Preparing a small business tax return is harder than filing a personal tax return. If you have a business in Tempe, Scottsdale, Maricopa County or any other place within the United States, you have to fill in a lot of extra forms. There is also the need to gather relevant receipts linked to your business activities for the tax year in question. You must be aware of a number of requirements, some of which include:
In preparing tax returns for your business, you need to fill in the Schedule C form apart from the 1040 tax form. The Schedule C documents the profit and loss arising from your business activities. It also lists your income as well as expenses and summarizes the company’s financial standing for the specified time.
You can claim a number of business expenses while filing your tax return. It is vital that you collect all the receipts and store them in one place for easier tracking of your business expenses. The list of possible deductions include office expense, business property depreciation, travel, wages, meals and vehicles utilized for matters of business. In case an inventory is managed by you, you can use Schedule C to deduct the cost of goods. If your home also doubles up as your office space, fill in Form 8829 and attach it to schedule C. It will help you deduct your expenses.
You must comprehend how the business component of the taxes you pay, affect the remaining part of your return. To put it simply, the Schedule C results may decrease or increase your adjusted gross income. After you compute your Schedule C net profit or net loss, you can carry the amount to Form 1040’s first page. The adjusted gross income either lowers or raises the taxable income, and consequently has the same impact on your income tax.
To be considered
Since you are an owner of a small business, you also need to pay the self-employment tax – a levy comprising of Medicare and Social Security taxes. You are required to pay the tax if you are employed in any other firm. However, the principal difference between an employee and a business owner is that you are compelled to pay full amount of Medicare taxes and Social Security amount, to be levied as per your income from the business activities.
Though majority of tax payers prefer e-filing their tax returns, you can also post them to the IRS. The best way to prepare a business tax return is to hire the services of a professional tax consultant. The consultant will act as a source of light to navigate the nooks and corners of the tax system – which can never be possible by relying solely on a software.
If you work for or own a local Arizona small business and are looking for some assistance and guidance in filing you business’s taxes Contact us now for a free consultation