Income Tax Preparation For Small Business Owners

You don’t have to be an expert and have an in-depth knowledge of tax laws and the tax code itself. You just have to know the basics!

First things first, what is considered as a small business?

The Small Business Administration generally describes small businesses as any privately-owned enterprise having less than five hundred employees and less than $7.5 million in annual revenues.

There are three major types of small businesses: sole proprietorship, partnership, and limited liability company. How you list your business as will determine how you will need to file your business’s tax return.

A sole proprietorship is an unincorporated business that is owned by an individual. Sole proprietors pay their business tax return along with their personal tax return. Aside from the 1040 U.S. Individual Income Tax Return form, they also need to accomplish the Schedule C form to calculate business profit and loss. Sole proprietors may refer to the IRS official website for the complete list of forms they may need to file.

A partnership is formed when two or more people establish a business. Members of this partnership contribute skills, money, properties, and labor to the venture. They are also expected to share whatever profit and loss the business has.

Partnerships need to fill out the Form 1065 to declare their annual return of income. They may also be liable for employment and excise taxes. Partnership income taxes are paid by individual partners based on their share of income and losses during the year.

Limited liability companies or LLC is a state-specific form of a private limited company and the least complicated of all business structures. LLCs are not a taxing form for federal income tax return purposes; this business structure follows regulations of the state where it is established. Single-member LLCs pay income tax returns as a sole proprietorship while a multiple-member LLC pays tax returns as a partnership.

Did you know that tax planning and preparation should be done, all year round and must be completed by end of the calendar year? This means gathering, organizing, and keeping all your invoices, receipts, and your business’s record of income and expenses. Here are the most common business records you should keep:

Having a clear and organized financial record of your business will help decrease the stress on your part during tax season, especially if you are going to have your tax returns done by a tax professional. This way, you won’t have to worry about any undeclared financial information on your part.

It is a known fact that tax laws are complex and confusing. Taxpayers are just one mistake away from possible penalties and audits by federal and state tax authorities. All business owners would want to maximize their deductions and have their tax returns filed correctly and on time. That is why it is a sensible choice for business owners to hire a tax professional to do income tax preparation on their behalf.

While there are thousands of articles written all over the internet on how you should choose a tax preparer, there are only two important things you should remember:

1. Find out about the tax preparer’s credentials. A good place to check on a tax preparer ’s credentials is the IRS’s Online Directory of Tax Return Preparers with Credentials and Select qualifications. You will find here a list of enrolled agents, tax attorneys, and certified public accountants that have met substantial proficiency requirements. It is also important to take note of their affiliations with the right agencies such as the National Association of Tax Professionals, the American Society of Tax Problem Solvers, and the National Society of Tax Professionals. Not only will these agencies vouch for the credibility and integrity of a tax professional, this will also guarantee that the tax preparer of your choice gets all the training and support needed in their job.
2. Avoid fly-by-night tax professionals. Even if you hire a professional, there may still be a slim possibility that you might get audited by tax authorities, say, for missing tax return from a few years ago. When this happens, you would want to have your tax preparer to still be around to answer your questions and assist you with your tax-related concerns. Also, avoid those so-called tax professionals who would promise bigger tax refunds without even looking at your records, refuse to offer IRS e-file, and most importantly, never hire a preparer who refuses to sign their name and provide their Preparer Tax Identification Number (PTIN) on your final tax return. These are red flags that you should look out for to protect yourself and your business from scammers during tax season.

Ranked by TopConsumerReviews.com as the Best Tax Relief Company of 2018, CuraDebt has been around the industry for nearly 20 years and has helped thousands of people and small businesses regarding their tax-related concerns. The CuraDebt Tax Team is composed of highly-experienced enrolled agents, tax attorneys, and CPAs, some of whom have worked previously with the IRS.

With CuraDebt, you can guarantee that you will be working with some of the finest tax professionals in the industry who will do the income tax return preparation for your small business correctly and on time.

Call 1-877-999-0486 for a no-obligation consultation, free of charge.