How Do I File My Small Business Taxes?

Get information on how to file your small business taxes. This includes tips on what forms you need to file, what records to keep, and what tax deductions are available to small businesses.

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Introduction

If you are self-employed or have a small business, you need to know how to file your small business taxes. While the process may seem daunting, it is not as complicated as you think. This guide will walk you through the basics of filing your small business taxes, including what forms you need to fill out and how to file them.

The first thing you need to do is gather your tax documents. This includes any forms W-2 and 1099 that you have received for the year, as well as your previous year’s tax return. You will also need a copy of your state and federal tax returns from the previous year. Once you have all of your documents, you can begin filling out your tax return.

The first form you will need to fill out is the 1040 form. This is the general tax return form that all taxpayers must fill out. On this form, you will report your income, deductions, and credits for the year. You will also calculate your total tax liability for the year on this form.

Once you have completed the 1040 form, you will need to complete additional forms based on the type of income you received during the year. For example, if you received income from interest or dividends, you will need to complete Form 1040A or Form 1040EZ. If you had capital gains or losses during the year, you will need to complete Form 8949 and Schedule D. If you are claiming any business expenses on your taxes, you will also need to complete Schedule C.

After you have completed all of the necessary forms, you can file your return electronically or by mail. If you are filing electronically, be sure to keep a copy of your return for your records. If you are filing by mail, be sure to send your return by certified mail so that it can be tracked if it gets lost in transit.

Step 1: Know Your Business Structure

The first step in filing your small business taxes is to know your business structure. Are you a sole proprietor, LLC, S-Corp, or C-Corp? This will determine which forms you need to file.

Sole Proprietor: If you are the only owner of your business, you will file as a sole proprietor. This is the simplest business structure and you will report all of your business income and expenses on your personal tax return (Form 1040).

LLC: A limited liability company (LLC) is a business structure that offers personal liability protection and flexibility when it comes to taxes. You will need to file an annual report with your state and pay LLC fees, but you will not need to file a separate tax return for your LLC. Instead, all of the LLC’s income and expenses will be reported on your personal tax return (Form 1040).

S-Corp: An S-corp is a corporation that has elected to be taxed as a pass-through entity. This means that the corporation’s income is passed through to the shareholders and taxed at their individual tax rates. The S-corp must file an annual corporate tax return (Form 1120S), but the shareholders do not need to file a separate return for the corporation.

C-Corp: A C-corp is a traditional corporation that is taxed separately from its shareholders. The C-corp must file an annual corporate tax return (Form 1120), and the shareholders must also file a personal tax return (Form 1040) for their share of the profits.

Step 2: Choose a Tax Year

The tax year is the 12-month period you use for reporting your income and expenses. You can choose any 12-month period you want, as long as you use the same 12 months every year. Many small business owners choose a calendar year, which runs from January 1 to December 31. However, if your business is a new business, or if you changed your business structure during the year (for example, from a sole proprietorship to an LLC), you may want to choose a different tax year.

If you’re not sure which tax year to select, talk to your accountant or tax preparer. They can help you decide which tax year will work best for your business.

Step 3: Determine Your Estimated Taxes

If you are self-employed or have income from investments, you may need to pay estimated taxes. Estimated taxes are paid throughout the year on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You may also need to pay estimated taxes if you have deferred compensation from an employer, or if you claim certain tax credits.

If you do not pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You can avoid this penalty by paying at least 90% of the tax for the current year, or 100% of the tax shown on your return for the prior year (110% if your adjusted gross income was more than $150,000).

You can make estimated tax payments using Form 1040-ES. This form is available on the IRS website at www.irs.gov.

Step 4: File Your Business Taxes

The IRS requires all small businesses to file an annual tax return. This is done using a Form 1120, which is the standard corporate tax return. The form must be filed by the 15th day of the 4th month after the end of the fiscal year. For example, if your fiscal year ends on December 31, you would file your return by April 15 of the following year.

If you owe taxes, you will need to make a payment by the same deadline. Taxes can be paid by check or money order, or you can pay electronically using the Electronic Federal Tax Payment System (EFTPS).

It’s important to note that even if you do not owe any taxes, you must still file a return. If you fail to do so, you may be subject to penalties and interest charges.

Step 5: Pay Your Taxes

The fifth and final step in filing your small business taxes is to pay your taxes. You can do this online, by mail, or by phone.

If you owe taxes, you will need to pay them by the April deadline. If you are due a refund, the IRS will send you a check in the mail.

Step 6: File Your Tax Return

Now that you’ve gathered all of your documents and information, it’s time to file your tax return. You can do this yourself or hire a professional, but either way, make sure you allow enough time to complete the process.

If you’re doing your own taxes, the first step is to choose the right tax software. There are many different options on the market, so do some research to find one that best suits your needs. Once you’ve chosen a program, follow the instructions carefully to complete your return.

If you’re hiring a professional, they will likely take care of everything for you. But it’s still a good idea to double-check their work and make sure everything is accurate before you sign and file your return.

Once your return is complete, double-check it one last time and then submit it electronically or by mail. Make sure to keep a copy for your records in case you need to reference it in the future.

Step 7: Get an Extension

If you know you can’t meet the filing deadline, don’t panic. You can get an automatic six-month extension of time to file your return by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

Step 8: Amend Your Tax Return

If you made a mistake on your tax return, you can file an amended return to correct it. You will need to complete a new Form 1040-X, which is the form used for amending federal tax returns. Make sure to include any supporting documentation that you didn’t include with your original return.

If you’re amending your return to claim a refund, you generally have three years from the date you filed your original return (or two years from the date you paid the tax, whichever is later) to file a claim. If you’re amending your return to pay additional taxes, you generally have three years from the date you filed the original return to pay any additional taxes due.

You can file an amended return online or by mail. If you’re filing by mail, send your completed Form 1040-X and any supporting documentation to the address listed in the instructions for Form 1040-X.

Step 9: Resolve Tax Issues

The IRS deals with a lot of businesses, and unfortunately, not all of them are honest about their taxes. If the IRS thinks you’re one of the dishonest ones, they may start auditing your business. An audit is when the IRS goes through your records to make sure you’re paying the right amount of taxes.

If you’re being audited, don’t panic. It doesn’t necessarily mean you did anything wrong. The IRS could be auditing your business for any number of reasons, and it’s important to keep calm and cooperate with the audit process.

There are a few things you can do to prepare for an audit:

– Keep organized records of all your business expenses. This will make it easier for you to prove to the IRS that you’re not cheating on your taxes.
– Cooperate with the auditor. The auditor is just doing his or her job, and if you cooperate, the process will go much smoother.
– Don’t try to hide anything from the auditor. If the auditor finds out you’ve been hiding something, it will only make the situation worse.

If you’re facing an audit, there are a few things you should do:

– Hire a tax attorney. A tax attorney can help you navigate the audit process and protect your rights.
– Don’t ignore the problem. The sooner you deal with an audit, the better off you’ll be. Ignoring an audit will only make things worse.

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