The first step in filing business taxes is to track business income and expenses throughout the year. This is important for calculating profits accurately when it’s time to file. It’s the responsibility of the business owner to track and calculate this information properly. Underestimating income may result in the IRS charging interest and penalties, while overreporting income or missing deductions can lead to overpaying taxes or needing to hire an accountant to fix the mistake.
Business bookkeeping is also important for recording sales and expenses. Every transaction should be recorded with the date, a brief description, and the amount. This includes sales, bill payments, invoices, purchases, and other transactions that involve money coming in and out of the business. The timing of when transactions are recognized depends on the accounting system used – either accrual or cash. With accrual accounting, transactions are recognized the day they occur, while with cash accounting, transactions are only recognized when cash changes hands. Bookkeeping for a business can be handled manually using a journal, ledger, or Excel, or through bookkeeping software such as QuickBooks or Wave. Point-of-sale software systems can also keep a ledger of transactions, which is helpful for businesses with high transaction volumes. Using these tools will help track income and expenses and prepare for filing business taxes.
Different business structures have different IRS forms and deadlines to follow during tax season. For sole proprietorships, Schedule C is used to report profit or loss and is due on April 15. Business partnerships must fill out Form 1065 and it is due on March 15. S corporations use Form 1120-S and the deadline is also March 15. C corporations use Form 1120 and is due on April 15. LLC filings depend on the chosen structure and the corresponding tax forms and deadlines. Additionally, business profits must be reported as personal income on the individual’s tax return, due on April 15.
After the first year of business, estimated taxes are expected to be paid four times per year, with deadlines on April 15, June 15, September 15, and January 15. To avoid penalties and interest, estimated payments should equal 100% of the previous year’s payment or at least 90% of what is owed for the current year. – Requesting an extension can delay the tax return deadline by 6 months, but taxes still need to be paid by the original deadline.
– Tax software can help with filling out forms and calculating taxes, and working with a tax professional may be a good investment for business owners.
– Staying organized throughout the year can make filing business taxes easier. 1. Third-party websites may have different privacy policies from First Citizens Bank.
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https://www.firstcitizens.com/small-business/insights/taxes/filing-business-taxes
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