How to File Taxes for a Business: What You Need to Know

Today, there are about 30.2 million small businesses in the United States. If you’re one of these then you might wonder how to file taxes. While you might only be concerned about taxes once per year, the fact is that you’ll need to think about it year-round. 

This all might seem overwhelming, but there’s hope. Read on to explore this guide on how to file taxes for your business today!

Business Taxes

When filing taxes, it’s important to understand local, federal, and state tax requirements. The business structure that you choose will determine the way you go about filing taxes. It’s a good idea to reach out to a tax professional such as that can help you out with your business questions and concerns. 

Self-Employment Tax

Your self-employment tax falls under your Medicare and social security tax. This is for those who work for themselves. A self-employment tax can go toward your coverage under the social security system. 

The great part about social security is that it can provide you with disability benefits, retirement benefits, survivor benefits, and hospital insurance benefits. 

If you work for a church-controlled organization or a church that has an exemption from Medicare and social security taxes, then you’ll be subject to the self-employment tax. This is if you make more than 100.00. 

If you’re a fishing crew member, alien, state or local government employee, or part of the foreign government, then you might have exemptions. Be sure to check out the IRS website if you fall under this. 

Understanding Estimated Taxes

These business taxes are based on income that’s not subject to withholding. This includes dividends, interest, and self-employment. You’ll also need to pay for it if the amount of income tax that’s withheld from your salary isn’t enough. 

If you don’t pay for estimated taxes, then you might be charged a penalty by the IRS, plus you’ll have to pay interest for the amount of time that you’re late. They’re due every quarter. 

This equates to: 

  • January 15th
  • April 15th
  • June 15
  • Sept 15

Be sure to pay attention to deadlines and keep in mind that each due date will be for a certain pay period. If you miss a deadline, reach out to the IRS to see what your options are. 

Collect Your Records

When you’re ready to file your employment taxes, you’ll want to collect all of your records first. It should show all of your expenses and earnings related to your business. 

It’s a good idea to use a spreadsheet or computer program to keep track of all of the transactions during the year. This will make it easier to figure out your deductions and income throughout the year. There are different programs online that you can pay a fee to use to make it easier instead of doing your taxes by hand. 

Use the Correct Form

Head over to the IRS website and choose the correct form. You’ll need to pay taxes and report your business earnings to the IRS. 

If you’re a sole proprietor, then you’ll be able to use a Schedule C attachment for all of your expenses and income. Even if you’re an LLC, if you’re the sole owner then you can use a Schedule C. 

For corporations, you’ll need to use an S-Corp (Form 1120 or Form 1120S). If you use an online program to do this, you’ll answer different questions about your expenses and income. 

Excise Taxes

Excise taxes are for those who receive payment for certain services, sell or manufacture goods, use different kinds of products, or operate certain businesses. There’s Form 11-C, 2290, 730, and 720. Be sure to check out the IRS website to see if you’ll need to pay these forms. 

Energy Tax Incentive

If you have energy tax incentives, it can make improvements in energy more affordable. You’ll receive credits for making energy-saving improvements or buying efficient appliances. 

Check out the federal, local, utility, and state incentives to see if you qualify. Find out if your area has a sales tax holiday on energy-efficient home appliances. 

Small Business Charitable Donations

If you’re a small business, you can receive a tax deduction if you make charitable donations. The donations must be intellectual property, non-food inventory, or food.

If you donate services, you won’t receive a deduction. You might be able to reduce expenses based on materials, donation, travel, etc. 

Avoiding Red Flags

In order to avoid any red flags, always report all of your income. It’s a red flag if anyone finds out that you’re not reporting all of your money.

Since the world is becoming more virtual, it’s even easier to see when someone isn’t paying their fair share of taxes. Also, avoid claiming losses every single year. If you continually claim losses, it’ll raise a red flag how you’re staying in business. 

Always comply with employment taxes as well. Keep in mind that if you hire an employee, you’ll need to understand the liability of employment taxes for them.

Avoid underreporting or incorrectly reporting taxes as well since that’s a red flag. Never cheat the system, and don’t deduct your personal expenses as a business. 

Understanding How to File Taxes

After exploring this guide, you should have a better idea of how to file taxes. Take your time deciding whether or not you’ll need a tax professional for your business.

Would you like to read more informative business content right at your fingertips? Be sure to check out our other articles today!

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