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How to Make a Tax Return from Financial Statements

Financial statements are the annual record of the business’s revenue and expenses for the year. They are usually divided into two parts: an income statement which reflects the business’s net income, and a balance sheet which demonstrates the capital resources and liabilities of the business all important regarding tax refunds. This includes both short-term and long-term assets and liabilities such as cash, accounts receivable, accounts payable and notes payable.

If you are a self-employed specific conducting business as a single proprietor, you will have to prepare an Agenda C for your tax return which is the summation of your business income and expenditures.

Preparing an Individual Schedule C

  • Prepare the Schedule C, which is the record of your business income and bills by using the totals from the year-end income and loss declaration. The Program C has brand items for some income and expense items. For instance, in the income section, the proper execution will ask for gross income. This can be found at the very best of your financial assertions. The same applies for expenditures. If your business comes with an expense item that is not shown on the IRS form, you can list it as an “other” expense in the bottom of the form.
  • There are several supporting schedules that must be mounted on the return that provide supporting detail to some of the trouble items shown on Routine C, such as depreciation expense and car and truck bills. Your bookkeeper or accountant should be able to provide the aspect associated with the deductions for these items.
  • Transfer the net profit or loss shown on the Routine C to the front page of the individual tax return and also to the Plan SE which is area of the individual tax return. Schedule SE is the proper execution that reports self-applied career — or cultural security – taxes to the federal government. This is how self-employed individuals pay into communal security. It is based on a flat-rate of 13.3 percent. For instance, if your business revealed a profit of $10,000 you’ll have an SE-tax of $1,330.
  • Complete your return by adding your net loss or profit from the Schedule C with all the other personal tax return additions to income or deductions, together with your itemized deductions such as home-interest and property fees. On page two of the return, you’ll calculate your personal income taxes and also add this to the SE-tax you computed from form SE. You’re SE-tax and personal income taxes comprise the total tax bill on your tax refunds.

Contact a duty professional when taking quantities from your business financial statements to insure you’re getting the utmost deductions allowable. This includes extra details like depreciation bills and auto bills. Also be certain to ask about additional personal business expenses that might not be mirrored on the income and damage such as customer products or business travel expenditures. More details here: http://www.afgtrucks.com/teen-jobs-and-tax-issues/

Warning

Specific businesses with a Schedule C have a greater potential for being audited than specific wage earners; therefore, it is a good idea to seek the guidance of a tax refunds professional while preparing a Routine C and its appropriate attachments