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The video discusses important things small business owners need to know about taxes. The first thing mentioned is a deduction called qualified business income deduction that could be beneficial for pass-through entities.
Tax credits are also discussed, which can save businesses money on taxes. The video then goes into the different types of taxes small businesses may face and the importance of keeping good records. The video advises small business owners to consider getting help from tax professionals and explains the differences between the various types of tax professionals.
The video also goes into the different forms small businesses may need to file, depending on how the business is set up.
Lastly, the video discusses estimated taxes and when they are due.
00:00 Qualified Business Income Deduction
00:29 What is a tax credit?
01:02 Introduction
01:29 Small Business Taxes for Beginners
03:16 Business Taxes Vs. Personal Taxes
03:56 How to File Taxes for Small Business Owner
04:47 Tax Professional for Small Business
06:19 Business Tax Returns Form
07:32 Form 1065
08:26 Form 1120s
09:24 Form 1120
09:50 LLC Taxes
Show More Show Less View Video Transcript
0:00
one of the good things about being a
0:03
pass-through entity is you may be able
0:05
to qualify for this deduction called a
0:08
qualified business income deduction
0:10
essentially 20 of your profits is a
0:15
personal deduction on your tax return so
0:17
it's based on your business income it's
0:19
not a business deduction it's a personal
0:20
deduction but it doesn't cost you
0:23
anything you get it because you qualify
0:25
and so that's a really good write-off
0:28
the other thing I want to talk about and
0:31
just mention is that there's a growing
0:34
number of tax credits and tax credits
0:38
are a dollar for dollar reduction on
0:41
your taxes if you think of a tax
0:43
deduction the deduction is worth only as
0:46
much as the tax bracket you're in so say
0:48
you're in the 22 percent tax bracket a
0:51
thousand dollar deduction saves you two
0:54
hundred and twenty dollars in taxes but
0:56
a tax credit a thousand dollar credit
0:59
saves you a thousand dollars in taxes
1:02
[Music]
1:08
so you've started a small business well
1:10
with tax season just around the corner
1:12
it's time to look at how taxes will
1:14
affect your new Venture up next Barbara
1:16
weltman attorney founder of big ideas
1:19
for small businesses Incorporated and
1:22
author of JK lasser's small business
1:24
taxes explains what you need to know so
1:28
Barbara what do beginning small business
1:30
owners need to know about taxes that's
1:34
different than paying taxes when you're
1:36
not running a small business well taxes
1:38
are just part of doing business you have
1:41
to deal with taxes and there are
1:43
different kinds of taxes you have income
1:45
taxes you have employment taxes if
1:49
you're self-employed you're going to be
1:50
paying self-employment tax there are
1:53
excise taxes there are various penalties
1:56
and they're called taxes so you kind of
1:59
have to know about all of these
2:01
different taxes and not only do you have
2:04
to know what's going on at the federal
2:06
level but you may have state and local
2:09
taxes to contend with as well so there
2:12
are certainly a lot of moving parts that
2:15
you have to know about I think the
2:18
important thing to know is that most
2:21
small businesses do use CPAs or other
2:26
tax professionals perhaps just to
2:28
prepare returns or do payroll but the
2:31
important thing for small business
2:33
owners to know is that they have to
2:35
understand what taxes all are all about
2:37
because it influences business decisions
2:41
and and you know I was saying oh is the
2:43
buck stops with you you have to know the
2:46
tax implications of your business
2:48
decision so do you hire an employee do
2:51
you use an independent contractor do you
2:53
buy or lease equipment do you start a
2:57
retirement plan and which kind of plan
2:59
what kind of health coverage do you
3:01
offer there are so many choices
3:03
especially when it comes to small
3:05
businesses there are special options for
3:07
small businesses so there's certainly
3:11
an awful lot to learn and to uh sort to
3:15
master really I was a business owner go
3:17
about filing uh their taxes for the rest
3:19
I mean you talked about getting a CPA I
3:21
mean maybe that's the first step but how
3:23
do you go about this process what's
3:25
different uh than say filing your
3:27
personal income taxes
3:29
the first thing that I sure hope that
3:31
you have been keeping good books and
3:33
Records because as a small business
3:35
owner you're required to do so you know
3:37
for your personal finances maybe you
3:40
have records maybe you have a shoe box
3:42
with receipts uh you know whatever but
3:45
for business you're required by tax
3:48
rules to keep good books and records and
3:51
having those good books and Records
3:53
enables you to do your taxes so you may
3:56
be able to do it yourself using software
3:59
I certainly don't recommend doing paper
4:02
returns anymore
4:04
too much opportunity for math errors and
4:08
and missed opportunities so at least
4:11
with software sort of prompts you what
4:13
you what to do
4:15
or turn to a tax professional and there
4:18
are various types of tax professionals a
4:20
CPA isn't the only option
4:23
um there are many different ways you can
4:25
get your taxes done if you don't know a
4:29
tax professional get a referral I mean
4:32
just like you'd find a pediatrician for
4:33
your child by asking your neighbor ask
4:37
your Banker ask your attorney ask other
4:39
local business owners who they use and
4:42
get a good a referral to somebody good I
4:45
think this is just kind of my take on it
4:48
and maybe you find this surprising since
4:50
I write a textbook every year to tell
4:52
people what to do with the book but then
4:55
I tell people we'll go get a tax
4:57
professional it's kind of worth the
5:00
money that you would pay a tax
5:02
professional because it will
5:05
help you sleep at night it will help you
5:08
find every opportunity for tax savings
5:11
and make sure that things get done
5:13
correctly you mentioned there's a couple
5:16
of different tax professionals what
5:18
kinds of different types of
5:19
professionals what are the differences
5:21
okay well there are tax attorneys which
5:24
you certainly don't need to to complete
5:26
your returns those are people who
5:28
primarily handle
5:30
tax problems if you get audited and
5:33
there are certain you know really
5:34
challenging issues but there are
5:36
enrolled agents who are licensed in a
5:40
sense by the IRS they get that that
5:43
certification they have continuing ed
5:46
requirements so they're they're supposed
5:48
to be knowledgeable in what they do
5:50
there are CPAs but there are regular
5:52
accountants who may act as enrolled
5:54
agents there are H R Block kind of
5:57
storefront places that will handle those
6:01
kinds of things so there is an IRS
6:04
website where you can find a tax
6:06
professional and see their
6:08
certifications and you can search by ZIP
6:10
code and that that may be one way to go
6:14
and again you can check their
6:16
qualifications and what they're about
6:19
what form or forms uh does a small
6:23
business owner use to file their tax
6:26
returns obviously the different kinds of
6:28
forms for different kinds of tax returns
6:30
and it depends how your business is set
6:32
up but what form do you use for this in
6:35
the first place well again as you say it
6:37
depends on how your business is set up
6:40
so for example if you are a sole
6:43
proprietor in other words you haven't
6:44
taken any legal steps to form anything
6:46
else or you are a one member limited
6:50
liability company a one minute there's
6:53
only one owner of an LLC
6:55
if you're one member LLC you're treated
6:58
just like a sole proprietor actually the
7:00
law calls you not very nice but it
7:03
disregarded entity like you don't even
7:06
count but what it means is that you're
7:10
going to file a Schedule C with your
7:13
personal income tax return so Schedule C
7:16
will be used to report all your business
7:18
income and expenses
7:20
and that goes along with your form 104
7:23
to your personal income tax return so
7:26
there's no separate filing if you fall
7:29
into that category and independent
7:31
contract is same thing a one member LLC
7:33
can opt to be treated like a corporation
7:36
in tax let's say like an S corporation
7:38
you have that option so if you are a
7:41
limited liability company with two or
7:43
more members you're a partnership you're
7:45
going to file form 1065. now what this
7:48
means is the entity the partnership the
7:51
LLC doesn't pay taxes what it does is it
7:54
reports its income and expenses on the
7:57
form and then it issues to you the owner
8:00
a schedule K1 which reports your share
8:04
of of this your share of the business
8:07
income or loss your share of certain
8:10
items that pass through separately to
8:13
you like if the partnership made
8:15
charitable contributions that passes
8:17
separately to you but it's your share of
8:19
the of that so if you're 50 owner you're
8:22
going to get 50 of what the partnership
8:24
reported the next kind of business would
8:27
be an S corporation you just incorporate
8:30
but for tax purposes you are a
8:33
pass-through entity and treated more
8:34
like a partnership than a corporation
8:36
meaning that the S corporation files
8:39
Form 1120 s and then a schedule K1 to
8:44
tell you the shareholder your portion of
8:47
business income and expenses that you
8:49
report on your personal return
8:52
so again the S corporation in most
8:54
situations there are some exceptions
8:56
don't go into but most times the S
9:00
corporation never pays taxes you're
9:02
doing this on your personal return and
9:04
each owner
9:06
does it separately let's say you have an
9:08
S corporation with two owners you're
9:11
going to file the 1120s and each owner
9:14
gets 50 percent of what's there
9:16
but the owners may be in different tax
9:18
brackets so the owners may be paying a
9:21
different rate of tax on the profits and
9:24
then of course the last entity is a C
9:26
corporation a regular Corporation that's
9:29
its own tax paying entity it files Form
9:32
1120 it pays its own taxes its own
9:35
estimated taxes and you as the
9:39
shareholder get either salary if you're
9:42
working for the corporation or maybe the
9:45
corporation is paying dividends to you
9:47
and you report what's distributed to you
9:49
I think a lot of beginning small
9:51
businesses particularly solopreneurs
9:52
they might go the LLC route could you
9:55
tell us a little bit about the
9:56
differences between taxes for an LLC and
10:00
those of an individual
10:02
well from the tax perspective again it
10:05
depends on if you have just one member
10:07
one owner or two or more so if you have
10:10
one owner
10:12
you're pretty much the same as if you
10:14
didn't take any legal action now the
10:16
legal action is great because it gives
10:18
you personal liability protection but
10:21
from a tax perspective it really doesn't
10:23
make any difference but if you have two
10:26
or more owners in the LLC then you're
10:28
more like a partnership you're going to
10:30
be treated tax wise as a partnership I
10:33
think you're right the LLC is probably
10:36
the most popular kind of entity these
10:39
days because it gives you that personal
10:42
liability protection but from a tax
10:45
perspective it's not that dramatically
10:47
different from other options you
10:50
mentioned it a little bit this LLC that
10:53
that has elected to be treated as
10:55
something else say an S corporation does
10:58
that make any significant changes in the
11:00
way you pay your taxes that's primarily
11:02
the driver for doing that because
11:06
if you elect to be treated as a
11:09
corporation then you elect S corporation
11:11
status it enables you to take a salary
11:15
and have the withholding on your salary
11:18
cover the taxes that you'd have to pay
11:20
on not only the salary you get but also
11:24
on your share of the business profits so
11:27
it eliminates for many owners the need
11:31
to pay separate estimated taxes which I
11:34
think are challenging for owners who are
11:37
just starting out because for many This
11:39
Is A New Concept I like to think that
11:42
most of these people are you know
11:44
they're W-2 employees so they've always
11:46
had withholding handle their tax
11:49
obligations but now the burden is on
11:52
YouTube to Antioch does an LLC just an
11:55
LLC pay quarterly taxes well the owner
11:58
would remember the LLC the partnership
12:02
the S corporation they're not taxpayers
12:04
they're pass-through entities so
12:07
everything passes through to owners so
12:09
the burden of paying taxes falls on
12:12
owners and they have to pay estimated
12:15
taxes which happens four times a year
12:17
it's called quarterly but it doesn't
12:19
fall evenly in quarters so it's kind of
12:22
that's kind of a misnomer so uh unless
12:26
you have some other way of handling
12:28
these taxes perhaps you have a spouse
12:31
who is an employee who's willing to have
12:34
huge withholding to cover your burden
12:37
you're going to be paying estimated
12:39
taxes and the estimated taxes has to
12:42
cover your sh your taxes on on the
12:45
profits and if you're self-employed also
12:48
your self-employment tax but
12:50
self-employment tax is a little
12:51
confusing for individuals who have been
12:54
W-2 employees they're used to paying the
12:56
employee share of FICA and
12:59
self-employment tax is essentially
13:01
you're paying the employer and the
13:03
employee share of FICA so you're paying
13:05
twice as much although you do get to
13:07
deduct one half there is no withholding
13:10
there's no depositing the money or
13:13
anything like that as there is with a
13:15
payroll tax it gets wrapped into your
13:18
estimated taxes which are four times a
13:20
year and the first estimated tax for
13:23
2023 is April 18 2023. we're not too far
13:28
from the first payment the second
13:30
payment is June 15th the third payment
13:34
is September 15th and the fourth payment
13:36
is going to be January 16 of 2024. now
13:41
also a reminder that you may be having
13:43
to pay estimated taxes on the state
13:45
level and check their due dates which
13:48
may be the same or they may be different
13:50
well that's it for another episode of
13:52
small business 15. thanks again to
13:55
Barbara weltman please like And
13:56
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13:59
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14:00
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