Published on April 26th, 2023

As a small business owner, filing taxes can seem like a daunting task. However, it is an important responsibility that should not be overlooked. Properly filing taxes can help you avoid penalties and interest charges from the Internal Revenue Service (IRS), while also helping you stay on top of your business finances.

In this article, we will provide you with helpful tips on how to file taxes for your business, step-by-step.

How to get started with your business taxes?

Before we dive into the specifics of how to file taxes for your small business, it is important to understand the basics of how taxes are calculated for your type of business. The type of business structure you have will determine how your business income is taxed.

Sole proprietorships, partnerships, and Limited Liability Companies (LLCs) are all pass-through entities, meaning that the profits and losses of the business pass through to the owners' personal income tax returns. Corporations, on the other hand, are taxed as separate entities.

As a small business owner, you will need to obtain an Employer Identification Number (EIN) from the IRS. This number is required for tax purposes and to open a business bank account. You can obtain an EIN online through the IRS website.

How can we help?

If you're feeling overwhelmed with getting started on your business taxes, don't worry, Jahm Financial Services can help. We have years of experience working with small business owners and can help you understand the tax requirements specific to your business. Our team can assist you in obtaining an Employer Identification Number (EIN), gathering and organizing your financial records, and choosing the right tax form to file. We can also provide guidance on how to track your expenses and take advantage of all the tax deductions available to you. Contact us today to learn more about how we can help you get started on your business taxes.

How to File Taxes as a Business Owner: 5 Steps

Now that you understand the basics of how taxes are calculated for your type of business, let's dive into the 5 steps on how to file taxes for your business.

1. Gather your financial records

The first step to filing your taxes is to gather all your financial records, including your income statements, balance sheets, and bank statements. It's essential to have accurate and up-to-date records to ensure that you are reporting your income and expenses correctly.

2. Choose the right tax form

As a small business owner, you will need to choose the right tax form to file. Sole proprietors, partnerships, and LLCs will file a Schedule C form along with their personal income tax return. Corporations will need to file a separate corporate tax return using Form 1120.

3. Calculate your business income and expenses

To calculate your business income and expenses, you will need to use your financial records. Subtract your expenses from your income to determine your net profit or loss. This number will be reported on your tax return.

4. Deduct eligible business expenses

Small business owners can deduct eligible business expenses from their taxable income. These deductions can include raw materials, startup costs, office supplies, and home office expenses. It's important to keep track of all your expenses throughout the year, so you can accurately deduct them when it's time to file your taxes.

5. File your tax return and pay your taxes

Once you have gathered your financial records, chosen the right tax form, calculated your income and expenses, and deducted eligible expenses, it's time to file your tax return and pay your taxes. You can file your tax return online through the IRS website or hire a tax professional to do it for you. It's important to pay your taxes on time to avoid penalties and interest charges from the IRS.

Tax Deductions to Consider

As a small business owner, it's essential to take advantage of all the tax deductions available to you. Here are some tax deductions to consider:

• Raw materials: If your business requires raw materials or inventory to produce products, you can deduct the cost of those materials from your taxable income.
• Startup costs: You can deduct up to $5,000 of startup costs in the first year of your business. These costs can include legal fees, incorporation fees, and advertising expenses.
• Office supplies: You can deduct the cost of office supplies, such as paper, pens, and printer ink, as long as they are used for business purposes.
• Home office expenses: If you operate your business from your home, you may be eligible for a home office deduction. This deduction can include a percentage of your rent, mortgage interest, utilities, and property taxes.
• Vehicle expenses: If you use your personal vehicle for business purposes, you can deduct the cost of gas, oil changes, and repairs. You can either deduct the actual expenses or use the standard mileage rate set by the IRS.

It's important to note that these deductions must be used for business purposes only. Keeping accurate records and receipts can help you claim these deductions without running into any issues with the IRS.

Conclusion

Filing taxes as a small business owner can seem overwhelming, but with proper planning and organization, it can be a manageable process. Understanding how taxes are calculated for your type of business and following the 5 steps outlined in this article can help you stay on top of your finances and avoid penalties from the IRS. Don't forget to take advantage of all the tax deductions available to you and keep accurate records throughout the year.

At Jahm Financial Services, we are here to help you with all your accounting needs. From bookkeeping to tax preparation services, we can help you stay organized and on top of your finances. Contact us today at 17702565037 or [email protected] to learn how we can assist you with your small business taxes.