Running a business can be enjoyable, exciting, and challenging, especially when it’s time to file your taxes. You have a lot of things to consider when you complete your tax return, including which forms to use and how to maximize your deductions. There are some basic tax season FAQs that will help you as a business owner. Many of your frequently asked questions are answered here.

When Do I Have to Send Someone a 1099?

When you hire someone to do work for you, such as a freelancer, you should have them complete Form W-9 before you start paying them for their services. Over the course of the calendar year, if you pay the freelancer or contractor more than $600, you must then send them a Form 1099. You also need to send this form to the IRS.

Do I Need a Tax ID Number?

The answer to this frequently asked question depends on your type of business structure. If you operate as a sole proprietor with no employees, you can use your Social Security number. However, securing a tax ID is simple and free and it will help protect you from identity theft. The federal tax ID number is called an Employer Identification Number (EIN) and can be used even if you have no employees. If your business operates as a limited liability corporation, a corporation, a limited partnership, you will need a tax ID.

How Do I Pay Taxes for a Pass-Through Organization?

A pass-through organization is one in which the profits pass through directly to you, the owner. Sole proprietorships, partnerships, limited liability companies, and S-corporations are pass-through businesses. If you own a business that falls into one of these categories, you will show your net profit on your personal income tax form.

What is the Self-Employment Tax?

When you are employed by another company, your employer pays some taxes on your behalf. However, if you are self-employed, it is your responsibility to pay what is known as a self-employment tax, which is essential for Social Security and Medicare. The self-employment tax rate is currently 15.3%. You must pay self-employment tax if your net earnings from self-employment are $400 or more. However, to offset this somewhat, you can deduct the equivalent of what an employer would pay when you figure your adjusted gross income.

What Forms Do I Use to File My Taxes?

There are many forms you may need to fill out, depending on whether you have employees, whether you are appreciating equipment, and a myriad of other circumstances for your business. For federal income tax purposes, there are four basic types of tax forms that vary with the type of business structure you own.

For a sole proprietorship and a limited liability corporation, you will complete Profit and Loss From Business, Sole Proprietor, Schedule C or C-EZ, Form 1040. On this form, you will list your income and expenses to determine your net profit. Your net profit is then included on your personal tax return, Form 1040.

For a partnership, you will complete US Return of Partnership Income, Form 1065. Your partnership must also file an annual information return to report the income, deductions, gains, and losses from your business. The partnership must also furnish copies of Schedule K-1 (Form 1065) to the partners. As owners of a pass-through business, each partner will include his or her share of the partnership’s income or loss on his or her tax return.

For an S-corporation, you will complete Income Tax Return for an S-corporation Form 1120S. S-corporations elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. Shareholders of the S-corporation are issued Form K1, showing the income that the shareholders received through the corporation. Shareholders of S-corporations report the flow-through of income and losses on their personal tax returns.

For a corporation, you will complete US Corporation Income Tax Return 1120. A regular corporation (also known as a C-corporation) is taxed as a separate entity under the tax laws. Income earned by a corporation is normally taxed at the corporate level and the corporation must file a Form 1120 each year to report this income. After the corporate income tax is paid on the business income, any distributions made to stockholders are taxed again at the stockholders’ tax rates as dividends.

Should I File My Business Taxes Myself?

If you are inexperienced or unfamiliar with business taxes, it is best to get professional help so you can focus on your business operations instead of worrying about tax time. Your company’s finances are important to your success. Missing a deduction or not completing a necessary form can be a major mistake, both financially and legally.

CLEAR VIEW BUSINESS SOLUTIONS CAN HELP

Taxes are confusing. The experts at Clear View know what you need to do and when you need to do it. We can help ensure that you are maximizing your available credits and deductions and minimizing your tax payment. We work with you at tax time and throughout the year to help you be better prepared to make sound financial decisions and to plan for your success. Learn more about how we can help you and your business by contacting Clear View Business Solutions to speak to our team about our services. Give us a call at (520) 544-0177.