How to File Your Business Taxes

Knowing how to file business taxes can be overwhelming, but it is an inevitable part of running your company. That’s why our hardworking and knowledgeable CPAs at Steward Ingram & Cooper, PLLC are here to guide you through the process of filing your taxes, one step at a time.

Our business accountants can help with tax planning and filing strategies to make the process as efficient as possible. In this article, we shed light on tax laws and provide valuable insights and practical tips to help you grasp business taxes. Join our CPAs as they help you learn how to file business taxes.

Types of Business Taxes

Before we help you learn how to file business taxes, it’s vital to know what type of business tax your company is required to pay. Business taxes refer to various taxes that companies and organizations are required to pay to the government. Business owners need to understand the different types of taxes for small businesses they may be subject to, as well as their rates and regulations, to ensure they are compliant with the law and avoid any potential penalties or fines.

Here are some examples of business taxes:

• Corporate Income Tax: A tax levied on a company’s taxable income, which is revenue minus expenses. The federal corporate tax rate in the U.S. is 21%. However, taxes can be lowered by various deductions, government subsidies, and tax loopholes.
• Sales Tax: A tax on the sale of goods and services. This is considered to be a consumption tax that is usually calculated as a percentage of the sale price. The rate and application of sales tax may differ from state to state.
• Employment Taxes: Employers are required to withhold certain taxes from employee wages, including Social Security tax, Medicare tax, and federal and state income tax. Employers must also pay their portion of Social Security and Medicare taxes for each employee.
• Property Tax: This tax is levied on the value of the real estate and personal property owned by a business entity.

Taxes for Specific Types of Business Entities

Taxes for specific business entities refer to tax laws and regulations that apply to certain types of businesses based on their legal structure and ownership. Different types of businesses, such as sole proprietorships, partnerships, limited liability companies (LLCs), and corporations may be subject to different tax rules.

Taxes for a Limited Liability Company (LLC)

An LLC is a hybrid business entity that combines the liability protection of a corporation with the tax benefits of a partnership. Owners of an LLC are called members, and their personal assets are generally protected from business debts and obligations.

Limited Liability Companies (LLCs) are considered pass-through entities, which means that the business’s profits and losses are passed through to the individual owners, who report them on their personal tax returns. 

Here are some steps for filing business taxes for an LLC:

• Obtain an Employer Identification Number (EIN) from the IRS.
• Determine the LLC’s tax classification and file taxes accordingly. Depending on the number of members in the LLC, it may be taxed as a sole proprietorship, partnership, S-corporation, or C-corporation.
• File Form 1065, the U.S. Return of Partnership Income, if the LLC is taxed as a partnership.
• File Form 1120S, the U.S. Income Tax Return for an S Corporation, if the LLC is taxed as an S-corporation.
• Each LLC member will receive a Schedule K-1, which reports the member’s share of the LLC’s income, deductions, and credits.
• Include the K-1 information on the individual member’s tax returns.

Taxes for S-Corporations

A corporation is a separate legal entity from its owners, known as shareholders. Corporations can be taxed as either a C-corporation or an S-corporation. C-corporations pay taxes on their profits at the corporate level and shareholders pay taxes on any dividends received. S-corporations are pass-through entities that allow profits and losses to be passed through to the shareholders’ personal tax returns.

How to file business taxes for an S-corporation:

• Obtain an EIN from the IRS.
• File Form 1120S, the U.S. Income Tax Return for an S Corporation, which reports the corporation’s income, deductions, and credits.
• Each shareholder will receive a Schedule K-1, which reports the shareholder’s share of the corporation’s income, deductions, and credits.
• Include the K-1 information on the individual shareholder’s tax returns.

Taxes for a Sole Proprietorship

A sole proprietorship is a business owned and operated by one individual who is personally liable for all business debts and obligations. A sole proprietorship is easy to set up and allows the owner to have complete control over the business. However, it does not provide any legal protection for the owner’s personal assets.

How to file business taxes for a sole proprietorship:

• Obtain an EIN from the IRS if required.
• Complete Schedule C, which reports the sole proprietor’s income and expenses.
• Include the Schedule C information on the individual’s personal tax return.

Taxes for a Partnership

A partnership is a business owned and operated by two or more individuals. Partnerships can be general partnerships or limited partnerships. In a general partnership, all partners are personally liable for the business’s debts and obligations. In a limited partnership, there are general partners who have personal liability and limited partners who have limited liability. Partnerships are also considered pass-through entities for tax purposes.

How to file business taxes for a partnership:

• Obtain an EIN from the IRS.
• File Form 1065, the U.S. Return of Partnership Income, which reports the partnership’s income, deductions, and credits.
• Each partner will receive a Schedule K-1, which reports the partner’s share of the partnership’s income, deductions, and credits.
• Include the K-1 information on the individual partner’s tax returns.

How to File Business Taxes in Three Steps:

Learn how to file business taxes in four easy steps as explained by a CPA.

1. Gather Your Personal & Business Records

Keeping good records is the foundation of preparing your taxes well. Before you do anything, collect all your relevant business records. Depending on your type of business entity, you need different documents. Begin with these:

• Personal information (SSN, address, DOB, etc.)
• Last year’s tax returns
• Employer Identification Number (this can be found on IRS.gov)

Collect everything related to your earnings and expenses. Possible records for earnings:

• Invoices you sent to clients
• Records of any goods sold to customers
• Sales records that note money coming into your business

Possible records for expenses:

• Rent receipts for your small business
• Office supplies
• Employee salaries
• Client lunches
• Mileage records

2: Find the Right Tax Form for Your Business Structure

After sorting your recordkeeping, find the right tax form for your business structure. See the sections above for the different types of businesses and the correct tax forms for each.

3: Complete the Forms with a CPA or Online

You can complete the forms using one of these methods:

• a tax preparer
• tax software
• online 

Tax preparers like those on our team at Steward Ingram & Cooper, PLLC will handle everything for you. If you are using tax software, the forms will be generated for you. If you are filing your taxes online with the IRS (sometimes called e-file), you can use the electronic filing options for business and self-employed taxpayers.

Benefits of Working with a Raleigh CPA

Working with a certified public accountant in Raleigh can provide several benefits for individuals and businesses alike. 

Expertise in Tax Laws

CPAs are trained to understand federal and state tax laws, regulations, and compliance requirements. They can help you navigate complex tax rules and maximize your deductions and credits, potentially reducing your tax liability.

Accurate Financial Reporting

CPAs have the knowledge and experience to accurately prepare and review financial statements, helping ensure compliance with accounting standards and regulations.

Strategic Financial Planning

A CPA can provide valuable insights and advice on financial planning, including investment strategies, retirement planning, and estate planning.

Timely and Efficient Filing

CPAs can help ensure that your tax returns and financial reports are filed accurately and on time, potentially avoiding costly penalties and interest charges.

Business Consulting

A CPA can provide strategic advice on financial management, budgeting, cash flow management, and risk assessment.

Representation in Tax Matters

If you face a tax audit or other tax-related issue, a CPA can represent you before the IRS or state tax authorities, potentially saving you time, money, and stress.

Contact Our Business Accountants in the Raleigh Area Today

Our team of small business tax prep CPAs can help you navigate complex tax laws, prepare financial statements, and work with you to develop strategic financial plans for your business. Contact Steward Ingram & Cooper, PLLC today to see how our accounting services can help your business.

Call us at  (919) 872-0866 or complete the contact form below.