You’ve just started your own small business. Congratulations! It’s now time to learn how your new venture will be affected by taxes, as tax season is fast approaching.
This episode of SBT is for you. Barbara Weltman, Attorney, Founder and CEO of Big Ideas for Small Businesses, Inc. Author of J.K. Lasser’s Small Business Taxes. She gives us business advice in this interview to help make business tax less intimidating.
This is a transcript of the discussion that took place on the most recent episode of Small Biz In :15.
What is different about the tax filing process at first?
Shawn Hessinger – What should small business owners know about taxes?
Barbara Weltman: Taxes are a part of business and you have to deal with them all. You have income tax. You also have to pay employment taxes. Self-employment tax is payable if you are self-employed. Excise taxes are also a thing. There are different penalties. You must be aware of all these aspects.
Tax filings at the local, state, and federal levels are important for small business owners. There are a number of things you need to know. The most important thing is to understand that small businesses often hire CPAs and other tax professionals to do their payroll or prepare returns. The important thing is that small business owners must know what taxes are because they influence business decisions.
How To File Your Taxes For The First Time As A Business Owner
Shawn Hessinger, how do I file my first taxes? You mentioned getting a CPA. Maybe that’s the initial step. How do you approach this? What makes this different from, say, filing personal income tax?
Barbara Weltman: The very first thing you need to do is keep good records and books. You must also do this for your own personal finances as a small-business owner. Tax rules require you to keep accurate records and books for your business. You can do your taxes with the help of good records and books. You may even be able do it yourself with the software.
Paper returns are not recommended anymore. Math errors and missed opportunities are too common. Software will prompt you to perform the necessary actions. You can also consult a tax expert – there are many different types of tax experts – a CPA is not the only choice.
Get a referral if you do not know of a tax expert. You can ask other local business owners for a referral to an expert.
Some experts are IRS-licensed enrolled agents. They receive certification. There are requirements for continuing education. They’re expected to know what they do.
CPAs are available, but regular accountants can also act as enrolled agent. Storefronts similar to H&R Block can handle these types of services. You can search for a tax professional on the IRS website, see their credentials and find them by ZIP code.
What tax forms do small business owners use for their tax returns?
Shawn Hessinger, What forms or forms do small business owners use to file tax returns? There are different tax forms to file different types of returns. It depends on the structure of your business. What tax form should you use?
Barbara Weltman: That depends on the way your business is structured. If you’re a sole owner and haven’t taken legal steps to create anything else or if you’re a limited liability company with only one member (the one-member LLC is owned by one person), then you will be treated as a sole proprietor. If you are a single-member LLC, then you will be treated as a sole owner.