The information provided in this article is for small business owners filing income tax returns on Schedule C with their personal tax return (Form 1040). It includes sole proprietors and single-member LLC, owners.
Preparing and filing taxes is an overwhelming task. Many small business owners struggle to understand how their tax liability is determined. They don’t know what their corporate income tax rate is and how to get eligible tax deductions to save some money. Also, it’s important to know, that as a business owner, you will not only pay income taxes, but you will also need pay payroll taxes, self-employment tax, and other kinds of taxes.
Therefore, it is important to gather as much information as you can beforehand. Make sure all your payment records, receipt, expenses are in order and easy to read. You will also need to understand what kind of forms you will need to use and how to compile information on those forms.
Things will get even more complicated this year since this year tax reform (the Tax Cuts and Jobs Act) is in effect. Many small business owners are confused about how this new change will affect their tax bill and filing methods.
Do I Need an Income Tax Preparer?
If you have a simple one-person business with no as such assets that need depreciation, then you might be able to use a tax preparation software program.
No doubt hiring a tax professional makes your small business income tax filing easier. They know all the recent tax codes that might help you give tax cuts that you cannot even think from your own. However, if you decide to tackle this on your own, there are a few things that you need to know before preparing tax returns.
Have a Proper Filing System in Place
When it comes to business tax preparation, it’s very crucial for small businesses to have everything organized and in place. Have a proper filing system in place, label everything properly, keep receipts and record all the business expenses in a proper format. Label your documents properly, file everything correctly, keep receipts, invoices and business expenses in an organized way, and make sure you can access whatever you need quickly without any hassle.
Forms Small Business Owners Need to File Income tax:
Sole proprietors and single-member LLC need the following forms including Schedule C Income Tax Forms and forms for calculating self-employment tax:
What Tax Information You Need to Complete Schedule C Form?
To file Schedule C form, you may need the following information on hand:
• The calculated cost of goods sold
• Proof of all business tax deductions including costs of business travel, business meals, etc.
• If you bought an asset or equipment for business purposes, keep a record of that as well.
• If working from home, you should include any information about the business use of your home
Where and How to File Schedule Form C?
There are two ways to file your tax return:
1. By mail
If you read the instruction given with the Form 1040, you will see that the last page has some addresses listed that you can use to mail your tax return to the IRS. E-file, however, is faster than mail. If you are using a software program to file your taxes, e-file fees will be included in your cost. However, a tax preparer will not charge any additional cost for this.
If you are self-employed, then you are responsible for paying your self-employment taxes which includes Social Security and Medicare. Now the benefit of being self e-employed here is that you can deduct half of these taxes or even more by eligible self-employment tax deductions.
Other Taxes Paid by Small Business Owners:
• Payroll Taxes
• Excise Tax
• Property Tax
• Sales Tax
Due Dates for filing Income taxes
Most small businesses sole proprietors and single-member LLC, owners file their business tax returns with their personal taxes. Therefore, the due date for filing these tax returns is April 15.
Filing an Amended Tax Return
If you made a mistake when filing your small business income tax return, do not worry. File an amended return right away. If you want to know how to file an amended tax return, provided your contact information along with the error details here. We can help you out!
What Do You Mean by Estimated Taxes?
Estimated taxes are taxes that are paid throughout the year based on the estimated amount of your taxable income at the end of the year. Most small business owners who expect to owe more than $1000 in taxes are required to pay estimated taxes on a quarterly basis. These quarterly payments that you will make will be deducted you’re your total liability when you file your income tax return at the end of the year. Federal Taxes must be paid as you earn or receive income during the year. If you are working as an employee, it gets deducted from your payroll as withholding taxes, but if you are self-employed, you need to make estimated tax payments. Failing to do so will incur penalties and interest.
Filing a Qualified Joint Venture
If your business has two joint owners like you and your spouse, then you may be able to file a qualified joint venture. This involves filing two Schedule C forms, for your respective shares of the business. The process is not easy to understand and includes complexities. It’s better to check with your tax professional when filing for a qualified joint venture.
Hire a Tax Professional for Your Small Business Income Tax Preparation
Rather than spending hours, days and even weeks on understanding tax codes and then going through your books and accounts, it would be far more efficient to simply hire a professional income tax preparer. The time that you can spend on expanding your business should not be wasted. Let our professional tax experts handle your business tax preparation needs for your LLCs and partnerships, corporations and sole proprietorship businesses. We at Swift Tax use the latest software. We deal with businesses like yours every day. We can help you get the maximum tax refund possible and help you avoid penalties and unnecessary fines.