10 Tips on doing the business taxes yourself
10 Tips on doing the business taxes yourself
Around 33% of Americans personally file their taxes per year. With fastidiousness, you can do your business taxes as well. Know the 10 tips on doing the business taxes yourself.
Tax filing methods vary based on your business type. A sole proprietorship, partnership, limited liability company (LLC), single-member LLC, or corporation (inc.) comes with individual ownership, taxation, reporting, and management styles.
Despite business tax advantages, some entrepreneurs hire no tax associates in New York. So, ZAKIR CPA PLLC delivers the top 10 tips on doing the business taxes yourself.
What is a business tax return?
A business tax return involves the company’s income, tax deductions, and tax payments and annually, all businesses must do it with the IRS by calculating tax liability. The classification of your business entity determines the filing and deductions on the return.
All business entities must annually file and pay taxes on received income. Almost all states impose a business or corporate income tax.
Although there are differences in taxation forms for different business entities, you can calculate your taxable income in almost a similar fashion.
What are the 10 Tips on doing the business taxes yourself?
Usually, sole proprietors or self-employed people choose this path. In fact, no business owners need a tax professional to prepare their returns as per legal or IRS requirements. However, the majority of businessmen resort to tax consultants.
But who says that you must do so as well? Our leading tax advisors in NYC send you 10 tips on doing the business taxes yourself. Let’s uncover the tax mysteries:
1. 10 Tips on doing the business taxes yourself: Put your financial records in order
The cleanest tax preparation starts with the collection of business records and all income sources need gathering and reporting. Some documents help you pace up the business return:
- SSN, address, DOB, personal records
- The last tax return copy
- Employer Identification Number (EIN)
- A balance sheet with assets, liabilities, and equity
- Bank statement
- Rent receipts
- Office supplies
- Employee salaries
- Financial statements
- All supporting documents including the audit report, etc
Also, check out the bookkeeping. Throughout the year, it has maintained all updated income and expenses for your smooth access.
Lastly, federal and state laws describe what records businesses must keep and what sort of regular reports they must file.
2. Taxpayer Identification Number (TIN): 10 Tips on doing the business taxes yourself
Two types of Taxpayer Identification Numbers (TIN) include Social Security numbers (SSN) and Employer Identification Numbers (EINs).
If your business has no employee other than you, you can use the SSN for returns.
On the other hand, you need an EIN in case you have employees. It also applies to businesses categorized as a corporation or a partnership. Luckily, a simple application on the IRS’s website gets you an EIN.
In case of loss or damage, retrieve the TIN document via the IRS website.
3. Appropriate the tax form for your business structure: 10 Tips on doing the business taxes yourself
Business types determine the IRS tax form number. Individual entrepreneurs need IRS Form 1040, U.S. Individual Income Tax Return. Sole proprietorships submit tax returns under Schedule C, Profit or Loss From Business. An independent contractor belongs to this category.
Partnerships and multi-owner LLCs require Form 1065, U.S. Return of Partnership Income. Partners can use Schedule K-1 for their individual returns.
Limited Liability Company:
If the LLC is taxed as a corporation, it requires Form 1120. Otherwise, single-member LLCs file Schedule C, and multi-member LLCs file Form 1065.
Note: For either profit or loss, you must use a different form.
Pay full attention to the next one among these 10 tips on doing the business taxes yourself. It relieves your pressure.
4. Use tax preparation software
Regardless of experience, all US taxpayers use tax software. Paper returns hover around 10% or so.
Simple and sophisticated tax software can do wonders. Intuit TurboTax, H&R Block, and Tax Act are ruling the market right now.
The software asks you a set of questions and your answers automatically fill up the options. The report generates on the basis of your answers. Moreover, behind-the-scene tax experts entertain your additional questions online or over the phone. After completing the form, you can do the cross-checking.
However, any wrong input results in wrong output. So, be careful.
Anyway, this is the cheapest tax preparation as you need no professional hand.
5. Learn deadlines, filing methods, extensions, and payment arrangements
Fill out the tax form in line with the deadlines. Return date varies for sole proprietors and corporations. So, explore the precise date as it might be a holiday and in that case, you can file it the next business day.
Tax extension can push back your return deadline. Depending on your business structure, you get different extensions.
Payment arrangements activate if you are unable to pay your taxes. Then, contact the IRS to make special payment arrangements.
Now, file your small business tax return by mail or through the IRS’s e-file system. Also, you can make tax payments through the IRS’s Electronic Federal Tax Payment System (EFTPS).
6. Itemize deductions
You need Form 1098 with mortgage interest to itemize deductions. Also, you can use receipts of charitable contributions, unreimbursed employer business expenses, and medical expenses.
Besides, the best tax software or tax consultant can give you tremendous insights. They guide you to accurate financial goals.
7. Home Office Deduction
“10 tips on doing the business taxes yourself” remain incomplete without home office deductions.
Business profits can land you home office deduction. However, you can carry forward the deductions if you incur losses.
Measure the square footage of the home used for business against the total square footage. The resulting percentage of business use applies to home office expenses. This percentage determines the amount to be deducted.
Here, the business owner must first deduct the percentage of the real estate taxes and mortgage interest. Otherwise, those would be considered itemized deductions.
Additional profits remain usable for other home expenses, such as landscaping. Besides, general home repairs go to the business and personal portion. Therefore, a deduction would be allowed for the business portion.
Plus, the depreciation on the home is allowed on the business portion.
8. File your taxes online
The best 10 tips on doing the business taxes yourself include online filing. Why?
An online filing offers several privileges:
- Needs no paper forms
- Faster IRS return
- Gets refunded electronically
- Totally secure and safe
Note: If your adjusted annual gross income (AGI) is less than $72,000, you can use Free File. If beyond, you’ll have to use Free File Fillable Forms. However, complicated business tax returns need the eyes of leading tax accountants in the USA like ZAKIR CPA PLLC.
9. Non-employee compensation
Review independent contractors that you paid. So, you can notify the government of their non-employee compensation.
Give your employees a W-2 form to identify their income and withholding tax. Any contractors who make $600 (as of 2020 tax year) or more would receive Form 1099-NEC from you. The federal and state governments would also receive a copy.
Corporations are exempt from receiving this form. Fortunately, this privilege is limited to partnerships and limited liability companies (LLCs) with several members.
10. Consult an expert
For the first year of your business, top tax consultants in NY are especially useful. Do you know, why?
Preparing your return drains time and energy. Meanwhile, your business begs for attention. Also, small mistakes breed costly complications. Moreover, paying less than you owe drags you in trouble with the IRS. Similarly, paying more could provoke a financial burden.
These top 10 tips on doing the business taxes yourself help you to the goal. However, a tax return is a tricky job. It requires much knowledge and attention to leverage nuanced financial considerations for future gains.
So, hire the best NYC tax professionals to beef up your business returns. Later, tap into those guidelines to do your own taxes.