Maintaining good financial hygiene all year long reduces some of the hassles of filing corporate taxes. Some could contend that crossing items off a to-do list are enjoyable. Whether entertaining or not, adopting a tax guide may keep you precise and organized.
Therefore, planning your taxes all year long and keeping records to reduce stress levels and expenses when tax season rolls around is ideal.
Tax Guide for Small-Business Owners
Use this small company tax preparation checklist during tax season to help you remember all you need to do.
Count on a tax expert
You might not require the assistance of a tax expert if your business concept is simple and your records are well-organized.
However, if you’re starting or your firm has changed, a tax expert can assist you in finding deductions, choosing the ideal business structure, and preventing more tax troubles. The most crucial benefit is that they can ensure you don’t spend too much or too little.
A certified public accountant claims that strategically claiming write-offs to lower your future tax exposure is one of the main advantages of small-business ownership. However, to do this, the tax code and the percentages and types of deductions other firms of similar magnitude claim must be thoroughly understood.
Be aware of your deadlines.
There are different tax filing deadlines for different corporate entity categories. For instance, sole proprietors had until May 17 to register this year, whereas corporations had until April 15.
Payroll taxes are deducted every month or every two weeks, and anticipated tax payments due every three months are other tax deadlines.
Gather your financial records
Get your financial records together before you start your taxes. This includes salary records, income statements, depreciation schedules, bank and credit card statements, and receipts for significant transactions. You will require this information to finish your company tax returns.
Finish the required tax forms
Create the correct tax forms to declare business profits or losses, reasonable expenses, and projected taxes. These documents will be filed in addition to or concurrently with your individual 1040.
Typical tax documents include:
- Report your profit and loss in Schedule C as a sole proprietor.
- As a corporate organization, report your income, profits, losses, deductions, and credits using Form 1120 or the 1120S.
- As a partnerships organization, report business expenses, profits, and losses on Schedule K-1. They are usually submitted with Form 1065.
- Additional forms for depreciation, home-based enterprises, self-employment taxes, and anticipated taxes may be required.
- After deducting any necessary business expenses, budget on paying approximately 35% of any income earned. You must estimate these taxes and deliver them to the IRS every quarter. If you don’t, interest and penalties will be applied.
The following facts should be noted
- Loans forgiven under PPPs are not considered taxable income.
- Even if the debt is forgiven, business costs paid with a PPP loan are still deductible.
- Some states differ in the tax code on this matter. Therefore, these regulations apply to federal taxes only.
This does not imply that you will incur double or triple tax burdens on the same income. Although the procedure differs, most states have a system to reconcile multiple state filings using reciprocity or tax credits.
Depending on where they stayed and how long they lived there, digital nomads who moved from state to submit numerous returns. Based on those data, a tax expert can assist you in deciding whether you need to file in more than one state.
