Business Tax Returns


It is fairly obvious that the tax return for a business is more complicated than the usual 1040. As we near the deadline for Business Tax Filing, it is good to know there are Business friendly laws to help business owners minimize their overall tax liability. C Corporation and S Corporation Tax Returns are due March 15, 2012. Partnership, Limited Liability Company, and Schedule C (sole-proprietor) Tax Returns are due April 17, 2012.

Details of your business are required for filing a business tax return. Questions to be answered when preparing a business tax return include the description of the type of business, is it your first year in business, and your business location.

Decisions the owner must make while preparing the business tax return could include deciding the Accounting Basis, the Depreciation Method, and whether a Home Office Deduction applies.


Accounting Basis

A business owner can choose whether to prepare the tax returns on a cash or accrual basis. On a cash basis, income is recognized when collected and expenses are recognized when paid. On an accrual basis, income is recognized when earned and expenses are recognized when incurred.

Tax returns can be prepared on a cash basis even if the financial statements are prepared on an accrual basis. Certain businesses, including those with larger revenues, must file the tax return as an accrual basis.


Depreciation Method

Businesses without profits cannot deduct the first year depreciation deduction of up to $100,000 for furniture and equipment. A new business owner might consider taking the slower depreciation route so that when the business has income and is in a higher tax bracket, most of the deductions will be available as a write off.


Home Office Deduction

Home based businesses should consider the ability to deduct a portion of their residence as a business deduction. The business area of the home must be used exclusively for business. The deduction will be limited if your gross income from your business is less than your total business expenses. If you qualify to take the home office deduction be sure to keep good records, including logging your home work hours to show the IRS your office is used only for business.


Business Tax Relief

There are many forms of Tax Relief for Small Businesses. Zero Capital Gain, Tax Relief for Cell Phone deductions, Increased Deductions for Start up costs, 5 yr Carry Back of General Business credits, plus New Health Care Tax Credits and Deductions are a few of the options available to business owners.


Business Tax Checklist

Following is a list of items that will assist you in identifying and collecting the information necessary for properly preparing your Business Income Tax Returns.


            __ Copy of your prior year Income Tax Returns

            __ Year End Balance Sheet

            __ Year End Profit and Loss Statement

            __ Year End Payroll Information

            __ Listing of any Equipment or Asset Purchases

            __ Year End Loan Balances

            __ Shareholder Loan and Distribution Amounts

            __ State Franchise fees Payment Detail including payment date and amount        

                 ($800 minimum)



Steven Z. Freeman, CPA  provides IRS Tax Preparation Services and can assist you with any actual calculations on your Tax Returns.  To learn more about preparing your Business Tax Return or to schedule a complimentary initial consultation, Please call us at (805) 495-4211.

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