Episode 50: Tax forms for the entrepreneur
How do you know what tax forms to fill out for your business when you have a W-2 full time job?
Disclaimer: I am not a CPA and this podcast does not constitute tax advice. Seek assistance from a tax professional whenever you require tax advice. In this podcast I provide information.
This is the personal tax return form within the Tax Return 10-40. It is for entrepreneurs, sole proprietors etc. It is where all your personal income and expenses will be listed giving you your profit or loss.
In the podcast I outline several additional forms, however I stress that these should not overwhelm you. Your bookkeeping software should automatically populate these forms for you, making the process far easier. It is a good idea to double check everything once the software has done its thing just to be safe. I recommend QuickBooks as the entrepreneur bookkeeping program of choice.
I know that it can be stressful during tax season especially when your books from 2020 are in disarray due to the pandemic. The single most valuable piece of advice I can give is to get your books in order! QuickBooks is a great piece of affordable software that I recommend for managing the bookkeeping of your business. Find out more about QuickBooks here.
As long as you see the Schedule C and are following the steps stated in your software you should be covered, however if you are ever unsure or uncomfortable, I highly recommend considering hiring a tax preparer to do your taxes. Especially when you are a busy mom and entrepreneur. This can help to make tax one less thing to worry about.
Remember: be current and consistent!
Speaker 1 (00:00):
Hey, business-minded mama. I’m so grateful that you are here and that you are ready to grow enough, authentic community and scale your impact. Hi, I’m Stephanie. Parenza the voice behind business-minded mama podcast, local and small business advocate and entrepreneur. I’ve created this community because I want to help business-minded mamas. Like you build your dream business by finding your authentic community and gaining control and clarity on the financial aspects of your business by managing your own books. Now let’s tap into your own potential. Hello,
Speaker 2 (00:44):
I am here. Um, I want to start off, uh, if you haven’t already listened to the last episode, um, let’s clear the air. Go ahead and do that just so you kind of know what’s going on here. Um, I will be recording from my phone for the foreseeable future. So please, I apologize for any background noise that may arise. Um, but I am trying to make the best of the situation and I want to keep putting out valuable content for you all. I actually recorded an episode, a few episodes back, um, all about the schedule seat, but I had a question come up in our Facebook group, which if you’re not already a member, uh, you should definitely go over there enjoying this free private Facebook group, business minded mama, um, where I am going to be giving you even more tips, more knowledge. Um, it’s a place for you to connect with other entrepreneurs and ask questions and just be a support for each other.
Speaker 2 (01:46):
So please come join us there anyways. So I recorded an episode about the schedule seat, but one of the questions that came through made me think that we should go a little bit deeper. Um, I’m hoping that by going a little deeper, I don’t confuse you even more. So I’m walking a very fine line today. Um, the question is how do I know which tax forms to fill out for my business? When I also have a W2, uh, full-time job, I’m going to first put my disclaimer out there. I have to start with this. Um, I am not a CPA. I am not. You’re a tax preparer. I am not your tax accountant. Um, I am not giving you advice, but merely putting information out there, uh, so that you are more informed. And if you need specific tax advice, then you should seek a tax preparer in your area or online in order to help you with your specific needs.
Speaker 2 (02:51):
Okay? So now that we’ve got that covered, I want to give you some more information about this. So the schedule C is just one form within the tax return, the 10 40, which is the personal tax return. So the form C uh, is only used. If you have a business, if you have an LLC, if you’re an entrepreneur sole proprietor, you will have a schedule C so not everyone has that in their tax return. Um, but if you are no matter if you have a W2 or not, uh, you will file the form 10 40 and the schedule C will be a part of that if you’re an entrepreneur. So the W2 is going, uh, that income is going to show up on page one of your 10 40, any of your business income or loss is going to show up on your schedule C which then also pulls through to your page one of your 10 40.
Speaker 2 (03:58):
Okay. So the difference here though, is that you have to have a supportive document. That’s why you have a schedule C um, for your business. So the schedule C is going to give all of the details, but the bottom line, the net profit, or the net loss polls to you are page one. The schedule C is where all of your income and expenses will be listed, giving you your net profit or your net loss, other forms that might come up as an entrepreneur are going to be populated based upon the information that you put into your schedule seat. So I’m going to make you aware of these forms, but I do not want you to get overwhelmed. If you are using a software, the software will prepare these forms for you based upon how you answer questions. If you’re using a tax preparer, the questions they ask, you will then determine what forms are completed.
Speaker 2 (04:56):
So do not let this overwhelm you. This is not something you need to know how to do. Um, it is something you need to know about. And, um, like I mentioned, as long as you are just trusting the process, following your software, these will be popular for you. And, um, you can do a double check at the end to make sure that they’re there, but that’s really all you need to know. One of the forms you may see is a schedule S E this is a form that calculates the amount of self-employment tax that you must pay for your business profit. You don’t need to do anything with this. The software will calculate this based upon your net profit, and then it will populate that amount for you. So you don’t need to do anything, but be aware if you see that number come through.
Speaker 2 (05:49):
That’s where you’re going to find the calculations schedule. S E another form you may see as an entrepreneur business form, 88, 29 expenses for business use of your home may be something you see as an entrepreneur. If you are using a designated part of your home for your business and not everyone will see this. Um, but it is something that could be populated if you are, uh, doing that. So your software should ask you, uh, what area of your home you’re using specifically for your business. It may ask you your total square footage of your house. And if you choose the simplified method, it will take the square footage. You’re using times $5. And that is that if you want to use the actual expense method, then you will have to input a utility mortgage interest, real estate tax, et cetera, et cetera. And then it will, uh, that form will calculate, uh, what you get to take as a deduction, as an expense in your business, um, from there.
Speaker 2 (06:55):
So once again, follow the software, uh, question and answer, um, follow the steps. It should ask you these questions, and it’s asking you these questions for that form. So you do not need to do anything with that form. The software should take care of it for you. Another common form for a small business or entrepreneur would be the form 45 62, which basically calculate your depreciation for any assets that you may have on your business books. Or if you, um, drive a vehicle for business purposes that may show up there. Um, once again, I’ll tell you that if you’re following a software, the software will ask you these questions. It will do the calculations behind the scenes for you and populate one number that will show up on your schedule C. Now this is not an encompassing all encompassing list of forms and schedules that you may see for your business, but those are definitely the most common and probably the only ones that a majority of you will have on your tax return.
Speaker 2 (08:03):
So to answer the question that came through our community, our Facebook community, as long as you see the schedule C as long as you are following the step-by-step of the software, everything should work out just fine. That being said, if you are not comfortable or still questioning whether or not something is missing, I highly recommend considering hiring a tax preparer to do your taxes. And I say that because as busy moms, as busy entrepreneurs, some of us working multiple jobs, we’re running multiple businesses. This is not one thing to stress about. It’s better to send it off and be confident and be able to really put the focus in the business. Maybe put the focus in the bookkeeping side of things, making sure you’re having accurate numbers, understanding your numbers, really knowing what’s going on in your business. Those are the things that are going to drive your business forward.
Speaker 2 (09:04):
Those are the things that are going to help you grow and scale. Preparing your tax return is not really going to do much for your business. To be honest, it has to be, we’ll be done. Um, it’s important. Uh, there’s no getting around it, but you taking the time to prepare your own taxes. Doesn’t do much for your business. So I want you to consider that I am AOK if you want to continue. Um, or if you do your own taxes, that is absolutely okay. Um, but I want you to just think, is this serving me? Is this creating more stress? Would it be just as easy to send it off? So things to consider? Um, I hope that I was able to give you a little more insight into what the tax return looks like. You still have questions, feel free to reach out.
Speaker 2 (09:50):
I will do my best to help guide you. Um, your, your, um, W2 income and your business income are completely separate, but they’re both. Um, they’re both going to show up on your personal tax return on different lines, using different forms. Um, so I hope I hope I’m not leaving you all more confused. All right. That’s my answer for today’s question. If you have a question, come ask me, you may just see it pop on this podcast. It’s tax time. And I know so many of you are overwhelmed or buried in the tax process. So, uh, let’s get through this tax season, but also, please, please, please remember that. I highly recommend that you also focus on your 2021 books so that when it comes to next year’s tax season, you’re not in this overwhelm state, you are fully prepared and you know, what’s going on, make sure you’re doing your 20, 21 books.
Speaker 2 (10:55):
If you are completely lost in that process, I have a course just for you, bookkeeping, basics bootcamp. I walk you through setting up your books. I walk you through the things you need to do each month. I simplify it as much as I can so that it’s not overwhelming to you so that it doesn’t become something you dread doing at the end of the week or at the end of the month. I want this to be one of your biggest focuses this year, because I truly believe if you have a good understanding of your numbers in your business, then the world is yours. Your business is going to grow, and it’s going to be an amazing year for you. And so head over to the show notes, to get a link, to check out the bookkeeping, basics bootcamp, reach out to me. If you have questions, if I completely, uh, confused you even more in this episode, come tell me, I will try to clear it up for you and I will see you all next week.
Speaker 1 (11:57):
Did you like what you heard on today’s podcast or do you know a business minded mama that could benefit from hearing this, take a screenshot and share best with your community? And don’t forget to give me a review, want to chat more by me on Facebook and the business minded mama Facebook page or on Instagram at Mrs. And SIS or through my website, www dot business-minded moma.com.