Since a great many small businesses calculate their business profits and losses and include them on their personal tax returns, this guide will assume that approach to preparing income taxes. This calls for filling out IRS form Schedule C and including it with your personal 1040 form when filing, which also means that the filing deadline is the same as it would be for a simple 1040 form, April 15th.
Using a Tax Preparer
While some small business owners prefer to do their own taxes, many others would rather have it done by a professional. This saves valuable time and effort which might detract from the business, and it avoids most of the potential for committing mistakes during the process.
Gathering Financial Documents
Your chosen tax preparer will need some financial statements from you in order to accurately file your taxes. For starters, you’ll have to provide balance sheets from both the beginning and the end of the fiscal year, an end-of-year profit and loss statement, and all relevant data needed to calculate cost of goods sold. If you aren’t sure about other documents which are needed, contact your tax professional so you can bring all these along, and not waste the trip.
In addition to the normal filing procedures you must follow, there are a few other possibilities which you should be aware of at filing time:
• self-employment taxes – small business owners are obliged to pay taxes on self-employment, at a specific rate against your earnings
• extension on filing – there are certain conditions under which you might qualify for an extension to file your taxes, and if granted, this extension will be for six months, i.e. October 15th
• amended tax filing – if you or your preparer should make a mistake on your original return, you can file an amended return, using an IRS form specific to your type of business
• paying estimated taxes – this situation arises when your business pays insufficient taxes during the year, which forces you to pay an estimated amount that does cover the self-employment tax.