Tax season every year may seem repetitive, but if this is the first year after a major career change, you may find yourself lost when it comes to filing your taxes. This is especially true if you find yourself filing taxes for the first time working for a small business. The good news is that the amount you’re being taxed is staying the same, just the way that you gather the appropriate information may differ from what you’ve done in previous years.
Things to remember when filing taxes for a small business
Filing your federal taxes as a small business for the first time may be confusing. There are a few things you should keep in mind when getting ready to file your taxes.
1-Your legal entity affects your tax burden.
2-You can probably deduct more than you think.
3-Don’t forget to account for your startup expenses!
4-You’ll have to make estimated payments.
5-You may be responsible for paying self-employment tax.
This is at what level you’ll be taxed. In most cases, small business owners can pay taxes at the shareholder level, instead of being subjected to the higher rates required of corporate businesses. There are limitations, however, so it’s important to research what legal entity your business falls under.
Make sure you keep track of all business expenses during the year! You can deduct for travel, business supplies, and employee salaries, among other things. Keeping track of any and all business expenses will make it a lot easier to figure out how to save money during taxes.
There are certain deductions that you can make during the first year of your business that you won’t be able to deduct later. You can save money on your taxes even if you’re not really making a profit on your business yet.
Being self-employed, you’re required to pay taxes every quarter, instead of just once a year. If you’re new to the world of small business, this is probably something you weren’t aware of! During your first year as a new business owner you’re not subject to this, but it’s something that you’ll have to worry about the following year, so it’s never to early to start planning for this.
When you have an employer, they pay half of your income tax. When you’re self-employed, you’re responsible for paying the tax portion for both employee and employer.