First-Time Business Owners: A Guide to Tax Filing

tax-filing

Most first-time business owners find it hard to understand the tax filing system. You should know that your federal tax filing due dates and obligations are determined by the legal structure that you have selected for your business and whether you use a fiscal year or calendar.

If you are a Sole Proprietor or Limited Liability Company, you must file Schedule C along with your form 1040, a United States Individual Tax Returns form, to disclose your business profit or loss. Additionally, you are required to file Schedule SE with your 1040. Note that if you adhere to the calendar year, you must file your taxes no later than April 15th. If you are a fiscal-year taxpayer, you must file your tax returns not later than the 15thday of the 4thmonth after the end of your tax year.

Partnerships file the form 1065 to report income and loss to the IRS. For partnerships, the owners must file copies of schedule K-1which discloses the each partner’s share of income, credit, and any possible deductions. The due dates for filing tax returns for partnerships have changed for the 2016 tax year.  Partnership filing dates are March 15th and September 15th for extensions.  If you are a fiscal-year taxpayer, you must file your tax returns not later than the 15thday of the 3rd month after the end of your tax year.

Corporations file form 1120 – the United States Corporation Tax Return.  You should file your tax returns on April 15thif you are a calendar-year taxpayer, while the fiscal-year taxpayers should note a change to the filing deadline.  The new deadline is the 15th day of the 4th month after the end of your tax year or the 15th day of the 10th month, depending on your year end.

The S Corporations owner files the form 1120S, a United States Income Tax for S Corporation. All the shareholders of S Corporations should receive copies of Schedule K-1, which is an integral part of the Form 1120S. S Corporations filing dates are March 15th and September 15th for extensions.

Apart from the legal structure of your business, you should also understand the tax-deductible business expenses. This will enable you to file your tax returns in a way that maximizes revenue for your business. According to IRS, the business operating costs are tax-deductible if only they are ordinary and necessary. Ordinary expenses are ones that are common and generally accepted in your business industry. On the other hand, necessary business expenses are ones that are helpful and appropriate to your business.

Most startups ignore the importance of understanding the tax filing process. This can result in fines, and this is an extra expense. Therefore, if you learn how to handle tax activities for your business, you will stay away from colliding with the law. Also, understanding the tax-deductible business expenses will enable you to save a few bucks.

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