Today it is easier to start a business more than ever before. Business resources have flooded the Internet, and business gurus, brand experts and accountants offer business owners free advice on blogs and social sharing sites.
With access to such knowledge, it is not surprising that businesses by self-starters are popping up everywhere, from Etsy shops to eBay sellers to bloggers. If you are a self-employed newbie, knowing how to file your Schedule C Taxes is critical. “You see, as twisty as the US tax code can get for employees, you don’t get the full IRS experience until you file your first Schedule C, the form that goes with your 1040 when you run a sole proprietorship,” wrote Matthew Amster-Burton for Mint.com.
As recently as 2009, almost 23 million tax returns included Schedule C, which is roughly 10 percent of all returns.
Below are some tips for those who are new to Schedule C tax filing . . .
Learn the rules about local and state filing.
Each state taxes business owners and independent contractors differently. Most states will have sales taxes and a number of other business taxes. If you live in a metropolitan area, it is likely you will also pay business taxes to the city.
Obtain a business license.
Not all businesses are the same, some require licenses, some do not, and some require two: one for the city and one for the state. A business license will protect your business and is sometimes free to set up. To learn more, go the Small Business Administration website and enter your information.
Create an alias.
According to Amster-Burton, “If you want to advertise your business under a name other than your own, you have to apply for a fictitious business name (Great term, isn’t it?) or DBA (for ‘Doing Business As’). It usually comes with a small fee. This is usually handled by the same state licensing agency that grants business licenses.”
Apply for an Employer Identification Number (EIN).
Only corporations or businesses with W-2 employees are required to have an EIN, but having a tax ID can help you guard your personal information from customers, like your social security number.
Do not mix business and personal funds.
“Maintain a separate checking account for your business, and don’t mix business and personal expenses in the same account. It’s just too much of a pain to sort out at tax time. Luckily, you have tons of options for a free checking account with no minimum balance. This doesn’t mean you can’t move money between your personal and business accounts—of course you can! Just restrict it to transfers. It’ll save you major headaches. I waited way too long to do this,” wrote Amster-Burton.
Get a tax professional.
Finding a tax professional is extremely important when it comes time to file. An expert will always help you optimize your deductions. If you have personal or business tax debts, it is best to meet with a tax resolution attorney. The lawyers at U.S. Tax Shield are specialists when it comes to dealing with IRS debts.