Simple Business Tax Return

The term “simple business tax return” is typically used to describe small businesses that are not necessarily professional in nature, but still want to keep track of their income, expenses, and taxes. These types of returns don’t require you to identify your taxpayer ID or do any complicated math.

Instead, they ask you to enter your business into the section titled "Businesses You Own" under Income Source, and then it calculates everything for you. All you have to do is make sure your answers match what information your accountant provides you with at tax time!

This article will go more in depth about simple business tax returns and how to complete them if you own a restaurant, car dealership, or other type of business.

Calculate your deductions

simple business tax return

The next step in completing your business return is to calculate your deductible expenses. This includes all of your office supplies, software licenses, website fees, and more.

It’s important to be as thorough as possible when calculating these costs because you don’t want to forget anything!

By being aware of all of your expenditures, your accountant or tax professional will be able to determine if what you paid for an item qualifies as a legitimate expense.

They may also suggest ways to reduce those costs so that you can re-evaluate whether the expenditure was necessary.

For example, were you given free use of Microsoft Office? It might not be considered essential equipment.

Another way to save money by having an appropriate amount of spending is to see how many others out there are using similar tools to yours. Is it enough to justify the price tag?

General business taxes

There are two main types of income taxation we look at with businesses; personal and company income taxes. These apply to both individuals running a business and companies that have employees.

Personal income tax applies to any income earned from sources suchas wages, dividend payments, interest, and capital gains. This tax is calculated individually for every person who earns over $50,000 per year (or $62,500 for couples). Any income under this threshold is taxed at a lower rate.

Company income tax covers any profits made through the operation of the business.

Calculate your taxable income

The second part of any business return is to calculate your taxable income. This is typically done by taking your gross income and then subtracting all applicable deductions.

Many businesses have allowances and/or exemptions from federal income tax that they are given, so it is important to make sure you claim these correctly.

Some examples of deductible expenses for a person running their own business include mortgage or rent, utilities, internet service, mobile phone bills, professional fees such as accountants or lawyers, and more!

These can be found in documents and receipts gathered during the initial set up stages of owning your own business and using them when filing taxes later will help reduce how much money you owe in taxes.

Calculate your tax liability

simple business tax return

The second part of doing business taxes is calculating your tax liability. This includes determining how much you owe in income, estate, and/or gift tax as well as determining what kind of entity you are (sole proprietorship, partnership, etc.).

Most individuals hire professional help to do their business taxes due to cost. But if you’re familiar with this information, it can be done easily without expensive professionals or courses.

You will need to know your yearly adjusted gross income (AGI), total income including capital gains, dividends, and interest, average monthly expenses, and whether or not you have an active retirement account such as a 401k or IRA.

Once these things are gathered, completing your business return becomes a matter of figuring out which deductions apply to you and taking those deductions. Some examples of deductions include for entertainment, legal fees, internet service, etc.

By using these guidelines, there is no limit to how small or large businesses manage their taxes.

Calculate your refund

simple business tax return

The next step is to find out if you are due a tax refund! There are several ways to do this, but the easiest way is by using free software such as TurboTax or H&R Block at refcpa.com.

Many of these sites have an option in the middle of the page to see if you’re due a tax refund from the IRS. They look for whether you are due a refund coming from the government, so it can be helpful to make sure that your income was reported correctly.

If you determine that you are not due a refund, then you don’t need to pay any money back to the federal government, which is great because you’ve still got some spending left over!

However, if you get through the site saying that you are owed a refund, you should go ahead and claim it since it will cost you nothing! This is totally free and easy to do!

Claiming your tax return takes just a few minutes usually done online via your computer or phone. After you have claimed your return, you will receive an email telling you when to pick up your return, all paperwork included.

Record your tax return

simple business tax return

It is very important to remember when filing your taxes this year that you have to include all of your income in reports, as well as information about yourself and any deductions or credits you are entitled to.

This includes but is not limited to: wages, dividends, capital gains, interest payments, etc.

You also need to report your business expenses such as for cars, gas, office supplies, etc. This can get quite complicated so it is best to hire professional help.

Professional assistance can be found by looking into local accountants and tax professionals, as well as free resources online.

Pay your tax liability

simple business tax return

The other major item on most business income taxes is paying your taxable income. This includes things like ordinary income, capital gains, franchise fees, etc. There are some small items that do not require calculating an additional fee, but they can add up quickly as time goes by.

Most people run into issues with this tax return when their accountant does not take enough time to explain it. It may be hard to understand without having gone through similar procedures in past years.

Taxpayers should make sure that everything is double checked before signing anything. And if there is something that looks wrong, speak up at that stage.

There are many ways to pay your business income tax liability. Some of the more common methods include direct deposit, monthly deductions via payroll, or payment apps such as PayPal or Stripe.

Claim your refund

simple business tax return

The second part of this article is going to talk you through how to claim your business tax return refund. Thankfully, it’s not too difficult to do!

First off, make sure that your personal information matches what was put down in the initial returns. If anything looks wrong or different, then don’t use those names as proof but instead look for supporting evidence such as receipts or statements.

Once everything checks out, send yourself an email telling you to confirm your membership with HM Revenue & Customs (HMRC). Within that confirmation email, tell them that you are claiming back money due to business expenditure and ask if they can process your refund faster than normal.

They will say yes, so mark that as done and move onto step three.

Plan for tax season

simple business tax return

This week’s topic is all about planning for this year’s tax return filing season. There are many ways to do your taxes, but one of our favorite simple strategies is using free online software or paid apps.

Many people hire professional tax preparers that charge up-front fees as well as monthly retainers. While these are great options, we believe there’s no reason you can’t take care of your own taxes!

Online tools have become very accessible now. You can search around and find lots of different types of software and apps that could help you file and understand your returns. Some even offer free versions to see if they work for you before investing in their paid app.

We recommend being familiar with the basics of paying taxes like income, expenses, and incorporating sources of revenue and deductions.

Once you have those under control, then looking into some easy ways to pay less in taxes is good next step.

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