Keeping your company’s finances in order requires transparent financial reports, fundamentals in accounting, and a significant understanding of how taxes work. Taxation is a mainstay in the business world, and failure to pay your taxes on time may attract several penalties from the Internal Revenue Service (IRS). Therefore, understanding what the IRS requires of you and the best practices to ensure optimum accountability in filing taxes is vital. On that note, here’s a detailed guide on tax returns. We’ll define exactly what tax returns are and how they work.
What is a tax return?
Corporate bodies use tax returns to report their earnings to their tax authorities. If you run a business in the U.S., you’re subject to report your income, expenses, and other essential tax information to the Internal Revenue Service. Alternatively, U.S. companies can report their taxes to the local state or any local authority.
The return will help you calculate your company’s tax liability, schedule tax payments, or request refunds when you overpay your taxes for a period. There are various return forms, which include W-2, 1099, and 1040-SR. The one you need depends on whether you’re an individual, married or unmarried, or a corporate body.
Once your return is complete, you can use custom tax return envelopes to safeguard financial reports and other essential tax documents. Generally, tax returns may come in plain indistinguishable envelopes, but using custom-designed tax return envelopes is a great way for businesses to improve their branding efforts.
How does it work?
When filing taxes, both businesses and individuals can do so electronically or physically via mail. Often, the first step in filing your tax returns is to determine your filing status. Your total tax depends on this status and how much you’ve paid in taxes over the years. Self-employed individuals may have to estimate quarterly tax payments as they record the company’s earnings. If it’s all too much, you can opt to use a tax filing software or seek the services of a financial accounting expert who’ll ensure your tax returns adhere to professional standards.
If you’re a sole proprietor or you’re planning to start a business, you might prefer to manage all your accounting tasks yourself. If so, enrolling in an accounting degree program is a great idea. You can study at your own pace for an Associate in Accounting degree to gain more valuable information on how the tax return process works. An AS accounting online degree also offers all the fundamentals and principles of accounting.
All in all, you may not be required to file a tax return if your earnings exceed your filing status’s standard deduction amount. However, you might want to go ahead with your taxes regardless, even if you’re not mandated to do so. Some individuals or companies can leverage the payments for tax refund benefits.
Main sections of a tax return.
The typical two-page 1040 tax return form comprises 38 lines and includes the following sections.
Income lines: The income lines span from lines 1 to 15, and these sections calculate your taxable income. Other lines may include other things like Social Security benefits. If your income sources don’t have their own lines, you may have to complete the first part of Schedule 1 and attach it to your tax return.
Deduction lines: This section details deductions from your income sources you can pay taxes on. On form 1040, this section may start from line 10, which specifically includes your income adjustments.
Tax credits and tax paid: This is recorded on the second page of form 1040. It calculates the tax you owe on your taxable income after all estimated tax payments made during the year have been recorded and subtracted.
All in all, knowing the different requirements for filing taxes can be essential for businesses. But accounting students may need it more to score entry-level employment and job opportunities.
