Top 10 Business Tax Filing Questions
Common Questions about Preparing and Filing Business Taxes
Being prepared for business taxes means having all the answers and working through the process. If you work through these questions, you can smooth out the wrinkles and get done faster.
New Tax Law and Your Business Taxes
The 2017 Tax Cuts and Jobs Act has major effects on business taxes. Included in the new tax law are some pluses and minuses. The possible benefits for your business include:
- A cut in the tax rate for corporations to 21 percent for all corporations
- A possible additional tax cut for eligible small businesses (sole proprietors, partners, LLC members)
- Increases in the amounts of depreciation for first-year purchases of business equipment, vehicles, and other big-ticket items
- A new family leave tax credit for businesses that give employees paid family leave time
Some new restrictions and limits include;
- A limit on the amount of interest expense larger businesses can deduct
- The elimination of tax deductions for entertainment expenses (with some exceptions)
- Deductions for commuting benefits for employees have also been eliminated
- And, some tax credits have been eliminated.
Get the full list in this article about benefits and drawbacks of the Trump tax cuts for businesses.
The form you use to filing your business taxes depends on your business type:
- If your business is a sole proprietorship or single-member LLC, prepare and file Schedule C and add it to your personal tax return
- If your business is a partnership or multiple member LLC, you'll need to file a partnership return (Form 1065) and Schedule K-1 for each partner or LLC member.
- For S corporations, use Form 1120-S
- For corporations, use Form 1120
For business taxes payable through your personal tax return, you will also need to complete Schedule SE for self-employment taxes.
Changes in due dates for corporate and partnership taxes, effective with the 2018 tax year (filing in 2019):
Corporate taxes are due four and a half months after the end of the corporation's fiscal year end. For all December 31 year-end C corporations, and for corporations, tax returns are due April 15.
Partnership and S corporation tax returns are due on March 15. This includes multiple-member LLC's filing as partnerships.
Sole proprietor and single-member LLC businesses filing Schedule C with their personal tax returns - the due date is April 15.
Read the complete article on 2018 business tax return due dates to see the specific dates for this tax year's specific dates. If the due date falls on a weekend or holiday, the specific tax due date for the year is the next business day. The dates for this year reflect any adjustments.
Businesses can apply for an extension to file tax returns. However, it is important to know that the extension doesn't exempt you from your duty to make tax payments on time.
What information do I need in order to file my business tax return?
For tax filing for all business types, the most important calculation you need is for business net income on a Profit and Loss (Income) statement and a balance sheet. You will also need records for deductions and purchases of business assets like vehicles and equipment. Here's the information you need, depending on your business type:
To complete your business tax return, you might also need this information:
- The 2018 IRS standard business mileage rate: 54.5 cents per mile
- The 2018 maximum amount of Social Security tax for an individual
This article explains the applicable business mileage rates, changes in capital gains tax treatment and depreciation changes.
This article also includes information on the 2018 personal tax rate.
Cost of goods sold is an important calculation for businesses that manufacture or sell products, because the result of this calculation affects the business's net income. Cost of goods sold (COGS) is calculated:
- Beginning Inventory Cost
- Plus Cost of Additional Inventory Manufactured or Purchased during the year
- Minus Cost of Ending Inventory
- Equals Cost of Goods Sold
Cost of goods sold is included in Schedule C for sole proprietors and in other business tax reports for partnerships and corporations.
Almost every legitimate business expense can be deducted, but for some expenses there are limits to the amount that can be deducted, and some expenses are not considered to be deductible for business tax purposes. Read more about business tax deductions from A to Z to see what expenses you can deduct (updates for 2018 tax year).
You may also want to check out this article discussing business expenses you cannot deduct.
The best way to file your taxes is to do it file federal income taxes online, by e-filing, either through your tax preparer or by using tax preparation software. The E-file system includes two ways to pay and two types of e-filing, depending on the type of form being filed. You can also e-file and pay using a debit or credit card.
You must pay your business taxes by the due date, even if you are filing an extension application. If you cannot pay your taxes by this date, penalties and interest will be imposed. But the IRS provides some late payment options:
- You may be able to get a short-term (120 day) extension, but interest and penalties will still apply
- You may be able to pay on an installment plan, or
- You may be able to pay with a credit card or debit card, for a fee
Yes, every business must prepare and file a business tax return, even if the business had no profit for the year. Businesses filing on Schedule C include business tax information with the personal tax return, and there may be credits from the business that apply to your personal taxes.
If you are a sole proprietor, partner, or member of an LLC, you must pay self-employment taxes (Social Security and Medicare taxes), in addition to business income taxes. This article discusses common questions about self-employment taxes, including how these taxes are calculated and paid.