One of the biggest responsibilities for business and corporations, regardless, is ensuring compliance when filing their income tax report. Since failing to do so, either by mistake or intentionally, can have severe consequences on any company, we need to make sure we are submitting our information accurately and in a timely matter. This might feel more difficult for small businesses for many different reasons, as they may not have enough experience or an assigned tax advisor to guide them. That’s why we have summarized four simple steps for small businesses to file their federal income taxes in an easy and efficient way.
The very first step of the process must be gathering all our records, making sure we have every paper and every receipt that we need in order to accurately document our business expenses and earnings. In order to make this step even easier, we should consider using an expense-tracking software or keeping the record on a spreadsheet. This would allow us to have a digital backup of our receipts in case we need one, and we might also be able to import our information directly to our income tax report.
Once we have put together all our expense and earnings information, we need to find the right form for our business, which will change depending on how we are operating our businesses. Many small businesses are run as a sole proprietorship, so they are able to report their income taxes by attaching a Schedule C form to their personal taxes. The IRS would also allow you to use Schedule C if you run your business as an LLC and you are the only owner. In the case that you ran your business as a corporation or you treated your LLC as one, then you would also need to file your taxes filling a separate Form 1120.
After finding the right form for our business, we can move onto filling out the information required. If we are going to be filing Schedule C, we shouldn’t worry much, as it is a two-pages long form which lists all the possible expenses and deductions our business can claim. Form 1120 is quite similar, but this form requires more detailed information that might not always apply to small businesses. Besides, this form must be separate from your personal taxes, unlike Schedule C.
Every business owner must pay a lot of attention to the different tax deadlines that might apply for their companies, depending on the organization structure and the tax form they will be submitting. Since Schedule C is part of the regular Form 1040 for personal taxes, the April deadline would not change. C-Corporations filling Form 1120 need to file their taxes on the 15th of the fourth month after the tax year closes, which would be April. S-Corporations filing Form 1120S need to submit their taxes on the 15th of the third month after the tax year closes, which would be March.
If you want to know more about the different steps for small businesses to file their federal income, don’t hesitate and get in touch with us. We will be glad to give you all the assistance and guidance you and your company need.