If you're asking yourself can I file my business and personal taxes separately, you need first to understand the basics of taxes. The type of return that you are going to file is going to be based on two primary factors. First, it's based on the way your business is organized. Secondly, it depends on how you incorporate your company with the IRS.

How Are Business and Personal Taxes Filed?

As a sole proprietor, you will have to file the income you acquire from your business on a Schedule C form. This form is filed along with your personal income taxes. If you file this way, you cannot file a tax return for your business separately. The same applies if you're a single member of a limited liability company, also commonly referred to as an LLC. The only way you would not file your income and expenses from your business on the Schedule C form is if you choose to file as a corporation.

If you are a partner in a business, you will need to file Form 1065, which is known as the Return of Partnership Income document. You will receive a K-1 from the partnership, and this will be reported on your personal income taxes.

Pass-through entities, also known as S corporations, file their taxes differently. All profits and losses from the business are passed down through the shareholders; these profits and losses are reported on a personal income tax return but not using a Schedule C. Instead, a Schedule E is used. This allows for any taxes owed to be paid according to your individual tax rate.

If an S Corporation has a sub-chapter and you are a shareholder of it, you will need to complete Form 1120-S, which serves as an income tax return for S Corporations. After you file this form, you will then receive a K-1 from the S Corporation, and this K-1 is reported on your personal tax return.

The amount of profits and losses that go to you as a shareholder in an S Corporation depends on the amount of the company that you own. For example, if you own half, then half of the expenses along with half of the losses and half of the profits must be reported by you. If you own a fourth, then only a fourth of the losses, a fourth of the profits, and a fourth of the expenses are to be reported by you.

The same thing that applies to an S Corporation applies to a regular Corporation. As a shareholder of a regular Corporation, you file an 1120 form and then receive a K-1 from the company and then report the K-1 on your personal taxes. The only difference is you file an 1120 form instead of an 1120-S.

Should I File My Business Tax Jointly With My Spouse's Taxes?

If you are married, you are probably wondering whether to file a joint or separate return for your business. The choice is up to you, but there are several tips you can follow to help you make the best choice. First, keep in mind that when you file a joint return, both you and spouse will be 100% individually responsible for any due taxes. If your spouse has any type of past-due tax debt and you were to file jointly and receive a refund, the refund will be kept and will be applied to the tax debt.

On the other hand, if you were not to file jointly, this means you forfeit several tax credits, including:

  • Child tax credit
  • Earned Income Credit

This means you might forfeit being able to acquire several thousand dollars back in a refund. The child tax credit, of course, is only applicable to you if you have a child in your care that depends on you for the majority of his or her financial well-being.

What Types of Business Structures Does the IRS Recognize?

The IRS recognizes only three types of business structures:

  • Corporations
  • Partnerships
  • Sole Proprietors

Some states recognize LLCs, but the federal government does not. If you are operating an LLC, it is up to you and any members how the company will be taxed. If you are operating a single-member LLC, you can either have your company taxed as a corporation or a sole proprietorship.

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