There are many different tax forms that business owners need to be familiar with. Filing the wrong form, or not filing at all, can result in costly fines and penalties. However, by understanding the different tax forms and when they need to be filed, you can avoid these penalties and keep your business on track.
Tax accounting
If you have a business, you need to file taxes. The first step in tax preparation is understanding your taxes and which forms you need to complete. To help you with this, you could use a service like Divvy. With a service like this, you will be able to learn more about taxes, accounting, and anything else you need to run your business.
Form 1120
The most common form for businesses that use a C corporation structure is Form 1120, also known as the US Corporation Income Tax Return. C corporations use this form to report their annual income and calculate their tax liability.
Form 1040
If you are a sole proprietor or single-member LLC, you must file Form 1040, the individual income tax return. This form reports your income and calculates your tax liability. If you have employees, you must file Form 941, the Employer’s Quarterly Federal Tax Return. You can use this form to report your business’ payroll taxes.
Form 1099
If you sell products or services, you may need to file a Form 1099. You can use this form to report income from contracts, dividends, interest, royalties, and other sources. You will also need to be sure to file Form 1096, the Annual Summary and Transmittal of US Information Returns. This form will summarize the 1099 forms you have filed and send them to the IRS.
In addition to these, you may also be required to file state and local taxes. Each state has its own tax laws, so you will need to check with your state’s tax authority to determine which forms you need to file. Also, if you do business in more than one state, you might have to file taxes in all of those states.
Employees
If you have any type of employee, you must get an IRS EIN Tax ID, withhold taxes from their paychecks and remit them to the government. These forms below will help you
Forms W-2, W-3, & W-4
The most common federal tax withheld from employee paychecks is the Federal Insurance Contributions Act (FICA) tax. This tax funds Social Security and Medicare. The amount of FICA tax the government withholds from an employee’s paycheck is based on their salary.
The other significant federal tax withheld from employee paychecks is the Federal Income Tax. The amount of tax relies on the employee’s filing status and allowances. Employees can choose to withhold additional taxes from their paychecks by completing a Form W-4.
State and local governments may also withhold taxes from employee paychecks. The most common state tax is the State Income Tax. The specific amount of this tax depends on the employee’s filing status and allowances. Some states also require employers to withhold taxes for unemployment insurance and disability insurance.
Form 1040-ES
Employees are also responsible for paying FICA taxes independently, even if their employer doesn’t withhold them from their paychecks. Employees can make quarterly payments of these taxes by filing Form 1040-ES. This form estimates your annual tax liability and makes payments accordingly.
Self-Employment
If you are self-employed, you are responsible for paying your own taxes. This includes paying FICA taxes and federal and state income taxes. Here are some forms that are especially relevant if you are self-employed.
Schedule C
When you file your taxes, you must complete a Schedule C, which you use to report your business income and expenses. You will also be required to file a Schedule SE, which you use to calculate your Self-Employment Tax liability. This tax funds Social Security and Medicare.
Form 8829
If you work from home, look into deducting some of your expenses from your taxes. This deduction includes things like utilities, rent, and insurance. To do this, you will be required to file Form 8829. This form calculates your Home Office Deduction.
Form 4562
Similar to the above form, if you purchased any equipment for your business, you might be able to deduct equipment costs from your taxes. This equipment includes things like computers, office furniture, and vehicles. To do this, you will need to file Form 4562.
Wrap up
Filing taxes can be a complex process, but for small business success, it is essential to ensure that you are familiar with the tax forms you may need to file. Doing this will help ensure you correctly calculate your tax liability and make the appropriate payments. In addition, it is crucial to stay up-to-date on changes in tax law, as these can impact your business.
