What Every Small Business Owner Needs to Know About Tax Returns
If you are a small business owner, you are probably familiar with the tax laws and regulations governing your particular industry. For example, you may have to pay federal income taxes, and you might be responsible for a host of other taxes. However, you can’t just throw a bunch of money at the government and hope for the best. You need to know how to navigate the tax system and take the right steps to minimize your tax liabilities.
The IRS and your state or local tax agency will have plenty of helpful information a small business owner needs to know. Some of these tax guides include Publication 15 (Circular E), a handy guide for the business owner who wants to understand the tax system and the various ways it works.
There is also the EFTPS, or Electronic Federal Tax Payment System. It’s the official name for the IRS’s tax collection and payment method for businesses. This service is especially useful to owners of home-based businesses and sole proprietorships, who don’t have a payroll department to manage. While it isn’t perfect, it can be the saving grace for many entrepreneurs.
Depending on your business, you’ll likely have to prepare and file a variety of tax returns. The most important are your business’s annual income tax return, a quarterly return for employment taxes, a monthly return for self-employment taxes, and an informational return. Each type of tax return has its own set of requirements, but you should be aware of the tax rules for each. Ideally, you should also keep copies of your business’s tax forms to avoid being hit with a surprise tax bill at the end of the year.
What every small business owner needs to know about tax returns is a bit complicated, but you should be able to figure it out. The following chart is intended to help. In the end, a good rule of thumb is to determine what type of business you operate, whether it be a sole proprietorship, a partnership, or a corporation.