2021 TAX GUIDE
For small businesses
For example, if you increased your sales without increasing your costs, your profits may go up and you may be required to pay more in taxes this year.
Are You Ready for Tax Season?
Juggling the day-to-day responsibilities of running a small business is hard enough. When tax season arrives, the stress is multiplied. Doing taxes is tedious, but doing them correctly is crucial. How can business owners streamline their tax to-do-list and maximize their return?
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YOU ARE NOT ALONE!
We have created this guide for the 2021 tax season to help small business owners reduce their stress and maximize their tax return!
Organize Your Records
The first step is to gather and organize all of your financial documents from 2021. This includes Balance Sheets, Income Statements (aka Profit and Loss Statements), and previous year’s tax returns. Examining these documents will help you see how your business has changed year-over-year and will also provide a preview of your profitability which will be a factor in determining what you will owe in taxes this year. Your tax professional will also need to review these documents.
Up-to-date and accurate bookkeeping will help you stay tax-ready. With all records and expenses organized, you can confidently file your taxes.
If you are behind on your bookkeeping, you are not alone! 25% of business owners are behind on their books. Xendoo will bring your financials up to date in no time. Get caught up now and enjoy tax-ready financials without the headache.
To ensure that you have all the necessary information you may need on hand, take a look at our complete tax documentation checklist:
Determine Your Business Structure
Your business structure determines the form you will use to file your taxes and how you are taxed. Here is a breakdown of the different business entities and the tax forms they require:
Sole Proprietorship
As a Sole Proprietor, the IRS views your business and personal finances as one and the same. Because of this, you are only required to file a personal tax return. Income and expenses related to your business are accounted for on your individual tax return Form 1040, Schedule C.
Limited Liability Company (LLC)
Taxation for LLCs varies, as they can elect to be taxed as different business entities. Here are your options:
Partnership
Partnerships do not pay income tax. Instead, profits or losses are passed through to personal income, using Form 1065.
S-Corporation
S-Corporations are not subject to double taxation, which saves them a great deal in taxes! Income, losses, deductions, and credits pass through to the shareholders. S-Corporations file taxes using Form 1120S.
C-Corporation
If your business is a C-Corporation, or if you elect to treat your LLC as a C-Corporation, you will need to file a corporate tax return, separate from your personal tax return. In this instance, you would use Form 1120.
For quick reference on business entity types and how they are taxed, please take a look at the chart below
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