Tips for Filing and Paying your Business Taxes
Alleviate the stress and confusion of business taxes through obtaining your federal business tax ID, determining your federal and state tax obligations, and selecting the appropriate calendar year. Ensure a seamless tax season for you and your business by taking care of these tax responsibilities.
Let’s take a look at some tips on how to properly file your business taxes.
Federal Business Tax ID
Your Federal Business Tax ID is a nine-digit number that identifies your company for business taxes. Obtaining your Federal Business Tax ID can save you time and money. It is crucial to have your ID for opening business bank accounts, filing tax returns, and securing business licenses. Get your Federal Business Tax ID first before other filings can take place.
State and Federal Tax
Your company is subject to both state and federal taxes. State taxes vary from state to state and include categories such as income, sales, and property tax. Likewise, it is your federal obligation to pay the IRS, the specific details of which may vary based on the structure of your business. For example, various legal structures include sole proprietorship, partnership, and corporations. Identify what structure your business falls under to facilitate easy payment of income, self-employment, estimated, employer, and excise taxes.
There are three different tax years that apply to various business structures. Sole proprietorships, partnerships, and LLCs typically use the calendar year in filing their business taxes. Calendar years, as the standard method, apply for companies that use no books nor records for tax purposes as well as have no annual accounting period. Calendar years are also used if the current tax year does not qualify as a fiscal year.
Fiscal years are used by corporations and large firms. Companies should use fiscal years for high revenues. It is also helpful to use fiscal years to show expenses in one year and income in another. Be aware that the most accurate reports reflect transactions that occur in the same 12-month period.
Short tax years are less than 12 months and apply to businesses operating for less than a tax year. Similarly, short tax years are used if you recently changed the tax year period of your business. However, tax returns are required regardless of the length of time your business has been in operation.