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Filing Your Business Taxes Correctly

This post will probably be useful and also help your small business stay out of legal troubles.
Finnegan Pierson

Time to Start Thinking

It's that time of year when business owners start thinking about their taxes. If this was your first year in business, and you've never owned a business before, the idea of filing business taxes might be daunting. However, there are ways you can prepare now so that you have what you need to file your taxes correctly and deliver them on time.

Financial Statement

Preparing a financial statement includes several different aspects of your business's financial records. First, you can create a balance sheet that presents an up-to-date snapshot of the company's holdings, including assets and liabilities. If your company is a corporation, you may also want to include current shareholder equity.
Next, create an income sheet comprised of the company's net income and losses, which can include revenue and gains. Then, a cash flow sheet is prepared to show any cash transactions related to financial activities like operations and investments. These elements combined should provide you with a complete financial statement you can present to an accountant.

Employee Tax Documents

If you have employees, you must be sure to create appropriate tax documents so your employees may also file taxes. The most common type of employee tax document is a Wage and Tax Statement. This is required by law to be sent out by January 31st each year. Also, your company must file this with Social Security Administration by February.
Also called W2, this form is used when employees file their personal taxes to report wages and other important taxable information. As the employers you're responsible for created the w2 forms for your employees. Thankfully, there are online services that can help you prepare them.

Review of Assets

Businesses must take stock of their assets so they may be reported to the IRS. Basic assets can include products sold, like inventory. However, capital assets are things like equipment, buildings, land or vehicles. A business must also report the buying and selling of intangible assets, like trademarks, patents or copyrights.
Whether tangible or intangible, these examples are considered capital assets. Calculating capital assets can result in a loss or a gain. For example, if your company's asset has a lower selling price than its cost, that may be considered a loss. However, if the selling price is higher, that could be considered a gain.

Home Office Expenses

If you use part of your home as office, you may want to include calculations for home office expenses. Unfortunately, proving home office expenses requires more than just keeping receipts. There are two major requirements to qualify for home office deductions.
First, your home office must be the main place of business, and second, you have to use that part for business's purposes only. The next step is to divide the total square foot of your home by the portion of your home you want to deduct. Then, multiply your overall expenses for the home by percentage of your home office.

Leave it to Professionals

If you're still confused by the process, consider going to an accountant who can help you with your first year business tax returns.