Key Differences Between Personal Taxes and Business Taxes
Getting ready to file your taxes this year? If you’re filing personal taxes or business taxes, you need to understand some of the differences so that you comply with all necessary requirements.
Read on to discover what separates these two unique filings, as well as tips on how to make the filing process easier.
Tax forms
One of the primary differences between filing business taxes and personal taxes is the form you’ll need to fill out. If you’re filing personal taxes, you’ll likely complete a Form 1040. For business owners, the situation is much more complex.
If you run a sole proprietorship or have a pass-through business structure, you’ll fill out a Form 1040 to report all self-employment income. Owners of C corporations must complete Form 1120, and owners of S corporations must complete Form 1120S.
If you operate a partnership, you’ll file Form 1065, an information return. Nonprofits must fill out information returns, too, under Form 990. You’ll also need to consider tax payments made on Form 1040-ES.
Filing deadlines
Filing business taxes is much more complicated than filing personal taxes, due in part to stricter filing deadlines. Individuals filing taxes must file before tax day, which falls on April 15 each year. Business owners, on the other hand, must be aware of several tax due dates throughout the year.
Business owners must make tax payments every quarter—by January 15, April 15, June 15 and September 15. In some cases, businesses must make monthly payroll tax filings. Keep in mind that deadlines can vary based on tax extensions. Pay close attention to your tax calendar, and stick to your deadlines to avoid significant late-filing or late-payment fees.
Tax deductions
While there are plenty of hoops to jump through when you file business taxes, you also can take advantage of some significant tax deductions that can save you money. There are many more business tax deductions than personal ones. Whether you run a busy hair salon or a trendy restaurant, you’re eligible for many tax write-offs that aren’t available to individual filers.
Individuals filing personal taxes can deduct unreimbursed employee expenses, mortgage interest and student loan interest, but the list basically stops there. Business owners can deduct much more. If you use part of your home for your business or if you use your vehicle for business purposes, you can claim a home office deduction and a vehicle deduction respectively.
There are countless business tax deductions, and working with a tax professional can help you take advantage of the ones that are relevant to your business. When it comes to making the most of your deductions, be thorough about recording all of your business expenses and keep receipts—the IRS often requires business owners to provide documentation to verify the write-offs they’re claiming.
Whether you’re preparing to file your personal taxes or business taxes, it pays to have help from professional tax preparers on your side. Contact Kedean’s Generation today so you’re ready to file with confidence when tax time arrives.
Categorised in: Tax Preparation