Differences between personal and business taxes


Differences between personal and business taxes

Differences between personal and business taxes

As a small business owner, you might think that the Internal Revenue Service or IRS may have bigger fish to fry than your small business operating under $100,000 or less. You might be in for a little surprise to know that the IRS audits and fine small businesses rather regularly and in recent years has risen significantly. Some reason for a small business getting audit or fine by the IRS are because of poor record keeping, not filing business taxes, filling the wrong forms, or confusing personal taxes for business taxes.

Business taxes is quite different from personal taxes that many people file at the end of each year. Similar to personal taxes, depending on how your business functions the forms filed along with your taxes may vary. This may mean that your business needs to keep very detailed records of business expenses or how your business is operating. While Form 1040 is a common and standard tax form use for personal taxes, beings a business owner opens up more and unique income tax returns. Depending on the industry your business operates, the tax you choose to file can save your business money or whether your business would have to pay any remaining taxes. You must choose the appropriate returns to file to accurately report your business income to the IRS. The form of business you operate determines what taxes you must pay and how you pay them.

Income Tax

The most common and basic form of tax that business and individuals pay is income tax. All business except partnerships must file an annual income tax return. The form elected by the business will largely be based on how a business is structured. A common practice is employer tax withholding for employees. As a business owner, there are four quarterly estimated tax payments on Jan 15, April 15, June 15, and Sept 15. A business is required to make these monthly payroll tax fillings.

Use Tax Deduction to Lower Business Expenses

New or even established business owners need to keep their expenses low to make profits. Keeping financial records at hand can help your small business maximize and reduce taxes owe to the IRS. Small business or even large corporate business have recurring expenses such as labor, supplies, equipment investment, depreciating assets, and insurances to operate a business. Fortunately for businesses, you are able to reduce your business taxes by writing off a lot of these operational expenses come tax season.

Write off Startup Business Expenses

As a new business owner, being aware of what can be written off and what cant can be a daunting task for new a startup business. The good news is that the IRS do allow small business owners to deduct a wide variety of cost with starting a business. However, keeping a detail record of your business’s startup expenses can be very helpful in filing the correct taxes and reducing your business’s tax burden. Some examples that small business can write off are cost associated with office rentals, supplies, professional services, and loan fees. These taxes write off might seem small but they can make a huge difference in determining how you can operate your business.

If your business needs assistance in obtaining legal and financial records or any documents related to your business, give our team at Datafied a call to see how we can help you retrieve a copy. At Datafied we can locate health insurance, life insurance, legal, physician, and patient related service documentation for your business as a new owner. Call us at 800-765-7510 to discuss how we can help you.

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