Knowing Basics of Small Business Taxes Will Protect You and Your Business
Basics of Small Business Taxes
It is imperative that if you have a small business, you should have, at least, the basics of small business taxes so you can check your returns and understand why your accountant has chosen the deductions for you.
Where to Get Tax Forms
All tax forms are available at IRS.gov. Search and print any form you need. Understand small business taxes, staying away from tax fraud and tax schemes by unscrupulous tax preparers. Tax publications are also available on the IRS website.
What is a Tax Publication?
Something every small business should know about is tax publications. You can verify any major tax issue when you read a publication, they hold the IRS facts. There are publications for home selling, home buying, selling a business, running a business, tax deductions for small businesses, and much more.
All the facts are listed in the publications. So, when you are told to check your taxes, the place to verify tax facts is the IRS publications. You will have to search publications and sometimes order the one you need, but most are online at the IRS.
Publication 17 gives you all of the general information you need to file an individual federal tax form. Small Business Publications are here to make sure you get all of your deductions you qualify for and verify your forms.
Download the Federal Tax Bulletin at IRS.gov
Importance of Tax Timing and Honesty
It is better to pay your taxes on time and not risk ruthless penalties than to get an extension and go over your extension or run out of money. If you are a small business, you could miss your social security contribution, and have to pay later.
You can go online to make sure you are getting credited with your social security contribution if you file an extension and the credit is not posted, this can be corrected.
Understand the best of tax and money,Chat with Lois
Small Business Taxes Estimated
Some new (first year) business owners forget that they have to pay taxes on profits at year-end, so they inadvertently spend all of their profits.
At the end of the first year when taxes are calculated you will be put on a quarterly estimated tax schedule and will also be told how much you owe for your first year. This means you must save funds from your first year into a tax savings account on your own.
Most first-year business owners will be safe to put aside at least 30% of their first-year profits. Now, in subsequent years you will have quarterly estimated payments you will make every 3 months, these payments are based on your previous year’s income, so be prepared to pay over your estimated taxes, at year-end, if your income skyrockets the previous year.
Who is Responsible for Your Tax Form Calculations?
It benefits you as a small business to use a qualified enrolled agent or certified public accountant. No matter who does your taxes it is important to understand that you are responsible for what is put on your tax forms.
You will have to pay penalties and interest on understated income if your taxes are done incorrectly. So, create a system where you can verify your tax deductions and the math on your tax forms.
Understand the best of finances,Chat with Lois
Every Business is Based on Profits and Losses
Because every business is based on profits and losses, the internal revenue service wants to know the details of your profits and losses. Those are recorded on Schedule C of 1040.
You should have receipts for everything you have done, and each receipt should be part of a category listed on your Schedule C. From expenses and the income you take in, you can calculate your profits and losses.
Download Schedule C at IRS.gov
1099 Income; Verify that you have all your 1099 statements
When you do business with another business and are paid income and they file a 1099 (income statement) they send you a copy. You must report that income to the IRS and claim it on your taxes.
Understand Tax Publications and Their Valuable Information
Something every small business should know about is tax publications. You can verify any major tax issue when you read a publication, they hold the IRS facts.
There are publications for home selling, home buying, selling a business, running a business, tax deductions for small businesses, and much more.
All of the facts are listed in the publications. So, when you are told to check your taxes, the place to verify tax facts is the IRS publications. You will have to search publications and sometimes order the one you need, but most are online at the IRS.
Importance of Tax Timing and Honesty
It is better to pay your taxes on time and not risk ruthless penalties than to get an extension and go over your extension or run out of money. If you are a small business, you could miss your social security contribution and must pay later.
You can go online to make sure you are getting credited with your social security contribution if you file an extension and the credit is not posted, this can be corrected.
Estimated Taxes for Business
Some new (first year) business owners forget that they must pay taxes on profits at year-end, so they inadvertently spend all their profits.
At the end of the first year when taxes are calculated you will be put on a quarterly estimated tax schedule and will also be told how much you owe for your first year. This means you must save funds from your first year into a tax savings account on your own.
Most first-year business owners will be safe to put aside at least 30% of their first-year profits. Now, in subsequent years you will have quarterly estimated payments you will make every 3 months, these payments are based on your previous years’ income, so be prepared to pay over your estimated taxes, at year-end, if your income skyrockets the previous year.
Who is Responsible for Your tax Form Calculations?
It benefits you as a small business to use a qualified enrolled agent or certified public accountant. No matter who does your taxes it is important to understand that you are responsible for what is put on your tax forms.
You will have to pay penalties and interest on understated income if your taxes are done incorrectly. You could get arrested if the IRS suspects tax fraud or a tax scheme.
So, create a system where you can verify your tax deductions and the math on your tax forms. So, knowing the basics of small business taxes will protect you and your business. You can protect yourself against tax fraud and tax schemes, which are huge..
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This is so useful and I am sure many small businesses will appreciate having the information in one place.
Yes, that is why I did it.
This is such a great topic to discuss. Knowing about taxes for business is surely a huge help.
Thanks!
WOW. Thank you for sharing this because of something as small as “tax publications” I personally even aware of.
Tax publications are important. They give you all the facts so you or your preparer don’t make costly mistakes.
It is so important to have the right information when it comes to taxes and other elements of being a small business. These are useful to know about.
Exactly, you are right. It tells you where to go to get the right information.
This is great information, passing it to my sister in law that owns a small business, super useful
Very good Monica
Very helpful! Taxes can be overwhelming!
Yes, but the IRS has direct and useful information.
This is a great walk through to help me get my head around taxes for a small business. Thanks so much for taking the time to share!
I am glad I could help!