With less than two weeks before the New Year, along with the preparations in celebration to Christmas and New Years, your businesses should be getting prepared to file taxes. The question should be, are you prepared to file your business tax? Tax filing for small business is made simpler by the guidance and information provided by the Internal Revenue Service (IRS). Help over the phone is also available. However, for a new entrepreneur who is filing his business tax for the first time, it is advisable to get the help of a professional. Here are a few pointers that can help you prepare your 2012 business taxes.
How to File Taxes for your Small Business
- Collect all the tax forms you will need to fill out depending on the type of business you are in. If your business is a sole proprietorship, you will need form 1040, Schedule SE for self employment taxes and Schedule C-EZ for reporting the business profits of the year 2012. For more information check IRS website.
- Ensure that you do not skip any sections when filling out the forms. In some cases, you may have to fill in multiple copies of the same form.
- You have to fill in all the business deduction that you are authorized for. For business deductions totaling $5000 or less, use Schedule C-EZ and if business expenses are more than $5000 use Schedule C. Business deductions vary from business to business and it includes expenses such as advertising, travel and boarding allowances, fuel allowances, payment made to freelancers, office supplies and rent of business space.
- Make sure to fill out forms for the estimated tax next year because as per the IRS rules, the taxes should be paid as you go throughout the year. If you are planning to file your taxes online, visit the IRS website and select an authorized e-file provider. Follow the instructions provided by the e-file provider.
What are your deductibles?
You have to be careful with your deductions if you are reporting a net operating loss for 2012. If you are reporting negative income, your deductions will be subject to increased scrutiny. This is applicable for businesses that would be paying taxes for the first time.
- A few things that could be easily written off as a deduction include the startup cost of your business. If you manage a home office, then it can be counted as a deductible. But the home office must be a dedicated space and not your coffee table or breakfast nook. You have to mention the square feet of the space used in your deductible column.
- The IRS allows a deduction of up to $100,000 for equipment and furniture for the first year of the business. A new entrepreneur can make use of this depreciation method only provided your business makes a profit. Otherwise, you can write off the cost over the period of five or seven years. Most small business owners consider depreciation deduction only when the business starts making a profit.
- Another tax deductible is vehicle expenses. This is considered a major expense for new or existing businesses. You should maintain a log to keep track the travel of your employees for any business purposes. Maintaining a record for the number of car maintenance for your vehicle is important as well.
Make sure all your records are in order using a reputable brand of tax accounting software.
