Filing a tax return already isn’t fun, and now you have to do it for your business too? Here is an easy-to-follow guide on exactly how to file a tax return for your business so you can get it done in no time! Starting a new business comes with all sorts of challenges. That said, knowing how to file a tax return may be the most critical challenge of all. This is one of those situations where preparation will pay dividends. The sooner you start thinking about your taxes, the more you’ll save on your bill. In other words, make sure to pay attention to your business records from the get-go. Keeping proper records is a crucial part of tax preparation, and it will make the whole process go much easier. Want to know more about how to file tax return for businesses? This short guide should get you started.
Starting Out
First of all, focus on setting up a reliable system. Two financial reports can be a big help in this regard.
The first one is an Income Statement, showing monthly business income and expenses. The other is a Balance Sheet, which provides information on the financial status of your business at the end of the month, quarter, and year.
Why is capturing business expenses so important? Well, any expenses you didn’t record aren’t deductible from your taxes. This includes meals, auto, and entertainment expenses.
The Next Steps
Once you’re happy with your business records, apply for an EIN (Employer ID Number).
Even if you don’t have employees, you’ll probably need this number down the line. An EIN is required for many financial transactions, and you may also need it for your business taxes.
This would also be an excellent time to hire a business tax advisor. If this is your first business year, chances are you don’t yet have a complete grasp of how to do taxes. An advisor can review your financial situation and provide valuable advice.
Understanding the Process
Before filing your returns, make sure you know what type of business you’re running.
See, each business type is subject to different taxation rules. For example, corporations pay income tax at the corporate tax rate. On the other end of the spectrum are the partnership businesses, which don’t pay their tax directly.
Now, most U.S. businesses are sole proprietorships. This means that they need to complete a Schedule C to report their income and expenses. The income from the Schedule C will then get transferred to the owner’s personal tax return.
Final Preparations
At the end of the business year, focus on gathering the necessary documentation. This is particularly important if you’re doing taxes online.
First, you’ll need a year-end report of your P&L and balance sheet. You’ll also have to include information on your allowances, expenses, and income sources. Finally, don’t forget to include your EIN, address, and business type.
If everything is ready, consider using an online service to file your tax return. Of course, you should make sure you haven’t neglected anything beforehand. This is where having a tax adviser on your side comes in handy.
More on How to File a Tax Return
If you keep proper records throughout the year, filing your tax return should go smoothly. If not, you can always ask for an extension. You’ll still have to pay your taxes by the deadline, but this gives you time to organize your paperwork.
Still not 100% sure how to file a tax return for businesses? Are you looking for more financial advice? You may want to take a look at our blog!
