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Annual Income Tax Return: Things You Need to Know

It’s the tax season again, and by law, everyone is encouraged to file their income tax returns. As for anyone who is starting to file their income tax returns, it’s high time that you know the reason why you need to file your taxes on time.

What is a Business Tax Return?

A business tax return is a report that is filed with the Internal Revenue Services or IRS or with the state or local tax collection agency. It contains information that is used to calculate the income tax or other taxes, such as the company’s income, tax deductions, and tax payments. Business tax returns are prepared using the forms prescribed by the IRS or other applicable taxing authorities.

When is tax season for 2022?

When it is time to file your taxes, it is referred to as “tax season.” Tax season happens in the early months of the following year. For the 2021 tax year, the IRS is accepting, and processing returns beginning January 24, 2022, and will be due on April 18, 2022.

What do you need when filing taxes?

There are different methods in filing your taxes, but we will talk about the basic and general information and forms you need to prepare in filing your business taxes.

  1. There are plenty of things you need to prepare for filing a business tax, and they include:

  • Personal information (SSN, address, DOB, etc.)

  • Last year’s tax returns

  • Employer Identification Number (find yours on the website)

  • Invoices you sent to clients

  • Records of any goods sold to customers

  • Sales records that note money coming into your business

  • Rent receipts for your small business

  • Office supplies

  • Employee salaries

  • Client lunches

  • Mileage records

  1. Prepare and fill out your forms such as:

For Sole Proprietorship: Schedule C, which you file with your personal income tax return, or Form 1040 and Schedule F if you have a farm that you run as a sole proprietor.

For C Corporations: Form 1120

For Partnership and S Corporation: Form 1065

Non Profit Organization: Form 990 to report income, expenses, and balance sheet information

Limited Liability Company (LLC): Schedule C

Here is the list of information and forms you will need to prepare:

  • Form 1045: This form can be used to apply for a quick tax refund relating to the carryback of unused general business credit, the carryback of a net operating loss in certain situations, or the carryback of a net section 1256 contracts loss.

  • Form 720: IRS Form 720 is used to report and pay your business’s federal excise tax liability on a quarterly basis.

  • Form 4562: This form is used to report the depreciation or amortization of property or vehicles used for your business and, therefore, claim a tax deduction.

  • Form 8829: Form 8829 is used to determine if you can claim a tax deduction for any of your home expenses. Generally, this form applies if your business is based in your home or if you use your home to conduct business on a regular basis.

  • Form 5329: This form is used to report additional taxes on retirement plans for your small business — such as IRAs, Coverdell ESAs, QTPs, Archer MSAs, HSAs, or any other qualified retirement plans.

  • Form 8283: Form 8283 is used to report and claim a deduction on noncash charitable gifts that your business has made of more than $500.

  • Form 8606: This IRS form reports nondeductible contributions you made to traditional IRAs, distributions from traditional, SEP, or SIMPLE IRAs, conversions from traditional SEP or SIMPLE IRAs to Roth IRAs, and distributions from Roth IRAs.

  • Form 8903: This form is used to determine your domestic production activities deduction or DPAD. However, this deduction was repealed and is now only applicable for tax years prior to 2018.

  • Form 7004: Completing Form 7004 allows you to request an automatic extension of time to file certain business income tax, information, and other returns, such as Form 1065 and 1120.

IRS business forms: Operating a business

  • Form 2553: Similar to Form 8832, Form 2253 is used by a corporation or other eligible entity to elect to be treated as an S corporation for taxes.

  • Form 2848: You use this form to authorize an individual, like your certified public accountant or business lawyer, to represent you before the IRS.

  • Form 4797: This form is used most generally to report the sale or exchange of business property. This form is also used to report other dispositions of assets and gains or losses from certain property dispositions.

  • Form 8822-B: Form 8822-B is used to notify the IRS if you’ve changed your business mailing address, business location, or responsible party.

IRS business forms: Managing business employees

Regardless of your entity type, if your business has employees, there will be a number of IRS business forms that you may need to complete as an employer. These forms may report tax and income information for your employees, as well as employee benefits to the IRS:

  • Form W-2 and W-3: Form W-2 is an annual form that must be completed and filed with the IRS, as well as given to each employee. This form reports the employee’s wages and tax withholdings for the tax year. Form W-3 is used to transmit employee W-2s to the Social Security Administration.

  • 1099-MISC Form: Similar to a W-2, the 1099-MISC form is an annual form that is filed with the IRS and given to your contractors to report wages you’ve paid them and any tax you’ve withheld for them during the tax year.

  • Form 1099-R: Another version of the 1099 form, Form 1099-R, is used to report any distributions you’ve made for pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc., in the given tax year. Form 1099-R must be filed for each person whom you’ve made distributions for, as well as given to each of those individuals. If you maintain any IRAs for your employees, you’ll also have to complete Form 5498 for each Form 1099-R.

  • Form 940: IRS Form 940 is an annual report of your business’s federal unemployment tax obligations detailing how much was owed the previous year, how much has been paid, and any outstanding balance.

  • Form 941: Form 941 must be filed on a quarterly basis to report income, Social Security, and Medicare taxes that you’ve withheld from your employee paychecks. You also use IRS Form 941 to calculate your Social Security and Medicare tax responsibility as an employer.

  • Form 943: Form 943 reports any wages and tax withholding that you made within the year specifically for agricultural employees.

  • Form 944: If your business has a lower employment tax liability — $1,000 or less — you may be eligible to complete Form 944 instead of Form 941. Although Form 944 also reports the taxes that you’ve withheld from employee paychecks, it can be filed annually instead of quarterly.

  • Forms 3921 and 3922: Both Form 3921 and Form 3922 are forms that corporations file in relation to the transfer of stock to an employee within the given year.

For deductions, this is the list of deductions that can be claimed by sole proprietorships, C Corps and S-Corps, partnerships, and LLCs, but different rules apply for each.

  • Startup and organizational costs

  • Inventory

  • Utilities

  • Insurance

  • Business property rent

  • Auto expenses

  • Rent and depreciation on equipment and machinery

  • Office supplies

  • Office furniture

  • Software subscription

  • Advertising and marketing

  • Business entertainment

  • Travel expenses

  • Interest

  • Bad debt

  • Taxes

  • Employee salaries

  • Employee benefits programs

  • Employee gifts

  • Contracted labor

  • Legal and professional fees

How to prepare the taxes?

There are several ways to prepare your income tax. You have options like do it yourself, hire someone to do it for you, or use the software.

Do it Yourself

Anyone who owns a business can file for their business tax return. There are forms readily available for download and printing from the IRS website and send them by mail. You can also use IRS’s e-file system. Depending on the business, some businesses are required to e-file by the IRS. But DIY tax filing for a business, whether big or small, is impractical. Unlike personal income tax filing, business tax is more complex, and many forms are needed to be filled out and submitted. But it is also a good way to be on track with the business finances.

Hire a Tax Professional

It is more practical for a business to hire someone to do the company tax filing. Tax professionals are more adept in tax filing, and they can easily spot if there are records lacking and deductions you can apply. Capable tax professionals can help minimize the amount that you owe, and they can also help you to maximize the amount of your deduction claims.

Use a Tax Preparation Software

With the technology evolving, even tax preparation is also evolving. You can always use tax preparation software to do your taxes for you, and it is quite easy and convenient to use. You only need to input your information, and the software is designed to help you through the step-by-step process.

There is available assistance online or by phone if you are struggling in completing the necessary details. When you use the software the previous year, they can automatically fill in other information you needed for the current year.

As a business owner, you are required to file your taxes annually. Whether you are a corporation, sole proprietorship, or partnership taxes should be filed for your business’ advantage. Early preparation is key to easy tax filing along with the records and receipts.

At PROFIT Bank, we are aware of how tedious bookkeeping and annual tax filing can be for a business. Thus, we would like to help especially with bookkeeping. PROFIT Bank offers free banking and bookkeeping services for small businesses. We also provide free checking accounts, we create and manage your Profit and Loss statements, reconcile and categorize your transactions, plus collect and match your receipts to the correct transactions. We do all this to save you time and money so you can focus on growing your business!

PROFIT Bank not only keeps your money safe it also helps you manage your expenses and issue employee debit cards all in one place - safe and secure.

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