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Home and Family Home Business Preparing Your Income Tax Returns For Your Micro Business
Home and Family Home Business Preparing Your Income Tax Returns For Your Micro Business| Preparing Your Income Tax Returns For Your Micro Business |
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| Written by Janet Redick |
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The old adage that nothing in life is certain other than death and taxes is especially true for micro businesses. If the work doesn't kill you, the taxes will! Income taxes were touched on in Chapter 5 under Forms of Business, and in Chapter 11 you learned that your financial statements are the basis for your income tax return. For most new micro businesses, the records that you give to your accountant for your tax return will first be used to prepare financial statements. The financial statements will then be used for the preparation of your tax return. The records that you need to give to your accountant for your income tax return are the grand totals for the year of the cash receipts journal and cash disbursements journal, the bank reconciliation for each month, your payroll records and payroll reports, purchases of furniture and equipment, and payments made on loans and details of new loans. You should tell them about any activity that occurred that is different or special. They will probably call you with questions as they are working on your accounting and tax returns. A Sole Proprietor files their business income tax return on Schedule C, Profit or Loss From Business. Only the income statement information is used. The Schedule C net income or loss is included in the taxable gross income of the taxpayer on Page 1, Form 1040, U.S. Individual Income Tax Return. Form 1040 is due April 15. In addition, if a sole proprietor shows net income for the year, self-employment tax on this income is also due. Self-employment tax is equal to both the employer's and employee's share of Social Security and Medicare taxes. This is calculated on Schedule SE and included in the Other Taxes section on Page 2 of Form 1040. A Partnership files its income tax return on Form 1065, U.S. Partnership Return of Income. Both the balance sheet and income statement are used. The partner's share of net income or loss on Form 1065 is reported to the partner on Form K-1, and included in the taxable gross income of the taxpayer on Schedule E of Form 1040, U.S. Individual Income Tax Return. In addition, if a partner shows net income for the year, self-employment tax on this income is also due. This is calculated on Schedule SE and included in the Other Taxes section on Page 2 of Form 1040. Form 1065 is due April 15. A C-Corporation files its income tax return on Form 1120, U.S. Corporation Income Tax Return. Both the balance sheet and income statement are used. The owner/ stockholder has received income in the form of payroll reported on Form W-2. Any tax due on the net income on Form 1120 is paid by the corporation. A net loss may be carried back to prior years or carried forward to future years. Form 1120 is due March 15. 25 An S-Corporation files its income tax return on Form 1120S, U.S. Income Tax Return for an S-Corporation. Both the balance sheet and income statement are used. The owner/stockholder has received income in the form of payroll reported on Form W-2. However, the stockholder's share of the net income or loss on Form 1120S is reported to the stockholder on Form K-1, and included in the taxable gross income of the taxpayer on Schedule E of Form 1040, U.S. Individual Income Tax Return, just like a partnership. However, there is no self employment tax due on this income. An S-corporation pays no income taxes. Form 1120S is due March 15. Both individuals and corporations may be required to make estimated tax deposits on April 15, June 15, September 15, and January 15. Corporations need to cover their income tax liability. Individuals need to cover both their income tax and self-employment tax. A penalty could result from underpayment of estimated taxes. Your accountant will explain these estimates in detail. About the Author: Want to learn more about Bookkeeping? Then checkout Micro Business Bookkeeping.com! Kindly provided by 4Girls.dk You are welcome to use this article on your own website, if you include this link. |
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