55% of small business owners were motivated to open their own business because they wanted to be their boss. As the boss, you have to handle major responsibilities such as filing taxes. Tax preparation for small businesses varies, so it is important to know the facts.
Read our complete small business tax preparation checklist.
Know the Deadlines
To get ahead on small business tax preparation, you need to know the deadlines. Deadlines for small businesses can depend on the type of business and how you handle legal manners.
A lot of small businesses will have the same deadlines as individuals, but some have random dates. Those set up as an S corporation have returns due in March while C corporations have a deadline in April.
Get All of the Forms
The forms will also depend on the business you have. In tax preparation, you need to figure out what forms you need.
Generally, returns will include summary pages, schedules, and other details. These forms provide a look at the entire tax picture of your business. Small business finances will be considered with the forms.
These forms will help decide if the business qualifies for tax deductions. Some of the most common forms are Form 1040, Form 1120, and Form 1065.
Collect Records
You need to collect business records so that the IRS knows how much income the business brings in. The numbers you report will then be verified. This means you have to provide accurate information that can be physically documented.
The type of income will decide what documentation is acceptable. You should have gross receipt records, refund documentation, and interest and investment income. You can use a salary tax calculation to help you, see more here.
Get Business Expense Documentation
Your taxable income will decide what tax breaks are available. Small businesses have the opportunity to get a lot of tax breaks, but you need to prove you qualify.
Expense documentation can be receipts, but sometimes more proof is required. You may have to provide transportation, meals, entertainment, and insurance documentation too. Be sure this is done correctly to avoid issues down the road. Not all S corporations are corporations in the traditional sense. An S corporation is a tax classification created by the IRS which some small businesses can qualify for. An s corporation has the potential for tax benefits which can be calculated using this S Corp tax calculator.
Send Information Returns
The certain information you need to provide to the IRS needs to be sent on time. You also need to ensure your business is receiving the returns you need.
If you do business with other parties, you will receive returns from them. These returns will include interest on loans, fees for services, or rent.
Small businesses with employees will need a W-2 form or a Form 1099. These forms will provide individuals with their income and deductions.
Ask For an Extension
If needed, you can ask for an extension. For small businesses, there is no negative outcome of getting an extension. They provide more time to make full returns.
An extension does need to be filed on a certain date. This date is usually before the original tax return is due. The extension is not for paying taxes, but for filing the return.
Small Business Tax Preparation Explained
Small business tax preparation will be different from individual tax returns. Filing a return can be a confusing process for first-timers. Follow this guide to ensure the small business taxes are filed correctly.
Your small business is counting on you, so keep coming back for more informing articles like this.