A small business distinguishes between items purchased for the short term and long-term expenditures, both in accounting and in taxes. Capital expenditures are business improvements, upgrades or expansions. A capitalized expenditure is primarily a tax term, reflecting depreciation for loss of value over a period of years.
Use Form 1040-ES â You can calculate your quarterly estimated tax payment using Form 1040-ES (the same form used to pay estimated taxes), which includes a worksheet that helps you estimate how much you owe for the current year. Corporations should use Form 1120-W to calculate estimated taxes. Refer to Last Yearâs Return â If you have been in business for a while, you can refer to your previous year's federal tax return.
Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income. Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.