Trepidation and resignation make many small business owners to make an approach to the tax season. Tax filing being an unavoidable activity, never lets business owners stay in their shape until and unless they are taken care of. IRS has established different sets of rules for many different kinds of businesses. Depending upon the business structures, there are many forms one has to file and many kinds of taxes one has to pay. Business tax return and personal tax return agents should be kept in mind at all times throughout one’s business career
When operating as a sole proprietor under the federal tax code, there is no separation between individual and business income. One as to include his/her business income and expenses on the schedule C when he or she is filing the individual 1040 tax return. Partnerships being similar to sole proprietorships, both partners have to pay both the income tax and the self-employment tax on their individual share of the profits. Partnerships have to complete the form 1065. Moreover, there also exists an annual income and a loss report for the business. Similarly, the corporation requires to file form 1120 and pay taxes on profits itself according to the corporate tax table. Proprietorship, partnership or corporations can be chosen to be designated by the Limited liability company. The designation will determine the tax filing rules one will have to follow. The change can occur after every five years.
When Small Business Taxes Need to Be Filed
One has to file the claim deduction for his/her expenses if their business is in start-up phase and has yet to make any money. Moreover, you must have to file a return to cover the payroll taxes if you have any working employees. Profits being regardless to the business, it’s still necessary. When small business owners exceed their tax liability for the year they are required to make an estimated tax payment of a certain amount. For most of the corporations, the amount can be 500 dollars or more depending on the type of business they are running. When the estimated payments are not made, that could hit the businesses with a penalty. The self-employment taxes are always there too and they count for the penalties as well.
Keeping a good record while running your business will be really handy. All kinds of paperwork including the cash register tapes, invoices, sales slips, credit card receipts, bank statements, deposit slips and even canceled checks are to filed away as soon as possible. A solid record-keeping system will avoid many major snags in the way. In addition to the income taxes, one may be penalized for the absent in payment of the sales taxes. It is state-mandatory charge that can vary in states. The business owners should keep this in mind that all time tat whether the state government charges the customers sales tax in the products or not. With the freedom of being a self-employed individual comes the sole charge of paying taxes and being penalized for not doing so.