If you own a business, the current deadline for federal tax filing is April 18, 2023 - with the exception of some Californian residents due to the recent storms. This means that you have to get all of your information in order before this deadline or run the risk of being hit with tax penalties and late fees.
Naturally, if this is your first time dealing with federal taxes, you can feel quite lost as to what to do. In this guide, we’ll explain everything you need to know about filing business taxes - including the best practices and what can be done to help you cover the payments.
Keep a collection of your business records
It’s incredibly important to get into the habit of collecting and storing your business records. Back in the day, you’d use paper records to deal with this, meaning there’d be a mad rush as the tax season ends because you’re frantically looking for all documents.
Nowadays, life is much easier thanks to digital records. You can find lots of different tax apps that will store all of your data automatically. This means you have a clear record of things like:
- Sales figures
You pay federal taxes based on what you earn, which is why it’s critical to have a collection of business records before doing anything else.
Ensure you fill in the right tax form
Different business owners may need to fill in different forms based on how your company is structured.
- Sole proprietorships - You will fill in form 1040, which is your personal income tax form. Alongside this, you add a Schedule C form, which details the profit and loss of your business.
- Corporations - Here, you will need specific corporation tax forms 1120 or 1120S. You’ll fill these forms in with income, gains, losses, deductions, and credits.
- Partnerships - If your business is a partnership you have to file the Schedule K-1 form alongside form 1065.
It’s really important to know which of these forms you have to fill in or you will incorrectly file your federal taxes. The good news is it’s as simple as understanding how your business is structured. These days, the majority of small businesses are sole proprietorships but double-check just in case you need to fill in a different form.
Choose how to file your taxes
Once you have the right forms, you can begin filling them in and filing your taxes. There are different ways of doing this, though the IRS currently recommends tax preparation software.
In fact, businesses can pay all of their federal taxes using the Electronic Federal Tax Payment System (EFTPS). If you click on the link, you’ll be taken to a page that lets you enroll in EFTPS, providing a convenient and fast way of filing your taxes online.
Alternatively, you can make a tax payment by signing into the IRS website and choosing any of the options shown here. You can pay via credit/debit cards, direct from your bank account, or with digital wallets.
Do all of this way in advance of deadlines
You still have a couple of months before the April deadline this year. Ensure that you get everything prepared well in advance of this date to avoid problems. The sooner you figure out how much tax you owe, the sooner you can get things in order.
Too many small businesses wait until the deadline before filing their federal tax returns. As a result, they’re left with a tax bill that’s way bigger than expected - and have no way of paying it. Knowing your tax bill as soon as possible means you have time to work out how you can afford to pay it.
Often, a good way to cover extortionate tax bills is through a business loan. At LendSpark, we can set you up with a small loan to help you pay your tax bill in full, and on time. As such, you avoid any late fees or penalties, and you don’t have to worry about not being able to afford the payment.
Hopefully, this guide has taught you some of the best practices for filing federal taxes as a business owner. The main takeaways are to know the deadline, keep records of all transactions, and start filing your taxes as early as possible. You can also make life a bit easier by working with tax professionals, though this is optional - it depends on how complex your business’s finances are.