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Tax preparation and planning: Common tax planning forms
Tax preparation and planning are both vital aspects of individual and business financing. Getting a grip on the complexities of tax filing can help you be compliant with tax rules and regulations and improve tax liabilities. For both business tax return filers and individual filers as well, there are a vast number of forms and deadlines to think about. A well-structured tax plan is a consistent process that assists individuals and businesses in making better strategic formulations on an annual basis to reduce their tax burden. Therefore, in this piece of information, we tend to look at the transactions involved in the tax preparation process. We will be focusing on business and individual tax filing processes for multiple states in the US.
Tax Planning for Business Tax Return
Tax planning for business tax returns involves making sure that the business is in compliance with federal and state tax laws. In this regard, the IRS facilitates you with multiple forms that are divided on the basis of numerous business entities. These are corporations, tax-exempt organizations, and partnerships. Following are the forms that are mainly used for business tax endeavors:
Form 1120 US Corporate Income Tax Return
Form 1120 is used to file C corporations for reporting of their profits, losses, gains deductions, and tax liabilities to the IRS. C corporations are legal organizations that are separate from their owners. Therefore, they are taxed separately from their shareholders. The tax preparer needs this form as it incorporates comprehensive financial statements about a C corporation. This includes income statements, balance sheets, and other significant deductions related to business proceedings of a C corporation.
The tax professional has the task of filing this form 1120 normally before April 15, as it is the fourth month after the conclusion of a C corporation’s fiscal year. The important information required is related to income, price of sold goods, deductions, credits, and dividends distributed.
Form 1120S
Form 1120S is used for S corporations, which are considered pass-through organizations. An S corporation isn’t obliged to pay federal income income tax. Instead, they have to pay income, losses, and deductions through the channel of their shareholders. Shareholders can then report this information on their personal tax returns. This form is normally used to report income, deductions, and other tax-related data to designated S corporations.
The filing deadline for form 1120s is March 15, which is the 3rd month requirement after the end of an S corporation’s fiscal year. The important information to be included in Form 1120S are the gross receipts, ordinary income, subtractions, and allocations to shareholders.
Form 1065
Form 1065 is utilized by partnerships, also known as pass-through organizations. This form is known for reporting a partnership’s income, subtractions, credits, and other financial plan information. Just like an S corporation, partnerships aren’t liable to pay direct income taxes but rather allocated income to partners who can report it on their personal tax returns.
Form 990
In terms of tax planning for non-profit organizations, form 990 is used to report income, business proceedings, and expenses. Form 990 is mandatory for organizations that are exempt from tax proceedings. This includes organizations like educational institutions, charities, and religious institutions. This form is important for helping the IRS find out if an organization is maintaining its tax-exempt status or not. It also seeks to provide corrections and clarity to the public record by helping donors and the public as well.
The filing deadline for Form 990 is May 15, which is the 5th-month requirement for a non-profit organization’s fiscal year. Important information to be included in this form is revenue, costs, expenses, activities conducted in the non-profit organization, etc.
Tax preparation of Individual Tax Return
For personal taxpayers, the Internal Revenue Service considers distinct forms that are based on the categorization of income and deductions. Following are the important types of tax return forms utilized by a tax preparation services provider.
Form 1040
Form 1040 is a basic tax document that is designed according to the financial situation of many US citizens. This can be used for a person’s income reporting, subtractions, and tax liabilities. The deadline for Form 1040Â is April 15 April. However, an extension can be requested. The important information is the W-2s details, 1099 forms, interests, allowances, dividends, tax credits, subtractions, and SSNs as well.
Form 1041
Form 1041 is filed by estate plans and trusts for reporting their income, subtractions, and distributions to receivers or payees. This form is required to find out the income tax liability of estates and trusts that have produced income for a given year.
Tax planning and tax preparation services
This means using strategies and managing someone’s financial affairs to minimize tax liabilities. This transaction is beneficial in helping individuals and businesses pay what only they owe. In some scenarios, this amount can be reduced by taking benefits of deductions, credits, and other benefits as well. Proper tax planning is an annual activity that is not just limited to the US tax season.
Some of the key aspects of tax planning included deductions and credits, investment strategy, business tax organization, and retirement planning as well.
Sales Tax Preparation and Planning
Sales tax compliance is an important aspect for a business that is operating in multiple states. This is important as each state has its own sales tax rules and regulations.
The filing of sales tax is normally done on a monthly, quarterly, or annual basis. Businesses have to make sure that they equip and remit the accurate amount of sales tax on business transactions to report them accurately. The sales tax frequency is done on a monthly, quarterly, and annual basis.
There is also a concept of multi-state sales tax, which is for business proceedings being carried out in multiple states for a single business.
ITIN
ITIN is the individual taxpayer identification number provided by the IRS for persons who are obliged to have a taxpayer identification credential and aren’t qualified for an SSN. This situation is applicable to foreigners residing in the US, non-residents, and people who engage in tax activities in the United States. An ITIN is exclusively designed for tax activities.
Final Words
Tax preparation and organization in the US is mandatory. It is an important aspect of fulfilling your financial obligations and staying compliant. For businesses, keeping their firm compliant using the vast state forms like those for income, sales tax, and tax-exempt organizations is also important for getting rid of penalties.
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