Are you a small business owner? Taxes are always the last thing that small businesses want to think about. The reality is, however, that taxes are an inevitable part of owning a company. Whether you're self-employed or have employees, there's no getting around it. If you own your own company and haven't filed your taxes yet, don't wait any longer! Tax filing season has already begun in some states across the country so it won't be long before they start coming after any unpaid balances. 

This blog post will help educate readers on what they need to know for their specific tax situation when running their small business in America today. No matter how big or how small your operation maybe, this can give everyone valuable insight into the process. We'll provide detailed information about tax laws and regulations to make sure you're up-to-date and fully informed on how to file your small business taxes correctly and in a timely fashion.

When Do You Need To File Taxes?

People may not realize it, but even if you run a small company with no employees, you still need to file and pay your taxes. You're still legally required to do it every year by law. If you choose not to, no one will stop you but if your business becomes big enough in future years, the IRS will come after you for unpaid balances when they find out that money was due and never paid.

If you hire an accountant, they'll file your small business taxes for you and will make sure everything is handled properly. Some accountants might charge a flat fee while others may charge hourly. It's up to you which route to take but if you're looking for the least expensive option, filing them on your own using tax preparation software like Turbo Tax or HR Block is recommended.

How Do You Know What Type Of Business You Have?

There are different kinds of businesses in America today, each with its own specific tax rules and regulations. Before you can file your taxes, you need to figure out what kind of business structure yours falls under. This fact sheet lists all the most common types of small-business structures recognized by the IRS. Read it carefully to determine which one applies to you and your company.

What Is The Difference Between An LLC And An S-Corp?

Business owners may wonder what is the difference between an LLC and an S-Corp when it comes down to filing taxes for their small business enterprise. There are currently two forms of business entities recognized by the IRS, LLC's and S-Corps. They are two of the most popularly used structures to run a business today so it's very important you understand how each one is taxed.

An LLC, which stands for Limited Liability Company, is typically taxed as a sole proprietorship or partnership. The major benefit is that owners are not taxed for business profits they draw from the company since it is taxed as a pass-through entity. This means taxes are paid at individual tax rates, which are typically lower than corporate or S-Corp rates. The downside of this structure is that you are personally liable if your business does something wrong and incurs a legal judgment.

S-Corp elections are made when the business owner wants the S-Corp to be taxed as a corporation. This means that taxes will be paid at corporate and individual levels and not necessarily at your personal tax rate like an LLC. The benefit of this structure is that you get all the benefits of a corporation for liability purposes but with lower taxes than a C-Corp. However, there are more requirements for S-Corp elections and you will need to file additional paperwork along with your regular taxes. There is also a limit on the number of shareholders you can have which typically ranges from 100 to 150.

What Is A Sole Proprietorship And Partnership?

If your business is not incorporated, it is automatically considered a sole proprietorship or partnership. This means that you are the owner of the company and all profits will go to your personal tax return at the end of each year. The bad thing about this structure is that you are fully responsible for any legal judgments brought against your business just like an LLC so if something goes wrong, you're on the line.

Sole proprietorships are not required to file taxes or pay federal income tax so they are typically easy to manage during the early stages of your company. However, if you have an LLC, S-Corp or C-Corp which elects to be taxed as a sole proprietorship, additional paperwork must also be filed along with your taxes each year. You must also maintain a balance sheet and an income statement for the business even if you're not required to file taxes.

The partner of a partnership is typically not taxed unless they receive distributions from the business which are included in their personal tax return at the end of the year. The good thing about partnerships is that individual partners are not held liable for business debts. However, the downside is that business profits are taxed at personal tax rates which are typically higher than corporate or S-Corp rates.

Who Should Pay The Self-Employment Tax?

One of the most common questions asked by new small business owners is who should pay the Self Employment Tax on business profits. The truth is, it's up to you to decide who should pay the tax since it can be paid by both the employer or employee. However, if there are multiple owners of the business then things may get a bit complicated when it comes to filing business taxes with the IRS.

What Is A 1099-MISC?

When you work for someone as an independent contractor, you will receive a 1099-MISC from them by January 31st the following year. Some business owners prefer to hire contractors because it is very difficult and costly to file taxes for each contractor in which they employ. However, businesses that hire contractors must take into consideration the cost of doing so which includes 1099-MISC forms, additional paperwork and filing taxes.

The major benefit of being a contractor is that you can deduct your business expenses from your business profits which means less taxes owed to the IRS at the end of each year. However, because you are considered an independent contractor, you do not receive any benefits like health insurance or sick days which can be expensive for the business owner.

How Do I Withhold Taxes From My Employees' Paychecks?

It is imperative that you withhold taxes from your employee's paychecks and forward those earnings to the IRS on a monthly or quarterly basis. The good thing about withholding taxes is that your employees don't have to worry about sending the IRS money during the year. However, you must clearly understand which taxes are to be withheld from employee's paychecks since this can get complicated if you don't do it correctly.

Which Accounting Method Should I Use?

When it comes to small business taxes, there are three different accounting methods that your business can use including cash, accrual and modified cash. The good thing about these accounting methods is that they can help you reduce your tax expenses since it depends on the type of business expenses that you're deducting.

Cash method -This is typically used by businesses with few accounts receivable or fixed assets like restaurants, retail stores, gas stations and other companies that receive their earnings immediately.

Accrual method -This method is used by companies that have receivables or fixed assets to track their business expenses meaning your business must be able to recognize when a sale takes place even if the customer has not paid you yet.

Modified cash method -This method can only be used for businesses with an established history of using the accrual method of accounting.

How Do I Register My Small Business?

You have to register your business with your state and local government before you can legally operate a business. You can file as an LLC (limited liability company) or as a corporation depending on what type of tax structure is beneficial for your small business at this time.

1. Publication 583, Starting A Business and Keeping Records (2013).

2. Publication 334, Tax Guide for Small Business (2015).

3. Public Law 111-147 (2010).

4. IRC 7701(a)(19) (2012).

5. Quinn Anaya v Comm'r, T.C. Memo 2014-101 (2014).

6. IRC 404(a)(9) (2012).

7. 1099 MISC Instructions 2016, Form 1096 and Pub 17: Your Federal Income Tax 2018: For Individuals, Estates and Trusts, Employers and Robleto Espinoza Perez v Comm'r, T.C. Memo 2017-164 (2017).

8. Pub 15: Employer's Tax Guide 2018.

9. 1099 MISC Instructions 2016, What is a 1099? https://www.irs.gov/pub/irs-pdf/i1099msc_02182018aplpub.pdf

10. 1099 MISC Instructions 2016, What documents are needed to do my job? https://www.irs.gov/pub/irs-pdf/i1099msc_02182018aplpub.pdf

11. Public Law 111-147 (2010).

12. IRC 7701(a)(19) (2012).

13. Pub 334, Tax Guide for Small Business (2015).

14. Quinn Anaya v Comm'r, T.C. Memo 2014-101 (2014).

15. IRC 404(a)(9) (2012).

16. Public Law 111-147 (2010).