If you are a business owner or entrepreneur who is just getting started, you might not have had time to consider your taxes yet. However, tax season is rapidly approaching, meaning that now is the time to get your ducks in a row if you want to avoid any nasty surprises from the IRS.
Filing your business tax return might make you feel somewhat anxious, but there is no need to panic. By making a few simple preparations and knowing how to fill it out the right way, business tax matters can be simple and straightforward, no matter the shape or size of your business. Read on to find out how to file taxes for your business, and why it is important to do so.
1. Why Your Business Tax Return Matters
It is not hard to see why large and small business taxes matter. Business taxes are (mostly) federal income tax. It must be paid no matter where in the United States you reside and work. If you fail to pay, the IRS can fine you, hold you personally liable, and even press criminal charges against you. It is also important to look at the positive reasons.
Filing your business taxes should be seen as an opportunity to take stock and get a handy refresher on your company’s financial situation. This will help you plan for the year ahead.
2. Consider Your Business Structure
First and foremost, it is important to choose a business structure that offers the right tax advantages that you are looking for. If you are a sole proprietor, you are considered to be the same legal entity as your business is, meaning you are fully liable. However, it also means that you can file your personal and business taxes at the same time (via Form 1040), making this the easiest option by far.
Meanwhile, partnerships, which must be owned by two or more people, are only taxed at a personal income level. If your business is a corporation meanwhile, all profits are taxed at the corporation level, rather than at any personal level. Make sure to choose the correct structure for your business before you start trading.
3. Get Your Documents in Order
Get your documents together now, no matter how far away your filing deadline is. If you expect to earn more than $1000, you definitely need to file your business or LLC taxes, so you might as well get started. As a sole proprietorship, you can fill out all business tax matters via personal income tax form 1040, using section C attachment to detail business revenues.
Corporations require Form 1120, while partnerships require a 1065 Form. It is imperative to report your taxes correctly, which is why you should not take the risk of doing it yourself, especially if this is your first time filing.
For this, make sure to consult qualified tax accountants in your state that have proven experience preparing tax returns for small businesses such as yours. This way, you can avoid messy and expensive penalties from the IRS.
Modern Business Made Easy
Understanding your business ta return will help you keep on top of those vital admin tasks that all businesses must complete to be successful. If you need more practical guides on understanding modern business rules, we have got you covered. Our dedicate Business section has the advice and know-how you need to thrive.
