If you own a company, you must complete annual tax returns. If you run a home business and do not have any employees besides yourself, taxes immediately became much easier. Even though your job just became easier, there is basic but important tax information you should know before you get started, plus tips on how to make the job simpler.
Home Business Tax Deductions
When launching a start-up, many business owners wonder what costs they can and can not deduct. A simple rule to follow is that deductions have to be both ordinary expenses and necessary expenses to the business.
There are a variety of places where entrepreneurs can deduct costs. For instance:A few areas are supplies, advertising, travel and entertainment, insurance, repairs, rental fees, worker pay, etc. Also deductible is the business use of your home and car.
The IRS website has additional information on write offs. If you maintain documented receipts and excellent records of expenditures regularly, tax returns will be easier to complete. Use a business credit card for business expenses. Do not mingle personal and business accounts.
For people who don't use an accountant, you may want to take advantage of a simple accounting software program like Quick Books Pro or Quick Books Simple Start. These programs organize both income and expenses so that preparing income tax returns does not become overwhelming.
Tax Return Documents
The income tax forms needed for a particular business will vary, depending on the way the company is organized (a sole proprietorship, corporation, s corporation, LLC or partnership). You can access the required forms from the IRS site, with directions for filling them out.
According to the IRS website, those who run a sole proprietorship or LLC complete a 1040 individual income tax return form with a Schedule C Attachment, profit or loss from business. Corporate entities use form 1120 while S corporations use form 1120-S. Companies that are partnerships use form 1065.
Tax Preparation Software
A tax professional can be paid to fill out business returns, or you can do them yourself. Just like individual tax software, there is do-it-yourself tax preparation software for small businesses.
You can even find home and business software packages which include both programs for preparing personal returns and corporation business returns. Buying a multi-software package most times is marked down and can be a great deal for small internet businesses on a budget.
Recognized companies such as H&R Block and Intuit offer home and business software together that you can buy for under $100. For people who do not like to download and install software, Tax Act offers a web-based program that is accessible online and you don't have to hassle with any software.
Tax returns filled out by a tax professional can set you back $500 or more, so there is a big cost savings to doing the work yourself. However, tax pros typically have knowledge of little-known deductions that non-professionals miss out on, and professionals can of course save you the work completing returns.