Before filing your taxes you need to get familiar with terms that will help you in getting ready for this Tax season. There are things which you need to understand because when some people think of filing and paying their taxes, they panic. Many have no clue on how to manage their Tax Obligations etc.
Thus, in order to make your life easier we decided to create your small business TAX glossary for your convenience.
Filing and Paying Your Taxes
So before you get started with your tax filing session, go through the following list, it will help you in speeding up the entire filing process.
The first and foremost thing which you need to know is your Tax Identification Number.
Tax Identification Number /Employer Identification Number (EIN)
Tax Identification number is the first and foremost priority as it helps in identifying business entity. You can easily acquire your number by filling out the application form provided by irs.gov.
After getting hold of your EIN, next step is to define and create your
Business Structure and Tax Implications
You need to identify your business structure as it will eventually help you in
1. Identifying the amount of taxes required and also the
2. Amount of paper work required for your business
We all know filing taxes is a time consuming process but if you develop an outline for yourself then a lot of time can be saved because sometimes irrelevant and incomplete information can only cause trouble for your business.
For example, many small business owners are not aware with the difference between business expenses and capital expenses. This aspect is also important because you need to familiarize yourself with the type of expenses your business has as it will eventually decide your tax amount.
Employment Taxes for Employers and Self Employed Individuals
It is important to know the difference between Employment Taxes for Employers and Self Employed Individuals as they help you in calculating the amount of taxes required by the government from your side.
1. Employers: As an employer, you must withhold certain taxes from your employees’ paychecks.
2. Self Employed Individuals: The Self Employment Tax is a Social Security and Medicare tax for individuals who work for themselves.
Being a small business owner with employees working for you, your tax rate varies from being a self employed business owner. Knowing the difference and its obligations will prove to be very fruitful during this tax season.
Whether you are a solopreneur or an employer your tax deductions require you to know the difference between business expenses and capital expenses.
Small Business Expenses and Tax Deductions
All self employed and sole proprietor small business owners should add two important words in their business dictionary
1. Business expenses: this is the amount of cost required and used in running a business
2. Capital expenses: these are the expenses used to purchase specific assets which may be useful in increasing the quality of services provided by your business.
You don’t want to mess up with these as they are tricky and it is not easy to define the difference between the two. For this purpose, one can always consider taking advantage of free tax training opportunities offered by the U.S. Internal Revenue Service (IRS).
Workshops and Programs
Small business owners can also train themselves for the upcoming TAX Week through workshops and programs which the government has to offer.
The U.S. Internal Revenue Service (IRS) offers online, in-person training and workshops to help small business owners understand their tax obligations.
IRS Resources for Small Businesses
The IRS provides many comprehensive pages to help business owners with their various tax-related questions. SBA also provides Tax Information for Specific Business Types which are available on their website.
You can use this guide or completely ignore its beneficial use. TAX season is just around the corner.
We know filing your taxes is time consuming, difficult and frustrating. We have created a list of do’s and don’t s which will help you in preparing for the upcoming Tax time.