Every business will have to file taxes every year that they are in business. Be aware, business taxes are not the same as your personal taxes. Depending on how your business is organized and filed, will determine what kind of filing you’ll need to complete for your business taxes. If you opt to do your own business taxes, this is where you will be glad that you invested in an accounting software or service.
The most common form of business tax filings for small businesses would the sole proprietor’s schedule C. This is just a simple form that is filed right along with your 1040. It does have all of the pertinent information, credits, and expenses, so it is all inclusive. This form is also able to be filed with the most popular tax software programs, so it is actually fairly convenient. With the guided ‘interviews’ that most of the programs use, any special additional forms, credits, etc will be automatically pulled into the form for you. Once completed, this form is added to your 1040 form and is also able to be e-filed.
Most tax software programs have services that will allow corporations to also file electronically, however it is usually bit higher priced to do so. Tax filing for corporations are far more complicated than filing as a sole proprietor, however the credits that are included for many corporation types and income levels are also much higher. The benefits of the credits can often offset the actual tax liability. If you have been listening to the presidential campaigns of the last few decades, you are aware of the conflict for corporate taxes. Many high income corporations actually pay far less in taxes than the small businesses. This of course is just wrong on all levels seeing as how the small businesses are the ones that are actually the majority of businesses within the country. I for one, will never understand the logic of
higher income, lower taxes.
In any event, more than likely for your business taxes, you will utilize a program or service to assist you in filing your taxes. The benefit to this is that you don’t need to know the name of every single form that is required to complete your taxes, but you do at least need to know what things you can write off as expenses and how that benefits you. In short, a write off will reduce the amount of income that the government (state or federal) is able to tax you on. A write off is any item, product, or service that you purchased in order to benefit your business. That tax software can even be written off in some cases. Your final taxable income is based on your full income, less the taxes you may have paid throughout the year, less the costs you incurred to do business, and less any credits you may qualify for. That can be a huge difference, so you want to make sure that your accountant has kept up with your expenses and transactions. You certainly do not want to leave off anything, as every penny that comes into your business is taxable, just as it is if it were your salary on your personal taxes.
The biggest difference between personal taxes and business taxes lies in what you can write off. You can’t write off dinner with friends on your personal taxes. But you can write that dinner off if you were actually discussing your business. So if you treat your 5 friends, who also happen to be business contacts, colleagues, vendors, etc to dinner and drinks, and your conversations, and/or reason for meeting is to discuss anything related to your business, that is a business expense. Meals and entertainment are limited in what you can actually write off, but again every little bit helps to reduce your tax liability. And of course it isn’t just about your tax liability, but about making sure you are only taxed on your pure profits.
It is important to understand what your filing status is, to keep track of all of your income through the year, and of course your expenses. If you have a good program or accountant, and you have these figures, your taxes will not be as painful as they may seem to be. Your bill could be a other issue, but at least filing them won’t be the hard part.
*Be sure to discuss any tax questions you may have with your accountant. This article intended for informational purposes only. It is not intended to be an instructional guide, or to give tax advice on how to file, or what to file.
LowKeyMedia Marketing Team