners and be taxed under the individual income tax (Brookings). Pass-through businesses include:
The only business entity that may receive a tax return is a C-corporation. In C-corps, profits are taxed separately from its owners, meaning it pays income tax directly to the taxing authorities. If a C-corp pays more in estimated tax during the year than is due on its final return, it would then be reflected on the owners, partners, or shareholders’ personal returns.
In certain circumstances where an LLC has filed Form 8832 and have an overage in their estimated tax payments when compared to the final tax return. This form essentially allows the LLC to be taxed similarly to a C-corp. These overages would then be paid back as a tax return.
While tax returns
Depending on the results of your tax return and business profit, your tax and accounting professional should assist you in making a plan for the next year. This typically includes making monthly or quarterly estimated tax payments. This ensures that you will have the correct amount (or minimum) needed for your taxes the following tax season.
While you do have a chance to overpay on estimated tax payments, most accountants recommend putting the overage – or what you might expect in a return – into your next estimated tax payment rather than paying it out to you.
No, not typically. Overall, a tax return would not be beneficial to your business. As tax returns are an overage of the payments you are making throughout the year, the amount in your return could have been used throughout the year to cover your other expenses or to be considered profit.
A tax return is essentially an interest-free loan for the IRS. It’s your money that they hold and return back to you – they do not pay interest and you receive no true benefits.