Taxes – A Guide for Beginners

There are a few things that worry small business owner as much as taxes do. This is especially true when you’re a new company and when the owner is new to the American way of doing things when it comes to taxation.

Luckily, there are plenty of guides out there to help you out. There’s also IRS itself which is very helpful and provides quite a lot of insight into how to deal with taxation. At the same time, it may be useful to hire an accountant just to consult with them if nothing more.

Due dates

The first thing to be aware of are the due dates that you need to keep up with. There are fees and penalties for those who pay their taxes late or who report their taxes late. This will also affect how IRC treats you since those who have been late before don’t have the favor with IRC.

Income tax return due date is 15th of April. If that falls on a holiday or a weekend it’s the next work day after that. There are a few cases in which being late is tolerated but these are rare.

Do you need an accountant?

This isn’t an easy question to answer since it very much depends on how large your business is and how fast you plan to expand it. It also matters what you plan to use the accountant for. Most of the work will be taken up by the work on payroll taxes. This is an easy job but it’s mundane and it will take up too much of your time.

When it comes to small businesses that need to pay income tax, there is plenty of software solutions you get to use that can do most of the job for you and save you the expense of accountants.

Tax forms

There are a few tax forms you’ll need to keep in mind when filing your taxes. It takes time to learn the language but after a while you get used to it. These are:

Schedule C
Schedule C Instructions
Schedule SE for self-employment tax
Schedule SE instructions

Other than that, there’s some data you need to have prepared for the forms. These include:

-If you have an inventory of products, you’ll need to provide data on what you sold and what you have available as well as the worth of both.
-The information regarding tax deductions that are provided by IRS. These include the cost of business travel and driving expenses.
-Information on the cost of the business assets that are needed to run the company.
-If you work from home you’ll also need to provide an additional set of information so that it can be determine which of your costs business costs are and which are private.

Self-employment tax

There’s one additional tax to consider if you’re running a business in which you’re the only employee. In these cases you need to pay self-employment tax. There are also social security and Medicare that you pay for yourself as you would for any other employee.

Extension of time

There’s an option of getting more time to do your taxes but this needs to be approved by the IRS. The extension can be up to six month for non-corporate entities, meaning individuals and NGOs. You’ll need to explain why you want the extension and to prove you’ll be able to pay in the time you’ve agreed on.

Corporations which include most small businesses that are set up as LLCs can’t get an extension unless they declare bankruptcy.

Amended tax return

Mistakes happen and there’s a chance you’ll sometimes make a mistake on your taxes without the intent to defraud the IRS. This is just fine and there’s a process to fix it if your return has already been sent.  It’s called the amended tax return.

The form in which to do it depends on how and why you pay the taxes in the first place. To amend a personal tax return you should use Schedule C, use Form 1040X-Amended Return. It’s important that you let IRS know about the amendment.

Conclusion

Taxes are one of the most important obligations you have as a business owner. That’s because you could face both legal and financial consequences when you’re late or wrong about your tax obligations. It’s important to be aware of your obligations and how the tax system works in the first place. For a new business owner there are only a few basics you need to be familiar with.

For instance you’ll need to make sure that you know the forms that you need to fill out and the dates on which that need to be done. Otherwise you may fees additional fees and charges.