Filing an individual tax return for business income can be daunting, especially if you’re new to business taxation. However, with some basic understanding and preparation, you can make the experience much more manageable.
Here are some essential things to know about business income individual tax returns:
Basics of Corporate Income Tax
Business income tax is a tax on the profits a business makes. It’s typically calculated based on the business’s net income, which is the total revenue earned by the business minus any deductible expenses. The individual who owns or operates the business generally pays business income tax.
Types of Business Income Tax Returns
Different types of business income tax returns exist, depending on your business type. For example, as a sole proprietor, you’ll use Form 1040 and Schedule C to report your business income on your tax return. As a partnership, you’ll use Form 1065 to report the partnership’s income, and individual partners will report their share on their tax returns. Similarly, as an S corporation, you’ll use Form 1120S to report the corporation’s income and your share of the income on your tax return.
Pay estimated taxes
Business owners must pay estimated taxes throughout the year. Estimated taxes are quarterly payments to the IRS to cover your tax liability. The estimated tax amount you owe is based on your projected income for the year.
Understand Gross income v/s Net income
When reporting your business income on your tax return, it’s important to distinguish between gross income and net income. Gross income is the total revenue your business earned during the tax year, while net income is the income remaining after deducting all of your business expenses. Your net income is what you’ll use to determine your tax liability.
Familiarize yourself with tax forms and schedules
Many tax forms and schedules may apply to your business, depending on its structure and activities. Some common forms and schedules include Form 4562 for depreciation and amortization, Schedule E for rental income and expenses, and Form 8829 for home office expenses. Familiarizing yourself with these forms and schedules can help ensure you’re accurately reporting your income and expenses.
Let us take care of the numbers with Corporate Tax return Services
At Tree of Life Financial, our team of experienced professionals understands the complexities of the tax code. It will tirelessly ensure your business complies with all relevant laws and regulations.
With our streamlined process, you can file your return quickly and easily, giving you more time to focus on what matters — running your business. Don’t wait until the last moment — contact us today!