How to File and Pay Income Taxes
1. Collect Your Business Records
• Gather and complete accurate financial data for the business. You’ll need a complete record of all sales made during the tax period, as well as all expenses, in line with what type of accounting you use.
• Make sure that your bookkeeping is accurate, reconciled and complete for the tax period.
• Gather and complete information on any source of business income other than sales if you have it, such as interest on cash accounts, dividends, and rent receipts.
• Complete and gather receipts and information for all tax-related items, such as tax deductions and tax credits.
• Complete your balance sheet and income statement for the period.
• Gather relevant records about the business. Generally, you’ll need:
• The previous year’s tax returns
• Your Employer Identification Number (EIN)
• Your Social Security Number (SSN)
• Any other information specifically required for your business entity.
2. File Tax Forms
Sole proprietor
- As a sole proprietor, you file personal income tax forms on IRS Form 1040, U.S. Individual Income Tax Return, and Schedule C, which itemizes the profit and loss from a business.
Partnerships
The partnership files Form 1065, U.S. Return of Partnership Income, to the IRS, which shows income, losses, deductions and credits for the business. Then, partners pass through profit and loss from the partnerships on their personal income tax every year by including a Schedule K-1, which delineates their share of each of those categories.
Limited Liability Corporation
- If your business is an LLC but you’re the only member, your tax filing is very similar to that of a sole proprietor. You complete a 1040 for your income tax and include a Schedule C providing your profit and loss.
- If your business is a multi-member LLC, your tax filing is similar to that of a partnership. The LLC will file Form 1065 to show and profits, losses, deductions and credits. Then each member will receive a Schedule K-1 and pay their share of taxes on their own personal income tax return.
C Corporation
- C Corp’s report business income on Form 1120, U.S. Corporation Income Tax Return. This form will contain information on income gains, losses, deductions, and credits.
- In addition, if you receive a salary or dividend income from a C Corp., you need to report and file these on your personal income tax return.
S Corporation
- S Corp’s report their gains, losses, deductions and credits on Form 1120S, U.S. Income Tax Return for an S Corporation. Individual shareholders report their share via a Schedule K-1 with their personal income tax return.
3. Pay Taxes
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