Preparing to pay for taxes is something many people try to avoid. It is even more of a burden when you operate a small business. Filing taxes for a small business can be a complicated job, and the instructions are often difficult to understand.
The most important thing you need to know before filing your taxes is that a record of all financial aspects of your businesses should be in existence. For this, many small businesses use a small business tax preparation service. If you are running a business on your own with no employees, a social security number will be enough but, you may want to get a Federal Employer Tax Identification Number (EIN) to establish that you are a credible business. Each year, the IRS sets a minimum amount that your business must make in order for that business to have to pay the self employment tax. If a small business with no employees makes less than that, they are exempt from paying that tax. Many businesses do not pay this tax because they do not reach the minimum amount set by the IRS.
If you business does have employees, then you need to withhold social security taxes, Medicate or Federal Insurance Contributions Act taxes, and state/federal income taxes. The small business needs to send this money to the IRS and state agency regularly. These businesses must also pay unemployment insurance tax.
Small businesses try to reduce the tax that they owe at all costs. There are several tax deductions that small businesses can utilize so they do not owe as much. Even with many tax deductions available to them, many small business owners do not use them. Some small business owners know about these tax deductions, but never utilize them. Some tax deductions that are available are tax deductions for sales, federal, salesman, commercial real estate, business, houses, property, and corporate.
Depending on what type of small business you run, you will have to file separate tax forms for federal and state income. Do some research to find the forms you will need to fill out according to your business type.