Small Business Tax Filings - Everything You Need to Know to Avoid IRS Penalties!

hey you welcome back to the channel in today's video i'll be going over everything you need to know about tax filing for your small business and how to stay out of trouble with the irs if you're a new business owner or thinking about starting a business for the first time or even if you already have a business and you want to make sure that you're doing everything correctly then this video is for you similar to yourself as an individual your business has tax requirements that must be met in order to avoid unwanted penalties and interest from the irs and just so you know these penalties are costly easily reaching thousands of dollars so today i'm going to break down the forms and filings you need to have in place in order to avoid irs penalties and keep your business compliant also keep in mind that every business is different so it's important that you consult your cpa for specific advice regarding your situation hey again i'm crystal cpa and co-founder of life accounting we are a full service accounting firm dedicated to helping small businesses with their financial and tax needs now before i dive into this video and break down everything you need to know regarding your small business tax filings please be sure to give this video a thumbs up and subscribe to our channel so you don't miss out on future videos sound good let's get started first it's important to understand that there are different business structures and your business structure will determine the forms and taxes you'll have to pay with the irs according to the irs website there are five business structures so proprietorships partnerships s corporations and limited liability companies or llcs let's first start with sole proprietorships sole proprietorship small business tax filings are actually the same as single member llcs i noticed that a lot of entrepreneurs confuse the two so let me clear things up the only difference between a sole proprietorship and a single member llc is an llc legally protects the owner's assets in case of a lawsuit the owner has limited liability for tax purposes there isn't a difference between the two and they require the same tax forms filed and taxes paid the form that should be filed every year by april 15th is form schedule c from schedule c is actually not a separate business tax return instead it is a form that gets attached to your personal tax return the reason why it has the same due date as personal tax returns of april 15th a completed schedule c will show your sole proprietorship or single member llc's income and expenses for the year this could result in a profit or loss number as a sole proprietor or single member llc you would then report the profit or loss of your business on page one of your personal tax return it could either increase or decrease your taxable income and you would then pay taxes based on your total taxable income and tax bracket in addition there would be an approximate 15 percent self-employment tax due on your business profits this amount is calculated on schedule se and is also included with your personal filing the next type of business structure is a partnership a partnership is a relationship between two or more people to do business each person contributes money property labor and or skill and shares in the profits and losses of the business a partnership also can be an llc in which case it's called a multi-membered llc however the tax requirements of a partnership or multi-member llc are a little different than that of a sole proprietorship or single member llc one of those differences are in the tax form that is filed partnerships are required to file form 1065 by march 15th form 1065 is a separate tax return from your personal tax return form 1065 must be filed before your personal tax return which is why the filing deadline is in march instead of april your form 1065 should include the preparation of schedule k-1 schedule k-1 shows each partner's share of the partnership's income or losses for example let's say you form a partnership with one other person and are 50 50 partners with them if the partnership earned ten thousand dollars in profits each partner would show five thousand dollars in income from the business on schedule k1 so as you can see each partner will need to receive a k1 from the partnership's return in order to correctly report their income on their personal tax return this is called pass-through taxation taxes are then paid on the partner's personal tax return and no taxes are due with the partnership return also depending on if you are a general partner or limited partner this would determine how much you would pay in self-employment taxes the next type of business structure i want to talk about is s-corporations corporations can have one or more owners but the tax form remains the same and that is form 1120s form 1120s is similar to form 1065 in that it is due by march 15 and should include schedule k-1 for every shareholder in the corporation each shareholder would then report their share of the s-corps profit or loss on their individual tax returns and pay the applicable taxes also called pass-through taxation which i mentioned earlier now different from sole proprietorships single member llcs and partnerships s-corp shareholders do not pay self-employment tax on all of the profits of the business but only on the compensation received let me explain s-corp shareholders are supposed to pay themselves a reasonable salary as if they are an employee of the business similar to employees payroll taxes such as medicare and social security should be withheld and paid on every paycheck so essentially you would be paying self-employment taxes with every paycheck but only on the salary you would be paying yourself any profits left over would be considered a distribution to the shareholders and not subject to self-employment tax the last business structure is a corporation or c corporation in forming a corporation shareholders exchange money property or both for the corporation's shares c corps can have one or more shareholders and is considered a taxable entity separate from its shareholders so c-corps are not considered pass-through entities the profits of a c-corp remain in the c-corp unless dividends are distributed shareholders cannot deduct any losses of the corporation the form required to be filed every year is form 1120 not to be confused with 1120s this form is due by april 15. c corporations are required to pay corporate tax on the profits of the business and currently the corporate tax rate is 21 shareholders only pay tax if they receive dividends from the corporation which would be calculated on their individual tax return okay i'm glad you're still with me because there is a few more pieces of information you should know first if you expect your business to be profitable during or by the end of the year you should make estimated tax payments we'll have a detailed video coming out soon fully explaining this but essentially the irs wants their money now and doesn't want to wait until you file your tax return to get it and if you do owe and did not make estimated tax payments they're going to charge you penalties and interest and we don't want that so please consider making estimated tax payments quarterly throughout the year at irs.gov second if march 15th or april 15th comes too quickly for you and you don't believe you'll be able to reasonably file your returns by those dates make sure to file an extension with the irs if you do you'll extend your due date by six months so that's either september or april 15th keep in mind that filing an extension only extends your tax return filing and not any taxes do so just send in a tax payment of what you think you'll owe on or before the original due date if you make your estimated tax payments you should be good to go third if you do pay yourself as an employee of your business that is with a regular paycheck that withholds social security medicare etc you would also need to file forms 941 quarterly and form 940 annually these forms tell the irs how much you have withheld and paid in payroll taxes alright guys i hope you found this video helpful in navigating your small business tax filings if you did please give this video a thumbs up if you have any questions please comment them down below and i'll respond to you directly also subscribe to our channel if you haven't already and be on the lookout for more videos to help you with your accounting and tax needs bye for now [Music]

Channel: LYFE Accounting

Views: 141,048

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Id: _TRYJS8Bahw

Length: 9min 2sec (542 seconds)

Published: Mon Oct 26 2020