Filing taxes as a small business owner can be overwhelming. Here is a guide on how to file your business taxes if you own a single member LLC or a sole proprietor business.

General Information

Because LLCs and sole proprietors are pass through entities, taxes are due on April 15th along with your personal taxes. If you require an extension for your taxes, one is available that will make your new deadline for filing October 15th. Please note that filing fo an extension on your taxes does not change when your payments are due. Taxes owed still have to be paid by the payment deadline and if you do not pay enough taxes throughout the year you are required to pay estimated taxes quarterly.

Schedule C Income Tax Form

All profits and losses are filed using Schedule C on your personal tax return form (Form 1040). The following information is required for successfully completing the form:

financial records that calculate the cost of goods sold if you maintain or carry inventory
financial records to itemize and prove all tax deductions (e.g.,  business travel, expenses, business meals, etc)
financial records for assets (needed to calculate depreciation), and 
information and proof (e.g., hours, space used, equipment, etc) on the business use of your home (home  business space deduction).

The itemized deductions section is the most combed through section by the IRS when it comes to pass through entities and small businesses/personal taxes. It’s important to keep excellent records and have an efficient bookkeeping system just in case you are audited.

Self Employment Tax 

Self Employment tax (Schedule SE) covers Social Security and Medicare and is paid on your business’ net income (profit). If your business income is nonexistent or less than $400 you do not have to pay self employment tax. Self employment tax is calculated by taking your business’s net income, multiplying it by 92.35% (or 0.9235) and then multiplying that number by 15.3% (or 0.153), the self employment rate. This number determines your eligibility for Social Security and Medicare benefits as a business owner.

Although adding your business’ profit and loss information simply requires transferring numbers from your Schedule C and Schedule SE, it’s always a good idea to consult with a tax attorney and/or CPA to make sure your numbers are correct and that you are receiving the best deductions for your specific business and financial needs. 

For more tips and tools for filing your business taxes, contact Sterling Capital Consulting today.