How to File & Pay Business Tax in Irvine and Orange County, California
Business owners have a great number of responsibilities that require their time and attention well after they close their doors for the day – including filing taxes. For business owners to correctly file and maximize their return, they need to be fully aware of the ins and outs of business tax filing. The following is a list of key steps business owners need to take when preparing and filing their business’s taxes.
1. Collect Your Records
A well-organized business is a reward for small business owners year round, including tax season. Before you start to file, make sure you have all of your records on hand for easy reference. You’ll need all records of the business’s earnings and expenses available while filing.
2. Find a Trusted Partner
Due to the constantly changing nature of U.S. tax codes, filing business taxes has become a thoroughly complicated process. Even those who are somewhat experienced with using business tax software can easily make costly errors. It’s important for small business owners to find a trusted partner they can rely on to help them through the maze of business tax forms, calculations, and the inevitable questions that arise.
3. Determine Your Federal Tax Obligations
The U.S. government collects four types of business taxes:
- Income tax
- Self-employment tax
- Taxes for employees
- Excise tax
The types of federal tax forms you will need to file depend on what type of business entity was established when you first started your business. Below you will find the required tax forms for your particular business structure:
- Sole Proprietorship: Download tax forms
- Partnership: Download tax forms
- Corporation: Download tax forms
- S Corporation: Download tax forms
- Limited Liability Company (or LLC): Download tax forms
It is important to determine your federal tax obligations not only because you are legally required to do so, but because filing your business taxes correctly and accurately can result in business tax deductions.
4. Determine Your State Tax Obligations
In addition to federal tax obligations, as a business owner you may also have state and local tax obligations. The more frequent types of taxes levied on small businesses are income and employment taxes. Almost every state will impose a business/corporate income tax. Once again, the exact income tax requirements depend on the type of business entity the business is legally. In regard to employment taxes, every state requires that a business pay state workers’ compensation insurance and unemployment insurance taxes. California is one of six states that require a business to also pay for temporary disability insurance.
5. Determine When the Tax Year Starts
There are two types of tax years: a calendar year that begins on January 1 and ends on December 31, and a fiscal year that is 12 consecutive months ending on the last day of any month except December. For the most part, businesses are able to use the calendar year for tax purposes. For more information on determining when your tax year starts, it is best to reach out to your trusted partner, who can help sift through the Internal Revenue Code and the Income Tax Regulations.
6. Pay Attention to Deadlines
It’s easy to get caught up in the day-to-day responsibilities of being a business owner, but it’s incredibly important to be aware of filing deadlines. If you find that you need more time to file your business taxes, you can apply for a business tax extension. It is important to note, however, that even with an extension you will need to estimate how much you owe (if this is applicable) and send in that amount by the existing deadline.
Frequently Asked Questions
How do I prepare and process payroll for taxes?
Processing payroll for taxes is an extensive process that needs to be completed throughout the year. In order to process payroll for taxes on your own, you need to be able to devote a significant amount of time to it, be savvy with numbers, know the current tax rates (which change on an annual basis), and be confident in your ability to prepare your payroll documents without error. A brief overview of the process is as follows:
- Preparation: making sure that all your employees have completed a W-4 form, having an Employer Identification Number (EIN), and setting up a tax calendar so that you keep track of deadlines.
- Calculating payroll at the end of each payroll period (weekly, biweekly, monthly, etc.) and deducting federal and state income taxes, social security, Medicare, and any other deductions.
- Make payroll deposits to the IRS on a regular basis (semi-weekly, monthly, etc.).
- Submit payroll tax reports to the IRS on a regular basis.
- When tax season comes, report your federal, state, and local tax deposits that were made throughout the year. You must also file your employer federal tax returns and give your employees their W-2s within a reasonable timeframe.
If the DIY tax process isn’t right for you, you can hire a professional accountant to handle it for you. With an accountant, you can have peace of mind knowing that your payroll and taxes will be processed and prepared correctly.
Should I hire an accountant to handle my small business taxes?
While some small businesses may be able to handle their taxes on their own, the assistance of an accountant during tax time can be advantageous in a number of ways. Not only will you save yourself the headache of dealing with a complex process on your own, but it’s often more cost- and time-efficient to hire an expert to handle it, especially if you’re not familiar with all the subtleties of small business taxes.
Furthermore, having a professional accountant handle your small business taxes will also ensure that your taxes are filed correctly while freeing your time up for other business initiatives.
What tax forms do I need for my small business?
Small businesses require a number of forms in order to file and pay their taxes. The basic list includes forms for starting and operating a new business, general business expenses, general and specialized forms, and employee benefits, most of which can be found and downloaded here on the IRS’s website.
Tax forms differ depending on what type of company you have. For example, a Limited Liability Company (LLC) will have a different form than a corporation. There may also be other forms for you to prepare depending on your industry. This is where working with an accountant for your small business tax needs can be very helpful. It’s their job to know all the necessary forms that you’ll need, so they will be able to get your tax reports set up quickly and without error.