Small businesses can file their business taxes at the same time as their personal income tax return. The deadline for filing is usually April 15th unless an extension has been granted in response to the COVID-19 crisis.
If you’re a small business owner, you need to have your taxes in order so that the IRS doesn’t conduct an audit. The best way to do that is to work with a professional team or hire a CPA, so they can ensure that your small business taxes are correctly filed by the deadline.
But some small business owners prefer to do their taxes and filing themselves. Whether you’re a newbie in the business world or need some clarity, TPI Group can explain what a small business is and how you can file your business taxes.
What’s Considered a Small Business?
In the US, a small business is defined as a corporation, sole proprietorship, or a partnership that has fewer employees than regular-sized entities. A single-member LLC is also considered a small business.
Each industry has a set limit of employees to determine the size of the business. Here are a few examples of size standards, according to the U.S. Small Business Administration (SBA):
- Offices of dentists and chiropractors must not exceed an annual revenue of $8 million.
- IT Value Added Resellers must not exceed 150 employees, but there are exceptions and additional details to consider.
- A business focusing on internet publishing, broadcasting, and web search portals must not exceed 1,000 employees.
Note: In the SBA’s chart of size standards (see link above), there is a code beside the industry type. Every business needs a North American Industry Classification System (NAICS) code because it groups similar businesses together to make the collection, tabulation, presentation, and analysis of statistical data easier for the government.
If you know you’re a small business, there are at least two tax forms to fill out: Schedule C and Schedule SE.
Schedule C Income Tax (Form 1040)
The Schedule C form is for you to record the Profit and Loss in Business. It requires you to know the following information:
- The cost of goods sold if your business has an inventory of items for sale
- Expenses for business travel, driving, and business meals, which are for business deductions
- Assets purchased, such as vehicles and equipment for the business
- The location of the business
Schedule SE: Self-Employment Tax (Form 1040)
Self-Employment taxes are also called Social Security and Medicare taxes. Business owners must pay these taxes on the net income of the business. You are exempt from doing this if a) your income is $400 or less for the year you’re filing or b) there is no income for the business for that year.
Note: You can find the Schedule C and SE forms on the IRS website. The forms for the relevant year may not be available immediately, depending on when you visit the website.
State and Local Taxes
Across the US, there are some places where small businesses must pay a state tax and a local tax. The state of Virginia has a corporation tax, but usually only C-type corporations must pay it. In other words, most small businesses do not need to pay a state tax on income or net worth unless that income goes to you personally. In those cases, you must report that income on your personal state tax return.
Virginia-Based small businesses must pay federal or local property taxes. While many small businesses operate out of the home, they are required to pay tax on:
- Business tangible personal property, such as furniture and computer equipment
- Property that is personally or commercially owned
- Property that is leased or rented
- Property that is temporarily used
For Vienna residents, property taxes are filed using county forms.
Depending on the type of industry you’re in, such as retail, you may have to pay a sales and use tax. This is done electronically, and you can find all of the forms here. You can file your taxes three different ways by:
- Using eForms, which do not require any login information and offer a direct payment method
- Creating a Business Online Services Account where you can make a few clicks, fill out a few fields, and easily schedule payments.
- Using Web Uploads where you can upload your files to the website and schedule submissions
Have Your Small Business Tax Return Filed Right
Small business owners don’t always have time or patience to figure out how to file their business taxes. That’s why the TPI tax specialists are here. With our tax preparation services, we can reduce your stress and frustration while ensuring that your paperwork is filed without any issues.
Contact us today to get started!