Finally put that “always an employee, never a business owner” behind you? If this is your first year owning a company instead of just working for one, you may not know where to start with filing taxes. Luckily, we’re tax experts, and we’re here to break down the steps so you can get a strong foothold on your business tax return.
- Use the right forms
The first hurdle is just making sense of the many tax forms available to businesses. But once you know which one to use, it’s pretty simple.
If you’re a sole proprietorship (meaning you and no one else own the business), file Form 1040 and use Schedule C (Schedule F for farmers and fishermen; Schedule E for income from rents or royalties).
If you’re a corporation, file Form 1120 (1120-S if you’re an S corporation).
If you’re a partnership, file Form 1065 and use Schedule K-1.
If you’re an LLC and you are the only member of the company, you can use Schedule C or F on Form 1040. Otherwise, use Form 1065, 1120, or 1120-S.
- Keep your records straight
If you’ve kept perfect bookkeeping records all year long, that’s going to make filing your taxes a lot easier. You don’t have to keep a complicated, color coded and notated record. You can use a spreadsheet or an online bookkeeping system, or you can simply note it all down on paper. It’s up to you how you do it: the important thing is that you do it.
- Get organized
Before sitting down to work on your tax return, you’ll want to have your records and financial documents handy. Make sure you’ve kept this information in a secure, accessible place throughout the year so you can easily find it when tax season rolls around.
- Check it twice
You can use an online tax filing service or a certified tax professional to ensure you do the math right and take advantage of all the possible deductions, or if you’re feeling confident, you can do it yourself.
Once you’ve finished, be sure to look everything over one more time just to make sure it all checks out and you haven’t missed anything—either in sources of income or in deductions and credits you can take.
- Remember to check state, local, and payroll taxes
Filing your federal return isn’t the beginning or the end of fulfilling your business tax obligations. If you have employees, you’ve likely been paying payroll taxes all year. Be sure to send all your employees a copy of Form W-2 by the end of January, and don’t forget to submit Form W-3: the summary of all your wage and tax statements. Many employers are also required to file Form 941 reporting the amount of withheld and paid federal income tax and FICA taxes each quarter.
Other things to be aware of are the Federal Unemployment Tax return (FUTA), due January 31 (February 10 if you’ve paid all past deposits when they were due) via Form 940; nonemployee compensation reporting, due January 31 via Form 1099; and any state franchise, excise, or sales taxes.