A How to Guide to Filing Your Small Business Taxes
Business taxes are a huge headache but they are also unavoidable. If you do not file your business tax returns each year, you’ll be facing some stiff penalties, and you don’t want to know how much interest the IRS will tack on to your bill. It’s best just to get it over with, and with proper set up from the get-go, you’ll have a much easier time each year.
Get a Tax ID Number
You first step to filing your taxes is to get a federal tax ID for your business. This is a different number from your Social Security number, and it’s better to separate your company finances from your personal ones. You will use this ID number when you file your state and federal taxes and also when setting up your bank accounts and applying for your necessary business licenses.
Find Out What Your Obligations Are
Next, research what business taxes you must pay to the federal, state and local governments. The federal government will tax you based on how you structured your business, i.e. sole proprietorship, LLC, partnership, S-corporation or corporation. You may also be responsible for employer and excise tax. Your state and local obligations vary based on where you operate your entity.
Determine Whether Calendar or Fiscal Is Better
If you are a one-person shop or small operation, you might do better to fulfil your business obligation each calendar year when you file your personal returns. Larger companies use a fiscal year, which is a twelve-month period generally from July to June of the following year. If you do not keep tax accounting records or operate under a fiscal accounting period, you need to file every calendar year.
Find Your Deductions
What you do will determine the business deductions you can claim. Take a look at the deductions allowable by the IRS and notate each one that applies to you. For example, if you drive a lot for your business, you can deduct your mileage. If you lease your equipment, your payments are an expense. Make certain you know the deductions you can take and keep track of them and any receipts.
Finally, invest in a good bookkeeping program to help you keep your books up to date. This will come in handy when it’s time to file your business taxes. You’ll have your profits, losses and deductible expenses right at your fingertips, and if you don’t feel comfortable filing the returns on your own, enlist professional help to make sure everything is done properly.