Every year by April 15th, Americans spend time preparing their tax returns and businesses spend their day making sure to file their business tax return. Many are able to fill out their individual tax return forms without much help. They do not have a lot of situations that call for an advanced degree in accounting to figure out. Individuals are not the only ones that are required to file taxes every year. Businesses also are required to file tax returns as well. Business tax returns are not always as easy to do without help.
More people than ever before are creating their own businesses. The internet has made it possible. That means that more people need to find out how to file business tax returns. If they do not do it right, it can hurt them both in business and in their personal life.
Who Has to File What Business Tax Return
Just like individual returns, a business has to use the right forms to file their taxes. The type of form that is used depends on how the business is set up. Unlike when an individual works for a company and gets a W-2 at the end of the year that shows their income and the amount of taxes that have been withheld throughout the year. The hope of most people is that they overpaid their taxes a little and are due a refund. Businesses do not have paychecks that have taxes withheld. Instead, they are supposed to fill out business tax return forms throughout the year that allow them to pay an estimated tax. This is typically done quarterly.
Not all businesses are profitable. That may lead some to think that they do not need to file business tax returns if they lost money. That is not the case. All businesses have to file their returns regardless of whether they make money or lose money.
Not all businesses are the same. The different types of businesses require different forms when they file their business tax returns.
- Sole Proprietorships and LLC’s with one member – These are one of the most common types of a business and require the individual involved in the business to file a tax form 1040. A schedule A and a schedule C have to be included in the filing of this type of business tax return.
- Multi person partnerships and multi person LLC’s – These businesses will file a form 1065.
- C Corporations – The C Corporation is a business that is taxed separately from its shareholders. This business can have an unlimited number of shareholders and is typically considered a medium to large business. This business is required to file a form 1120.
- S Corporations – S Corporations are for smaller businesses. The shares of the business must be held by a legal resident or a citizen. Shareholders of an S corporation are required to pay taxes based on the percentage of the business that they own. They do this through the form 1120S.
How to File a Business Tax Return
Since a business does not have a paycheck that tells them how much income they have earned during the year, figuring out the taxes due when filing business tax returns requires a different type of calculation. The income of a business can be a profit or a loss. It depends on how well the business is doing. In order to fill out the business tax return forms it is necessary to see how much revenue a business has earned and how many expenses the business incurred. The taxable income for the business is the difference between the revenue and the expenses. Expenses for a business can include many different things that include salaries, cost of product, rent, depreciation and many other things. It is up to the business to keep a record of all of their expenses throughout the course of the year. The business also needs to keep track of the revenue that it is generating from all sources.
Some businesses can wait until the end of the year to fill out their business tax returns and pay any taxes that are due. Other businesses have to file estimates throughout the year and pay a portion of the taxes that they determine they will owe by the end of the year. If they overpay through the estimates, they will get a refund. If they underpay, they will have to pay more at the end of the year. Businesses that expect to owe more than $1,000 in taxes when they file a return are required to fill out the form 1040ES. The estimated taxes are due quarterly.
There is a saying that the only things that are certain in life are death and taxes. This holds true for individuals and businesses. While paying taxes may not be the most pleasant thing to have to do, it is important that it is done right and on time.
For any business that wants to make sure they are taking care of their business tax returns properly, it is time to call Marlandale (972) 478-4346.