When you own a business, it is important to keep close tabs on every dime that is spent so that you can make claims to the IRS when you go to file taxes. You need to be sure that everything is accounted for in case you are audited for a deduction that you make. Keeping track of the books on your own can be very difficult to do because you have so many other things to track when you are running a business.
When you just do not have time to meet with the tax prep person, you can take advantage of a service offered by some tax return preparation services. It is often referred to as the "drop and go" service, and it is best suited for people with extremely busy schedules. Here is more about that service and how to make it work smoothly for you.
The Drop and Go Tax Service
If you're about to open a business, you first need to decide which type of business you're going to open. In general, you'll be deciding between a sole proprietorship, partnership, or corporation. Among other things, the structure of your business will significantly impact your end-of-year tax liabilities.
The Tax Consequences of a Sole Proprietorship
A sole proprietorship is known as a pass-through entity. Your income from your business is taxed alongside your own income -- essentially, you are simply a self-employed individual who is making money.
Did you open a business that is earning you a substantial amount of income? The wisest thing that you can do financially is hire a tax accountant to assist with various aspects of your business. You must keep in mind that you can get audited by the Internal Revenue Service (IRS) and end up in legal trouble if inaccurate calculations are on your income tax return. Below, you will discover why hiring an accountant is a good thing to do for managing your business finances.
An operating loss on self-employment income is usually offset by income gains in other areas. However, the loss is sometimes greater than all other sources of income combined. Self-employed individuals with a net operating loss can sometimes use the loss to offset income from other years and receive refunds or tax reductions.
A loss on self-employment activity is reported as a negative figure on Form 1040. Other income sources are likely to be entered as positive figures on Form 1040.