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Tax Preparation 101: A Guide For Small Business Income Tax Preparation

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Taxes are some of the seemingly most complex documents one has to prepare. It is also one of the most tedious and critical. There are many things to fill out and many requirements to complete.

Making a single simple mistake can land you on the wrong side of the IRS. When that happens, expect a lot of trouble. You can end up in jail and getting fined expensively with your reputation getting tarnished. You can lose different assets and properties, and it can ruin your business too. Therefore, the utmost caution and care are needed when preparing taxes. It is also best, to be honest in your declarations to prevent future problems. Make sure that you have a business lawyer to back you up especially if you have zero knowledge in all of these. To better understand why you need a business attorney, learn more here.

For small businesses, the profit and loss are calculated and then included in the owners’ tax returns. Here is a guide on how you can go about the tax preparation for your small business. Do note though that this guide is only for Schedule C with their Form 1040. It is only applicable to single-member LLC and sole proprietors. If your business does not fall on these categories, then a different process needs to be followed.

Due Date

Since small businesses file their tax returns together with their tax returns, the due dates are the same. The deadline for that is April 5 of every year. In cases when the due date is on a weekend or holiday, the due date is moved to the next business day. It is important to remember this information to avoid any confusion in the future.

A good read: How to Send Payments to the IRS

Income Tax Forms

There are different forms for different schedules of taxes. What you need are the Schedule C Income Tax forms. They are necessary for calculating your self-employment tax. The types are Schedule C, Schedule C Instructions, Schedule SE for self-employment tax, and Schedule SE instructions.

Tax Details

There is a lot of information you will need to complete Schedule C. You will need the information to calculate the cost of goods sold if you have an inventory of parts and products. You also need information and proof for all business tax deductions. Examples of business expenses are driving expenses, business travels, and business meals. Unfortunately, entertainment expenses are no longer included in the deductibles. You will also need to provide information on the cost of purchasing business assets like equipment and vehicles since you need to calculate the depreciation deductions. In some instances where your business operates at home, you need to include any information relating to the business use of your home so you can have a home business space deduction. It is essential to not miss out on any of these things since it can affect income tax returns a lot.

Tax Preparer

There are others who prefer to do their taxes on their own. It is good if you are familiar with the process and you know what you are doing. You may also do so if you already have experience in filing this kind of schedule. However, the best way to go is to hire a tax preparer. If you do not know anyone, then search for the best tax preparers on the web to get recommendations. You may also visit some firms for assistance.

Author Credits for Patrick Monahan

Patrick Monahan is the managing partner of Monahan Law Firm, PLC. Patrick began his legal career practicing real estate, construction, and general business litigation. Over the years, Monahan Law Firm, PLC has expanded to serve clients in domestic relations, personal injury, and estate planning.

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