Steps to Paying Your Business Taxes With the Help of a Software Program
There are several federal taxes your business has to pay. These include business income, payroll, and employment taxes. Each type has unique rules and qualifications, so check with the IRS for detailed information.
Online tax software focuses on calculating, tracking, and preparing taxes. It asks user-friendly questions, performs calculations, and prepares forms to file electronically or in print.
In this article, you’ll find the basic steps to paying your business taxes using a software program. Whatever software you choose to use, make sure they are IRS-approved.
Gather all business records
To file your business tax returns correctly, you must have all the documentation demonstrating your company’s income and expenses. It includes documents that show money paid to your employees and independent contractors, receipts for supplies, canceled checks, bank statements, and cash register tapes. You must also have all records documenting your business’s purchases and sales, including invoices, credit card statements, and utility bills. Finally, you should have the IRS Form 1099-MISC, which reports non-employee compensation. You should retain these documents for at least three years in case the IRS audits your firm, or you need them for future tax returns.
To make record keeping easier, set up a financial account for your business that is dedicated to all business transactions. It will aid you in tracking your expenditures and claiming deductions when submitting your taxes. You can also use a point of sale (POS) system or financial software to track your income and expenses. Both systems are more accurate than manual bookkeeping and can lessen your time on paperwork.
Remember to store receipts in a designated folder and label them according to date or category. Organizing your records by fiscal year will also make them easier to find. If you are getting rid of old receipts, check with a legal professional to ensure you don’t need to save them.
Paying your business tax
Many business owners pay various local, state, and federal taxes. These can include income tax, like taxes paid by employees, sales and use tax, property tax on business-owned buildings or equipment, franchise tax, real estate tax, and self-employment tax. The taxes you have to pay depend on your business, the business entity type you create, and where you operate.
Most small business (non-corporate) owners file their business taxes with personal tax returns. It is usually valid for sole proprietorships, partnerships, and single-owner LLCs. However, some businesses must file separate business tax returns and pay different taxes from their profits. Consult an accountant or a lawyer if you need clarification on the tax structure your company requires.
When you file your taxes, make your business tax payments on time. Most business tax preparation programs allow you to set up an estimated tax payment plan, making it easier to manage your payments throughout the year. Some software will even automatically transfer your withheld or estimated taxes to the IRS on your behalf. If you cannot pay all of your taxes on the due date, the IRS offers several payment options, including an installment payment plan for businesses.
Filing your business tax return
You will have different tax liabilities depending on how you structure your business (a sole proprietorship, partnership, or S corporation).
Your federal income tax liability will depend on the amount of your taxable business earnings. Calculating your taxable business income is simple using a tax software program. The best programs will walk you through the process in plain language and offer definitions and answers to common questions. In addition, look for a software program with an accuracy guarantee that will cover any IRS penalties that result from calculation errors.
Once you have calculated your taxable business earnings, you must subtract your expenses to determine your net profit or loss. Then you will add this to your other personal income tax items to decide on your total tax liability.
Many states also require business owners to file state returns. Your state tax burden will vary depending on the nature of your firm and the local income tax rates. Estimating your state tax liability quarterly is a good idea based on your yearly taxable business income. It will assist you in avoiding a hefty tax payment at the end of the year.
Filing your tax return
Whether you have a simple return, are self-employed, or own multiple real estate properties, tax software can help you file your tax returns. Many of these programs offer an interview-style filing system that prompts you to answer questions about your finances, while others use a form-based system that mirrors traditional tax forms. The program you choose should match your needs and budget.
Before choosing a program, review the different features and pricing options to ensure it offers the necessary functions. Most programs cost a small fee to use, while some are free with more features when you upgrade.
If you have a complicated return, choosing a program that is up-to-date with the latest tax laws and can handle the most recent income adjustments, deductions, and credits is essential. You should also confirm that the software is IRS-approved.