If you’re new to the world of entrepreneurship, taxes are one of the things you need to learn about, fast. Not to worry, help is at hand. Here’s our handy guide to the forms you’ll need, both for yourself and your employees.
Income Reporting for Yourself
The form you use to file an annual income tax return depends on your type of business entity. For example:
Form 1040 for sole proprietors
Form 1120 or 1120-S for corporations
Form 1065 or 1065-B for multiple member LLCs and partnerships
Tax Payments for Yourself
Most small businesses pay estimated quarterly taxes throughout the year. One of these forms should accompany each payment:
Form 1040-ES for individuals including sole proprietors, partners and S-Corporation shareholders
Child care and education costs
Form 1120-W for corporations
In addition, you must pay self-employment tax, which covers your social security and Medicare taxes. This tax is included on Form 1040.
Income Reporting for Employees
Anyone you pay to do work for your business must have their earnings reported to the IRS. Send in one of these forms for each individual:
W-2 for employees
1099 for independent contractors
Tax Payments for Employees
You must deduct some taxes from your employees’ paychecks, and then pay those taxes to the government. They include social security, Medicare, federal income tax withholding and federal unemployment tax.
The accompanying form will be one of the “94-series,” depending on your specific business, such as Form 940, 941, 943, 944 or 945.
You don’t have to make any tax payments for independent contractors.
Certain types of business — such as manufacturers or sellers of heavy equipment, or who conduct a wagering business — must also report excise tax.
Form 720 for environmental, communications, air transportation and fuel taxes
Form 2290 for trucks, tractors and buses used on public highways
Form 11-C for wagering activity (use Form 730 to figure the amount)
There’s a whole array of deductions you can take as a business owner in order to decrease your tax burden. Be sure to keep expense records and receipts so you don’t miss out. Report on Form 1040, 1120 or 1120-S:
Costs of raw materials and labor
Capital expenses (purchase of equipment and other start-up costs)
Interest on business mortgages, loans and credit cards
Personal expenses such as a home office and business travel
As a new business owner, all this info may seem overwhelmingly complicated. To be sure you get it right the first time, consider using a professional tax service or CPA (Certified Public Accountant) who is knowledgeable about the tax requirements governing small businesses.
At Xendoo, working with small businesses is our specialty. We understand your concerns and needs, from getting your books ready to finding opportunities to reduce your taxes. Best of all, we understand you can’t afford to pay an arm and a leg for accounting expertise. Check out our affordable rates today.