by Blair Butters | Aug 20, 2021 | IRS, Tax Planning
A quick tax guide for sole proprietors just starting out Starting a small business is exciting, however, if you’re used to working as a full-time employee, the transition to self-employment can be overwhelming when it comes to keeping track of your taxes. Understanding what the IRS expects from small business owners is a key piece in the success of keeping your business running. In today’s blog, we’ll focus on taxation for sole proprietorships, as this business structure is the simplest and the most common choice for many business owners who are transitioning from employee to self-employed to launch their first small business. A sole proprietorship is an unincorporated business that has just one owner. It is known as a “pass-through entity” for tax purposes because the business income passes through to the business owner, who then reports it on their personal income tax return. We will focus on sole proprietorships reported on Federal Schedule C. Sole proprietors that do farming activities are similar but are reported on Federal Schedule F. Sole proprietors with rental business activities reported on Schedule E will not be covered in today’s blog. As a sole proprietor, you are responsible for paying the following: State and federal income tax Self-employment tax Sales tax, if applicable We’ll dive into each of these items below. State and Federal Income Tax For Wisconsin sole proprietors, business income and expenses are generally reported on Federal Schedule C – Profit or Loss from Business. The revenues and expenses of the business are reported on this schedule with the net profit/loss carried to the first page of Form 1040, your personal...
by Blair Butters | Feb 12, 2021 | General Tax and Accounting Information, IRS, Tax Planning
2020 was the year that many dreams turned into reality as the health crisis and resulting economic climate spurred many people to start their own businesses. Business Insider recently reported that the number of new businesses applied for in 2020 had reached a 13 year high. If you started your business in 2020, the transition may make you feel apprehensive about filing your taxes for the first time as a business owner, so in this month’s blog we have put together a checklist of items you can use to get prepared. Gather Formal Documentation The first thing you will need in order to file your business taxes is formal documentation. Any tax professional will want to know about your products, industry, the state your business is filed in, and the names of any owners. It’s also a good idea to bring the following documents with you: Articles of Organization or Incorporation The formal name of your business (as registered, if applicable) The structure of your business (LLC, Sole Proprietor, Partnership, Corporation etc.) FEIN, if one was obtained Make sure you have all of this ready for your tax professional to avoid any unnecessary time delays. Financial Documentation The next, and most obvious, documents to gather are your financial statements. You will need: Your profit and loss statement – the financial statement that summarizes the revenues, cost of goods, and expenses incurred during a specified period. For the first year, it is generally from the date business began to the end of the year. Your balance sheet – a financial statement for a business that lists assets, liabilities, and equity...
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