With the rise of technology, it is becoming increasingly easy to file one's own taxes. There are plenty of programs that will guide you through the entire process.
But even with this new software, it can still be difficult to understand all of the details and receive the maximum refund you can.
Here are some steps for you to take before attempting to prepare your taxes.
Gather Your Earnings and Expenses:
Gather all of the records that pertain to your business’s earnings and expenses. One highly recommended way of both storing and keeping track of these records is online, via spreadsheet documents or programs like QuickBooks. If you use a computer program or spreadsheet to keep these in order, calculating your expenses becomes easy. Make sure to have accounts (or sheets) set up to show exactly how much you spend to a specific element of your business (cost of goods, office meals, etc.). Keep track of your income over the course of the fiscal year by checking in at least once per fiscal quarter.
Determine the Right Form for You:
Determine which IRS form or forms are correct for you to file. Basically everyone needs to report their business earnings. However, how your business opertates its business determines which form to report said earnings. Many Small business owners use a sole proprietorship which allows them to report their income and expenses on the Schedule C attachment on their personal income taxes (1040). If you operate as an LLC and you are the soul owner, the IRS will allow you to use the attachment, but if you use a corporation then you must ALWAYS prepare a separate corporate tax return on Form 1120.
Fill Out and File Your Form:
Now that we have completed the difficult task of determining which form we need, it’s time to fill it out! Fill out either your Schedule C (1040) or Form 1120. If you are filing a Schedule C (1040), you can simply search the IRS website for a copy and print it out. Schedule C (1040) is a simpler way to file business taxes since it’s only two pages and lists all of the expenses you’ve claimed. When complete, all you do is subtract your expenses and transfer the ending number to your personal tax form and file it along with your personal forms.
For the Form 1120, you calculate your overall income in the same way but the difference is that this form requires many more details that may not apply to a small business. The only main difference in filing this form is that it’s separate from your personal filing.
Remember the Deadlines!:
That word we all hate to hear, deadlines. Though you still have some time to file your taxes, the deadline is approaching faster than you’d think! March 15th is the absolute deadline to file your company taxes to the IRS. However, if you file with a Schedule C, it becomes part of you Form 1040 and is subject to the same April 15th deadline.
Now for corporations. If you are filing as a C-Corp, you need to file a Form 1120, which needs to be in by April 15th as well. But on the other hand, if you are taxed as an S-Corp, you need to file a Form 1120S which must be filed by the original deadline of March 15th.
I REPEAT: depending on what type of business you run, your deadline is either MARCH 15th, or APRIL 15th. Filing late will not only charge you an expensive fee, but it may also increase your chances of being audited by the IRS.
You could also always hire a professional.
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