When you own your own company, it will be your responsibility to ensure that all taxes are filed appropriately. However, this is often easier said than done, so if you are self-employed and have questions about filing taxes for your business, it is critical to contact an experienced tax preparation professional who can address your concerns.
The type of business that you own will in large part dictate how your taxes must be filed. For instance, sole proprietors must report business income and expenses on Schedule C forms. Furthermore, they are responsible for paying self-employment taxes, such as Social Security. Those who have business partners, on the other hand, will need to file as either a partnership or a corporation. Partnerships are required to file an information return with the IRS that records business transactions but do not need to pay income tax. The partners would then use Form K-1 to report partnership income. Business owners who file as a corporation must file as either a:
C-corporations are recognized as separate tax-paying entities, which means the business could be eligible for special deductions. However, it also means that any profit earned by the company is taxed at the corporate level and again when it is distributed to shareholders. Like partnerships, the income of S-corporation business owners flows through to the taxpayer’s personal tax return.
After obtaining a separate tax ID for their business, self-employed taxpayers can begin to assess whether they satisfy the requirements of any business-related deductions, which could include:
The home office tax deduction
Deductions for automobile expenses, although this requires a written log of business miles
Deductions for office supplies
Deductions for travel expenses
In order for these deductions to apply, business owners must keep careful records and retain copies of all receipts showing business-related purchases. Finally, business owners are also responsible for paying payroll taxes and sales tax in addition to federal and state taxes on profits.
Business owners are responsible for filing taxes on behalf of their company, which can be difficult and time-consuming, so if you are self-employed, please contact the CORE team today.