QuickBooks is an accounting software which provide many features and facility that makes accounting a breeze and saves substantial amount of time. It helps you save the efforts incurred at tax time by enabling the user to generate accurate end-of-year reports for the business income, profit and loss, payables and the list goes on. Even if you have the personal accountant who takes care of everything for you, QuickBooks accounting software also provides you the facility to do that. It gives the swiftest way to prepare a copy of the data designed. And even if you do want to prepare the own tax returns, QuickBooks saves the data into a format which is easy to access for all users.
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Elucidating Business Taxes…
As same as the personal income tax return which we submit as an individual, a business also have the tax obligations to the federal government, as well as to the state. The tax obligation depends it depends upon the state where your business is setup and even in few scenarios local taxes are also applicable.
A tax return documents encompasses all the inevitable parameters, such as business income, tax payments along with tax deductions. In order to deposit requisite taxes to the respective federal government, Employer Identification Number (EIN) is mandatory. Not to mention, the Employer Identification Number (EIN) is same as the federal tax number.
If you are paying taxes as a business, then there is a requirement to adhere that you might require to pay taxes which includes the following:
- Sales Tax: A lot of states involve a sales tax requirement, which suggests that if you sell a goods or services, you are required to collate and report sales tax.
- Income Tax: Herein, you pay on income from your business during the tax year.
- Self-Employment Tax: Paid to cover Medicare and Social Security taxes.
- Employment Taxes: (Social Security, Federal Unemployment Tax or FUTA, Medicare, Federal Income Tax Withholding,).If you employs employees, this tax is subtracted for things such as Medicare, Unemployment, and Social Security.
- Property Tax: This tax is subjected on any land, property or real estate owned by small businesses.
- Estimated Tax
- Excise Tax: This tax is subjected to goods and services, such as fuel, tractors, and air transportation.
Who is Eligible to Pay the Small Business Taxes?
Yes, it’s imperative to pay taxes as a small business too. Most of the businesses are required to pay the taxes – it hardly matters how much they have earned over the year, anything earned over $400 is considered as taxable income and that’s why taxes must be filed. Not to mention, that the income you report is imperative to get reconciled with the amount reported in the 1099 Forms you receive.
Why do Small Businesses need to File a Tax Return?
You are required to file your tax return every year without a fail through the IRS to figure out the tax liability at the basic level. It’s necessary to make sure that your tax return is precise as the recent reports have indicated the IRS has been targeting small businesses for tax audits in the past years.
What Documents are Required to File Small Business Taxes?
There are many accounting documents and business records which we need to collect at the tax time. Here is the given checklist which helps you to make sure that all the required documents you have collected to file the returns.
Small Business Tax Checklist
1. Sole Proprietorship or Partnership
- Other income information
- Business Income and expenses
- Invoices, receipts, payroll information, and GST/HST return
- GST/HST returns
- Financial statements and trial balance
- Invoices, receipts, payroll, bank statements
- Previous Year’s tax returns
- Copy of Incorporation papers
- The latest notice of assessment
- Accounts receivables
- Accounts Payables
- Employee deductions payables
- Fixed assets continuity schedule
3. Business Income
- Gross receipts for sales or services
- Sales records
- Returns and allowances
- Business bank account interest (Checking/Savings)
- Other Income
4. Capital Assets
- Business Vehicles
- Machinery and equipment
- Invoices for all capital assets transactions occurred during the filing year
What comes Next after the Filing of Required Tax Forms is Completed, and You have Collected all Applicable Financial Documents?
Next, We will know About the Business Tax Deduction?
A business tax deduction is an expense which user can deduct or write off from the taxable income. This helps with a possible tax refund and this is very helpful for the business owner. Here is the list given below for the things which are very common for the small business tax deduction:
- Rent Expenses: Rent refers to the space which is rented for business operation, it also includes if you operate out of and rent the home. This can also include equipment besides physical location.
- Vehicle Expenses: The cost of vehicle operation can be deducted either car expenses or standard mileage if there is vehicle which you specifically used for business purposes.
- Insurance Benefits: Insurance benefits include premiums like health insurance and business owner’s policy.
- Professional Services: Professional Services directly related to the needs of the business, including lawyers, accountants, tax preparers, and bookkeeping services. However, you need to note that if you use these services for personal use, that time is not deductible.
- Telephone/internet Expenses: This expense requires the diligent recordkeeping to deduct however can be beneficial to you as a business owner. Also, ensure that if the personal internet connection and cell phone are used for business purposes, you can only deduct the amount which is used business purpose and not the full amount.
What Information is Required for the Tax Preparer?
If you have taken the professional help for the business tax preparation, there are several considerations to remember prior to begin the work. Also, If you have just started working with a tax preparer for the first time, please ensure that the process is not completely hands-off. You are required to provide the preparer with the information they are required to complete the small business tax return.
Below is the list of common items which is required by the tax professional at the time of preparation of the taxes:
- Tax forms
- Business information
- Personal information
- Financial statements
- Business expenses
How to Prepare the Year-End Reports?
Here are a few steps given to assist you to prepare the year-end reports.
- Firstly, launch the QuickBooks on the system. Now hit on the “Reports,” “Profit & Loss Standard” and after that “Company & Financials.” Now, go to the “Transaction Date“, scroll down and opt for the option mentioning “Last Fiscal Year“. Once done, opt for the “Run Report.“
- Post review of the report, you are required to opt for the “Print” button to take a print when preparing the tax return.
- Now hit on the “Reports” which is present at the toolbar, and after that choose the “Accountant & Taxes” opt for “Last Tax Year” and click on “Run Report.” To get the print of the report you are required to click on the “Print” option.
- Now hit on the “Reports,” and choose the “Vendors & Payables” and then click “1099 Summary.” To get the print of the 1099 summary you are required to click on the “Print” option.
Create Accountants Copy of Books
- In the initial step, QuickBooks, and then hit on the “File” option which is present at the menu bar. Now choose the “Accounts Copy,” and then hit on the “Save File.“
- Secondly, choose the “Accountants Copy” option, and then click “Next.” You are required to choose the last day of the tax year in the “Dividing Date” control box and hit “Next.“
- Now, you need to hit on the “Save In” option which is there in the drop-down list, and then go to the folder where the file needs to be saved the accountant copy of the QuickBooks backup. opt for an elaborative file name for the QuickBooks file. Once done, hit on the “Save” option to save the accountant’s copy of the file.
- Now, you are required to copy the QuickBooks data file (accountant’s copy of the company) to an external storage device. You can share the accountant’s copy of the file to the tax preparer via email or handover the printed copy directly.
Do You Need Extra Help, so this is the Time for a Virtual Accountant?
Are you looking forward to file the business taxes with total confidence? You can touch base with the QuickBooks Live support that makes reporting and filing taxes utmost simple and easy. A customized setup assist you personalize the experience and assist you through connecting to the bank. The online consultant will give the key reports to assist you make solid financial decisions.
Paying the business taxes is one of the standard expenses you are required to manage when you are the business owner. Although it can be confusing to navigate on your own, QuickBooks professional experts team is here to assist you with your queries.
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