12 Questions You Should Ask Before Filing Taxes
- December 3, 2019
- Posted by: BenG-Admin
- Category: Blog, IRS, Taxes
Today, most of the small business owners leave legal write-offs during filing taxes. Sometimes keeping track of your receipts and expenses does all the wonders.
That said, thorough preparation of business taxes requires finding the underlying cause of all the answers. Once you figure out the fundamental questions, the journey to file taxes becomes much more comfortable.
What Is The Required Data You Need To File Your Business Tax Return?
When it comes to tax filing, all business structures need to calculate their net income. You need to mention the information on a profit and loss (P&L) statement along with a balance sheet. Similarly, you will require proper records of all the deductions and purchases, such as vehicles and equipment. It is imperative to understand that the requirements of information ultimately depend on your business structure.
What Form Should You Use To File Business Taxes?
You will need to use a different form to file your taxes as per your business structure. For instance, sole proprietorship-based businesses need to prepare and file their tax return on Schedule C. Additionally; if you run a partnership business, you will have to file Form 1065 along with Schedule K-1 for every partner of the company.
S corporations, on the other hand, need to prepare and file tax returns on Form the 1120S. If you pay your business taxes via your personal tax return, you will also have to fill out Schedule SE (self-employment).
What Is The Right Method To File Your Tax Return?
You have plenty of options to file your tax returns. You can file your tax return is to do it file online, electronically (e-filing), or through tax software. The e-filing method is quite useful since it allows you to have two ways to file and pay taxes practically. However, it depends on the kind of form you used for filing your taxes. In addition, you can e-file and make payments through your debit or credit card.
What Is The Deadline For Your Business Tax Return?
Your business can, however, seek an extension to file tax returns. However, do not confuse extension as an exemption to prepare and file taxes before the due date. 2019 tax filing deadlines for corporations and partnerships are as follows:
You need to pay corporate taxes four and a half months after the end of the fiscal year. Currently, the due date for C corporations and corporations is set on December 31, and the deadline for tax returns is April 15.
Conversely, the deadline for Partnership and S corporation tax returns is March 15. The same date goes for an LLC partnership with more than two members. As for sole proprietorship, you will need to file the personal tax return on Schedule C before April 15.
What Happens If You Fail To Pay Your Tax Amount?
It is advisable to pay your business taxes before the deadlines. In addition, you especially should not have an excuse when you have an extension. It should not come as a surprise that failure to pay taxes on time results in hefty penalties. However, the IRS offers various late payment options for taxpayers.
You can, for example, receive a short-term extension of 120 days. However, you still will have to pay added interest and penalties. Furthermore, you can select a preferable installment plan to make the payments.
Can You Make Additional Tax Changes?
You need a general understanding of your business’ mileage rates, modifications in capital gains, and depreciation adjustments. You may also need more information to decide the applicability of your business tax return. Contemporarily, the usual business mileage rate set by the IRS is 55 cents per mile.
How Exactly Do You Calculate Cost Of Goods Sold (COGS)?
The cost of goods sold (COGS) is a vital calculation for small or large companies that make or sell products. The amount of COGS inherently changes the net income of your business. Remember, the cost of goods sold (COGS) is part of Schedule C.
You can calculate the cost of goods sold quite quickly. Combine the beginning inventory cost with manufactured inventory throughout the year. After that, minus the ending inventory to get the equal cost of goods sold.
Which Business Expenses Can You Deduct?
You can deduct every legal business expense. However, there are limitations on certain expenses that you should know about before deducting from your tax return. Several business owners often hesitate to write-off the mileage they used. Moreover, that is fair because you do not want to come across fraudulent in front of the IRS.
The best way is to keep and maintain a record. This process does not require layering. You can create a rough amount by noting the regularity of your business routes. It is an efficient way to make a legal record and make relevant deductions. That said, do not confuse your auto expenses with travel expenses. Your two primary options to write-off are mileage and actual expenses of your vehicles.
What about Cell Phone Expenses
Several business owners are unaware of the IRS ruling, where you can write-off 100% of your mobile expenses. The flexibility is available to business owners that have one more home phone line. Also, do not forget to add the cell phones of family members who are part of the business.
You should also make notes, build a spreadsheet, and check the details of your bank or credit card statements. In addition, if you think you have a valid or logical reason to make a deduction; do not be hesitant to make the most out of it.
What Are The Most Common Deductibles?
Whether you run a small business or C corporation, the frequency to purchase supplies and update computers, change office furniture, and upgrade digital equipment to boost productivity is quite common. Small business owners, for instance, can deduct most of the above items. In short, so long as it serves a business purpose, you can write it off.
Moreover, small businesses can deduct dining expenses, which happen to be one of the most under-utilized expenses. However, do not generalize it. Instead, make sure that the nature of dining relates to business sales.
Ideally, your business will be able to write-off a multitude of meals as you do more business. It is better to take some time and view all your meals of the year with clients and partners to deduct the right amount.
What Is The Ideal Way To Pay Self-Employment Taxes?
Whether you operate as a sole proprietor, partner, or an LLC member, you should pay self-employment taxes, which includes your Social Security and Medicare taxes. Though it should not be too stressful, the calculation of self-employment taxes depends on your business type.
Do You Still Have To File If Your Taxes Are Not Payable?
Every business is under obligation to prepare and file business tax returns despite earning little to no profit margins. In hindsight, filing taxes on Schedule C incorporates information on your business taxes and personal tax return. Lastly, if there are payable credits from your business, they will transfer to your personal taxes.