Business Taxes How to File & Pay Business Taxes

Business owners have a great number of responsibilities that require their time and attention well after they close their doors for the day – including filing taxes. For business owners to correctly file and maximize their return, they need to be fully aware of the ins and outs of business tax filing. The following is a list of key steps business owners need to take when preparing and filing their business’s taxes.

1. Collect Your Records

A well-organized business is a reward for small business owners year round, including tax season. Before you start to file, make sure you have all of your records on hand for easy reference. You’ll need all records of the business’s earnings and expenses available while filing.

2. Find a Trusted Partner

Due to the constantly changing nature of U.S. tax codes, filing business taxes has become a thoroughly complicated process. Even those who are somewhat experienced with using business tax software can easily make costly errors. It’s important for small business owners to find a trusted partner they can rely on to help them through the maze of business tax forms, calculations, and the inevitable questions that arise.

3. Determine Your Federal Tax Obligations

The U.S. government collects four types of business taxes:

  • Income tax
  • Self-employment tax
  • Taxes for employees
  • Excise tax

The types of federal tax forms you will need to file depend on what type of business entity was established when you first started your business. Below you will find the required tax forms for your particular business structure:

It is important to determine your federal tax obligations not only because you are legally required to do so, but because filing your business taxes correctly and accurately can result in business tax deductions.

4. Determine Your State Tax Obligations

In addition to federal tax obligations, as a business owner you may also have state and local tax obligations. The more frequent types of taxes levied on small businesses are income and employment taxes. Almost every state will impose a business/corporate income tax. Once again, the exact income tax requirements depend on the type of business entity the business is legally. In regard to employment taxes, every state requires that a business pay state workers’ compensation insurance and unemployment insurance taxes. California is one of six states that require a business to also pay for temporary disability insurance.

5. Determine When the Tax Year Starts

There are two types of tax years: a calendar year that begins on January 1 and ends on December 31, and a fiscal year that is 12 consecutive months ending on the last day of any month except December. For the most part, businesses are able to use the calendar year for tax purposes. For more information on determining when your tax year starts, it is best to reach out to your trusted partner, who can help sift through the Internal Revenue Code and the Income Tax Regulations.

6. Pay Attention to Deadlines

It’s easy to get caught up in the day-to-day responsibilities of being a business owner, but it’s incredibly important to be aware of filing deadlines. If you find that you need more time to file your business taxes, you can apply for a business tax extension. It is important to note, however, that even with an extension you will need to estimate how much you owe (if this is applicable) and send in that amount by the existing deadline.

Should You Do Your Own Taxes, or Should You Hire a Tax Accountant?

Clients seek the assistance of Fast Tax, CPA, because we are able to help them navigate through the complex maze of tax codes they have to face every year. However, people sometimes choose to file their own taxes. While preparing and filing your own taxes may seem like a simple, viable option, there are a number of important considerations to factor into your decision:

Do you have time to adequately complete your tax return?

In 2012, the Internal Revenue Service (IRS) estimated it would take over 20 hours for the average taxpayer to complete a tax return. This includes organizing the information necessary to prepare and complete a tax return. The amount of time it takes to actually complete the return increases significantly – at least an additional 50% – if you own a business or rental property that must be included in your return. The more information that needs to be processed, the smaller the window you have to thoroughly fill out and complete your return before the deadline.

There is a much higher risk of making a mistake and then being audited.

Due to the number of items and documents you need to acquire, organize, and prepare, it can be deceptively easy to make a single mistake on your tax return that could result in an audit. A professional tax accountant will properly organize and make accurate assessments of your finances, and then will file your return to help ensure that you are not audited by the IRS.

The tax code may be too complex for inexperienced navigation.

Depending on how much income and assets you possess, the tax code and laws might be too much for inexperienced individuals to handle on your own. There have been over 3,000 changes to the tax law since 2000, and the average taxpayer cannot possibly understand them all or know which laws are relevant to his or her specific situation. An accountant has the knowledge and professional training necessary to fully comprehend the various tax codes that may apply to you. An accountant will be able to file a tax return that accurately represents your financial situation and ensures the best outcome for you.

You might not get as high a tax refund as you deserve.

No one knows tax laws as well as an accountant. With years of in-depth research and careful study under their belt, accountants have all they need to find exemptions and credits that you may not realize you have. This information is something only a tax professional with years of experience would have. Hiring a tax accountant offers you the best chance of getting a larger tax refund.