There are two things inevitable in life: death and taxes. For business owners like yourself, taxes are certainly unavoidable. Your profits, revenue, and expenses all impact your operations and business future.
But taxes for small businesses vary in complexity based on many things. You’ll find where and how you run your business significantly affect your tax filing season. Who you employ and how you pay them also impact tax reporting.
Of course, your industry impacts your reporting, too. You may gain access to extra tax credits and expense write-offs. Filing taxes on your own may be the best option (or not). Discover everything you need to know about how and when to file taxes for your business.
How to do taxes for your small business
How you file depends on how you pay yourself from your business earnings. If your business is unincorporated or you don’t treat yourself as an employee through your business, you’ll have to pay out self-employment tax. This is based on the net income or profit from your business. Again, if you pay yourself as an employee through your business, you won’t have to pay self-employment taxes.
Filing on your own
If you are filing on your own, you likely will pay self-employment taxes. You’ll need your business net income multiplied by the self-employment tax rate (15.3%) to determine your tax liability. This covers what normal businesses pay into Social Security and Medicare benefits from employee taxes.
Aside from managing your own personal annual taxes, you’ll need to file taxes based on quarterly and annual revenue for your business, too. You’ll need a few forms, including:
- Schedule C, Profit, or Loss from Business
- Last year’s instructions for Schedule C
- Schedule SE, Self-Employment Tax
- Last year’s instructions for Schedule SE
Completing a Schedule C tax form means inventorying your products or parts for sale. You’ll need to calculate the cost of any goods sold, too. Afterward, you’ll need to include all information proving your business expenses and write-offs. Costs for business space, such as a home office, will need to be proven, too.
Hiring a CPA
A CPA may be the way to go for your business if you’ve hired many employees or wish to avoid self-employment taxes. Simple businesses without the cost of goods sold or depreciating assets won’t need to hire a tax preparer.
Most often, CPAs help you make the most out of your business taxes. You’ll find that write-offs and expenses are more easily sourced with a tax pro, too. If you’re cautious about hiring a tax preparer, you can always invest in good tax software programs, too. Or, you can even use the SBA’s provided tax forms.
Write-offs and expenses
Write-offs vary year to year based on assets you acquire, such as high-value equipment or property expansion. These must be proven with paperwork and receipts. Without documentation, you’ll be hard-pressed to prove your write-offs if you’re ever audited.
Expenses are often industry-specific and stay the same quarterly or annually. Receipts are just as important here, too. If you’re filing taxes on your own, make sure to research what you can expense and write off on your forms. This information is often accessible on both the IRS and SBA websites. Depending on what industry you operate in, you may also be able to utilize tax credits. These tax credits can go a long way in bringing down what you owe on an annual basis.
Bookkeeping and preparing
Whether you hire a tax pro or DIY your taxes, you need to keep reliable records. For yourself, the better your records, the easier it is to track expenses and write-offs. The better records you maintain, the easier you make a CPA’s job, too. That means you’re spending less because they’re working less to sift through your documentation.
When to file taxes for small business
Due dates for taxes don’t change, short of federal or state governments announcing delays due to current events (i.e., the pandemic). Of course, you can always file for an extension if you do so with enough turnaround time.
If you ever file for an extension on your taxes, you must do so no later than October 15. This doesn’t impact when you must pay for quarterly or annual taxes, though.
Quarterly taxes are required for any business and vary by state. Federal annual tax payments are due April 15 for everyone unless you file for an extension. If you prepare your taxes on your own, you must pay attention to these details to avoid any late fees.
If you hire a tax preparer, you’re more likely to get your taxes in on time. One way or the other, your taxes will be taken care of you take the time and due diligence to keep accurate records for your business.
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