Filing your business taxes can be stressful, confusing, and time-consuming. There are multiple filings you may be required to complete, and the information you need to file your taxes properly is seemingly endless. Check out this Balboa Capital blog post to ensure a seamless tax season. It explains how to file your business taxes with minimal work and effort, even if you wait until the last minute.
Get a federal business tax number.
Your Federal Business Tax ID is a nine-digit number that identifies your company for tax purposes. This ID is helpful when opening business bank accounts, filing your tax returns, and securing various licenses. Take care of this step first, as it can be the most time-consuming and needs to be done before other filings occur.
Learn your tax obligations.
Your federal tax obligations, which consist of the taxes you pay to the IRS, will vary based on the legal structure of your business. Legal structures include sole proprietorship, partnerships, corporations, S corporations, and LLCs. All of these structures will have different tax requirements.
These taxes include income tax, self-employment tax, estimated tax, employer tax, and excise tax. Aside from federal taxes, your company is also subject to state and local taxes. Think of these as income tax, sales tax, and property tax – taxes that vary from state to state. As with federal taxes, your legal structure will also determine your tax obligations for these.
Pick a tax year format.
Most sole proprietorships, partnerships, and LLCs use the calendar year when filing their business taxes. This is the most standard method used for taxes. However, most corporations and large firms use the fiscal tax year. Fiscal years are those that do not end on December 31. Businesses that utilize the fiscal year include those with high revenue or show expenses in one year and income in another.
You will want these transactions to occur in the same 12-month period for the most accurate reports. A short tax year (less than 12 months) only applies to businesses that did not exist for an entire tax year or have recently changed their tax year period. Tax returns are required regardless of whether you have been open for less than a whole year (12 months). Finally, suppose if you purchase or finance equipment eligible for the Section 179 tax deduction. In that case, the equipment needs to be placed into service by December 31.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.