Every year everyone in the country who has earned an income has to pay for the privilege of being able to live within the national infrastructure.
Corporations are no exception, although in most cases it is a more involved process to file your corporate taxes than it is to file individual ones.
The first step in filing corporate taxes is to gather all of your business financials from the previous year together in one spot. If you have been in operation for more than a year, you have probably seen the importance of keeping good records and keeping them altogether and filing as the expenses and profits come in.
On the other hand, if you haven’t kept your business financials in good order, then you had better set two or more days aside to try and get everything straight before you attempt to start filing your corporate taxes.
Next, familiarize yourself with some of the basics that come up when it’s tax time. Most importantly, you should be aware of the rate at which your corporation will be taxed, expenses which qualify as deductions, and which governmental bodies you will be paying taxes to.
Corporate tax rates can be found in a number of different places online, and they go up the more your business earns. We’ll trust you to find your tax rate yourself, and clarify the other two issues instead.
Deductions are business expenses that you incurred over the year, or money that you invested to make your small business run.
Deductions fall under many areas, including necessary business expenses, depreciation of assets, interest payments, real estate taxes, losses not covered by insurance and the taxes you pay to other levels of government.
The rules regarding what can be declared as deductions are strict, so make sure you consult them before you go to file.
The purpose of declaring deductions is to have your business making less, on paper. The less money you made as profit, the less tax you will have to pay at the corporate level.
Levels of Corporate Tax
Corporations will usually have to pay tax to two levels of government, and sometimes three. All must pay federal tax, most must pay state tax, and some even have to pay municipal tax.
After you gather the information regarding income and deductions, determine the route you will follow to file your corporate taxes. Again, first year small business owners usually make the mistake of deciding to file corporate taxes themselves.
This can be done, but you will probably need to take three days or more out of work just to file. There are an incredible number of forms and rules that you need to understand, and errors will be very expensive.
Most corporations prefer to file through an accountant or even a computer program. Both of these options are deductible and both are much less error prone than individual attempts.
Software filing is less expensive but requires greater individual effort, and is a good choice for the small business. Larger businesses should probably select the professional services of a certified accountant in order to file.
Unless you are confident that you can wade your way through all the forms and regulations, it may be best to file corporate taxes through some professional medium.
That does not exempt the business owner from preparation work, however. You must be sure to have a basic understanding of your corporate tax structure, and be able to provide accurate records of all your business financials.