Like any other company, small businesses have to file taxes. If this is your case, and you’re doing it for the first time, the process can be confusing: there are several forms you must complete and submit to the IRS. But with the following guide, we want to save you an occasional headache. Here you’ll find the steps you have to follow to declare your taxes and a list of the forms you will have to fill in depending on your case.
Get Ready for Tax Season in These 4 Steps
If you are conveniently prepared to declare your taxes you will not only save time, but also gather some useful information about your business that can make it more efficient. Follow these steps to survey the taxes season!
Step 1: Check your business information
Make sure your employees and contractors’ information is accurate and up to date. Double-check their names, addresses, social security numbers, status, etc. If you work with independent contractors, review their names, TIN number, and addresses.
Step 2: Organize your documents
Keep your documents and records organized for a more efficient tax-preparation process. Also, in the event of an IRS audit, you’ll have everything you need at reach. You can visit the official websites to know exactly what tax forms you need for your taxes and how to fill them in. Also, in the second part of this guide, we offer you a detailed list of these forms.
Step 3: Be mindful of extensions, deductions, and reimbursements
According to the IRS, there are business administrative expenses that are deductible, as long as they are “ordinary and necessary”. The IRS defines “ordinary expense” as one that is common and accepted in your trade or business. A necessary expense, on the other hand, is one that is helpful and appropriate for your trade or business. Some examples include the purchase of equipment or vehicles, or travel expenses. Check this list to know exactly what expenses you can deduct in your taxes.
Step 4: Seek professional counseling
Gathering all the required documents and making sure you’re following the right steps can be an overwhelming process. Don’t hesitate to look for a lawyer or accountant for advice. External counseling can be the fastest and most simple option to avoid an IRS audit and to save money.
Small Businesses Tax Forms
The tax forms you need and the submission deadlines will depend on the legal entity your business belongs to. Legally speaking, businesses are divided into the following categories: sole proprietorships, partnerships, Limited Liability Companies (LLCs), and corporations.
Forms for Sole Proprietorships
These entities must submit the Schedule C (Profit or Loss From Business), and the Form 1040 (Individual Income Tax Report), to report the net profit and loss of the business. The Schedule SE (Self-Employment Tax) is also required.
Forms for Partnerships and Limited Liability Companies
These entities must submit the Form 1065 (Return of Partnership Income), where profits and losses of the company are reported to the IRS. Also, copies of the Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.), which is part of Form 1065, must be distributed to the members of the company.
Forms for Corporations
If your business is a corporation you have to submit the Form 1120 (Corporation Income Tax Return).
Deadlines to Submit your Tax Forms
Since small business owners submit their commercial taxes along with their individual taxes, the deadline for both is the same: April 15th. However, the return date can vary if your business reports the taxes based on the fiscal tax year or the calendar year.
It requires some effort, but we recommend you not to leave your taxes prepared for the last minute. If you work on your tax filing during the year, investing some time and resources, not only you will comply with the law and avoid an audit: you will also open the door to your business success.
Are you ready to fill your taxes? Have you sought external counseling? Tell us about your experience in the comments section.