Intro to Corporate Taxes:
Tips for filling out schedule C for Corporations and Partnerships
There are some common mistakes that many businesses make when filling out their Schedule C. A few them are noted by us below as reminders for you to keep in the back of your mind when doing your taxes. Dont forget that even a slight hiccup in preparing your paperwork can ring the wrong bell at the IRS.
- Many people forget to calculate their self-employment tax on the Schedule SE, which gets attached to form 1040. The SE tax goes on line 50 of form 1040. The filling out of this schedule becomes essential after you file a Schedule C with the IRS. This alerts them to the SE tax that you owe. And if you dont file this schedule, your chances of getting audited are certain. Remember the advantage of filling a Schedule SE is that you can claim a 50% deduction for it on your income on the form 1040, line 27.
- Another common mistake that many people make is the handling of the various forms that they have. We all know that businesses have to deal with many forms and schedules that need to be filled out. Many times, even if one form is left out by mistake, it can result in penalties and fines. Try to be very articulate about counting all the forms and double-checking them before you send them out to Uncle Sam. Put your name and Social Security number on every page of every form that you submit. All forms need to attach to your 1040. Remember most of these forms are for deductions and tax credits. You dont want to short change yourself by hastening your tax preparing.
- Many people who are self-employed and file a Schedule C, forget to include the items they received through bartering. The only properties that are non-taxable barter property are machinery, buildings, land, trucks and rental houses. These are known as like-kind exchanges. Anything else you received through bartering needs to be reported to Uncle Sam. The value of these barter properties should be included in your gross income.
- Businesses also forget to carry forward their net capital loss. This usually happens when the loss cant be deducted in the same year. It needs to be carried back first and then carried forward for the rest of the loss for deductions in those years from their capital gains. You also need to check your old tax returns to check that you dont need to carry forward any losses. Remember this is for your own good and helps you reduce the taxes you pay on your gains for this year.