How To Do Your Business Taxes
Updated: Dec 23, 2022
Do you have nightmares when you think about your business and taxes? Yes, taxes can be stressful. But they don’t have to be if you are prepared for them.
Keep reading for the steps on how to do your business taxes from a CPA and profit strategist for quilt shops.
Keep Good Records and Keep Them Up to Date
If you keep your records organized, it is easy to collect your information when it’s time to calculate your business taxes.
There are many ways that you can keep your records. You can use a spreadsheet, or you could use other tools to keep your receipts organized. I recommend that you use an electronic bookkeeping software like QuickBooks or Patriot. It makes it easier to find information and see who sold you what and when rather than trying to look through paper receipts.
You should also complete your bookkeeping on a regular basis to keep your records up to date.
Know What Forms You Need to File
The forms that your business needs to file depends on the legal structure of your business.
Many quilt shop owners operate their business as a sole proprietorship. This means that you will report your business income and expenses on a Schedule C attached to your personal tax return. Your business year is the calendar year.
You may operate as a Limited Liability Corporation, or LLC. If you are the only owner of the LLC, the Internal Revenue Service (IRS) will still allow you to report your business income and expenses on a Schedule C attached to your personal tax return.
However, if you elect to tax your LLC as if it was a C-Corporation, then you would file a separate business return and a separate individual return. The business return is Form 1120 for C-Corporations or Form 1120S for S-Corporations.
If you have set your business up as a Partnership, then you would file Form 1065.
Fill Out the Right Forms and Schedules
Every business needs to report their business income and expenses to the IRS on the appropriate forms.
Once you know which forms to use, you can read the form instructions and follow the form line-by-line. If you have a simple business, I recommend that you file on your own and NOT pay for someone else to file for you.
But if you have a more complex business, or if you are unsure, you do want to hire a knowledgeable tax preparer. This will ensure the proper forms are filed and that you are reporting properly. You do not want to get in trouble with the IRS.
Pay Attention to the Deadlines
Every tax form has a specific deadline. If you don’t file by the deadline, you can be subject to significant penalties and interest charges.
If you are filing a Schedule C attachment to your individual tax return, the deadline to file is generally April 15. If this date falls on a weekend, or there is a holiday, this date may be adjusted.
If you are filing a Form 1120 for a C-Corporation, the deadline to file is the 15th day of the fourth month following your year-end. If your C-Corporation has a December year-end, the deadline is April 15. If your C-Corporation has a June year-end, the deadline is October 15.
If you are filing as an S-Corporation, a Partnership or a Multi-Member LLC, the deadline to file is the 15th day of the third month following the close of your tax year.
There is the ability to request an extension of time to file your return without fear of penalties. However, if you owe any taxes, they need to be paid by the original due date to avoid interest charges.
Be careful with extensions though. Your individual tax return may require a schedule from your S-Corporation or Partnership return. You may need to extend both returns so that you have all the required schedules and information for both returns.
If you need more information, or if you would like for me to prepare your taxes, schedule a 30-minute consultation with me free of charge. I can help!