For most entrepreneurs, filing business taxes is a daunting but necessary task. The complexities of tax preparation often lead business owners to procrastinate or neglect proper record keeping and tax deadlines. Nevertheless, following these basic steps can simplify the process and guide you as you prepare to file your business tax return.
- Pay attention to important deadlines with filing business taxes.
As a business owner, it is very important that you keep the various tax deadlines in mind as you go about your daily tasks. Failure to adhere to the Internal Revenue Service’s (IRS) deadlines can result in interest and penalties that accumulate over time. The most well-known tax deadline is April 15, but businesses may have additional tax deadlines depending on their legal entity type.
- Choose the appropriate accounting method.
The IRS allows a business to choose its method of accounting. The two primary options are the cash method and the accrual method. The cash method allows a business to account for income and expenses when the money is actually paid and spent, whereas the accrual method accounts for money when it is earned or billed.
- Pay your employment taxes.
Employment taxes refer to the taxes a company must pay for the individuals employed by the company. This includes Self-Employment Contributions Act (SECA) taxes for individuals who work for themselves and Federal Insurance Contribution Act (FICA) taxes for employees, both of which cover Medicare and social security taxes. Employment taxes are not paid for independent contractors because no tax withholding occurs for independent contractors. Contractors are responsible for paying their own self-employment taxes. In such instances, employers provide contractors with 1099-MISC Forms instead of W-2s.
- Review documents for mistakes.
Finally, it is not uncommon for tax returns to be filed with minor mistakes like the wrong Social Security number or address. Carefully review your tax documents before submitting them to ensure that they are accurate.
If you are preparing to file your business taxes and would like additional guidance, call our office to schedule a consultation today. Our experienced attorneys can assist you in reviewing your records and understanding the legal implications of your tax decisions.
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