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.

What is a Tax Publication?

Something every small business should know about are 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 business, 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 are 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 Here

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.

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Estimated Taxes for Business

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 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. So, create a system where you can verify your tax deductions and the math on your tax forms.

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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 Here

Download Instructions For Schedule C Here

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 are 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 business, 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 are the IRS publications. You will have to search publications and sometimes order the one you need, but most are online at the IRS.

Download the Small Business Tax Guide Here

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.

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.

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About Lois Center-Shabazz

Lois Center-Shabazz, aka MsFinancialSavvy, is a Money Strategist specializing in helping others with Mega-Money Management through what she calls the Money Trio of Guerrilla Budgeting | Sane Savings | Investing Insights. Visit the top toolbar of MsFinancialSavvy.com and schedule a discovery session with Lois. She is also a nature photographer (www.arbazz.net), acrylic painter (www.artbazz.com), and has an online calculator website at www.livericalculators.com. Lois is the author of the Live Rich Save Money! series on Amazon Kindle.

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