How to file small business tax returns: A business owner’s guide
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Originally Posted On: https://quickbooks.intuit.com/r/taxes/file-small-business-taxes/
If you’re new to filing taxes as a small business owner, you might feel a little intimidated by the process. And you probably have questions like these: How can I be sure I’m using the correct forms? How do I prepare my business financial records for tax season? How do I file my taxes as a business? What if I need an extension due to the impact of COVID?
We have all those answers and more in our guide to small business tax returns. Keep reading for a comprehensive overview of how to file business taxes, or skip to the navigation links below.
- What are business taxes?
- Why do small businesses file tax returns?
- What’s the self-employment tax?
- What are business tax deductions?
- How to file and pay your small business or self-employment taxes
- Gather your records for tax filing
- Know what IRS forms you need
- Fill out the tax forms
- Know your tax deadlines
- Know your tax extensions
- Tax filing for small businesses
- Getting extra help to file your business taxes: It’s time for a virtual accountant
What are business taxes?
Just like a personal income tax return you have to fill out as an individual, a small business also has a tax obligation to the federal government, as well as to the state (depending on where you live). In some cases, you’ll need to pay local taxes too.
A tax return documents your business income, tax payments, and tax deductions. To file your taxes with the federal government, you’ll need an Employer Identification Number (EIN). Your EIN serves as your federal tax number.
As a business, you might have to pay taxes that include:
- Self-employment tax
- Estimated tax
- Sales tax
- Property tax
- Excise tax
- Employment taxes (Social Security, Medicare, Federal income tax withholding, and Federal unemployment tax or FUTA)
You can find more information about these specific taxes and your obligations as a business owner by visiting the USA.gov website.
Why do small businesses file tax returns?
At the most basic level, you need to file your tax return each year through the IRS to figure out your tax liability. It’s important to ensure that your tax return is accurate because recent reports have indicated the IRS has been targeting small businesses for tax audits in recent years.
What’s the self-employment tax?
For business owners who are self-employed or act as independent contractors, you’ll be responsible for paying the self-employment tax.
- The self-employment tax consists of Social Security and Medicare taxes for those that work for themselves.
What are potential tax deductions for small businesses?
You may be able to reduce the amount of taxable income from your business with tax deductions.
- Business meals
- Work travel expenses
- Home office costs
- Business insurance
- Work-related car use
- Retirement contributions
These are just a few of the potential tax deductions that might apply to your business—a tax preparer may be able to help you find even more.
How to file and pay your small business taxes
Use QuickBooks’ small business tax prep checklist to help you stay organized during the tax filing process.
Gather your records for tax filing
You’ll need to get all of your company records together to report your business income and business expenses.
Pro Tip: Using tax preparation or tax software as you go to track your business transactions is much easier than trying to figure it all out at the end of the fiscal year.
Know what IRS tax forms you need
The types of IRS forms you need depend on your business structure.
- Sole proprietorship: If you’re a sole proprietor, you’ll need to use a Schedule C IRS file form. Individuals need to attach their Schedule C to their personal tax returns. Certain small businesses can use a Schedule C-EZ Form.
- Partnerships: Partnerships file their business tax returns using Form 1065. Partners and the partnership need to report business losses and gains to the IRS. A partnership sends Schedule K-1, Partner’s Share of Income, Tax Credits, and Deductions out to the partners. The partners then utilize the Schedule K-1 to complete their individual tax returns.
- Corporations: If you’re a corporation, you must use the corporate tax return Form 1120 (or Form 1120S if you’re in an S-Corporation structure).
- Limited liability companies (LLCs): LLCs use a variety of forms, conditional on how the business is taxed. If you want your business taxed as a corporation (C Corporation), then you use a Form 1120. But single-member LLCs file a Schedule C and multiple-member LLCs file a Form 1065.
You can find all the forms you need to file your small business taxes on the IRS website.
Fill out the tax forms
For a typical taxpayer, filling out tax forms can be tough. But you can use accounting software and other resources to stay organized.
Know your deadlines
During some tax years, the due date for sending in your personal income tax return or business tax return falls on either a holiday or a weekend. If that occurs, the new tax deadline is the next business day.
You already know how important it is to stay organized as a business owner—you need to manage invoices, inventory, website, payroll, employees, and everything else. Being organized when it comes to the due date of your business taxes is essential.
For partnerships and multiple-member LLCs that file a Form 1065 with the federal government and give out a Schedule K-1 to partners, the filing deadline is March 15. S Corps need to file their Form 1120-S by March 15.
If you’re a sole proprietor or single-member LLC, you’ll need to send in your Schedule C by April 15.
Corporations with a fiscal year that ends on December 31 also need to submit Form 1120 by April 15.
If your fiscal year ends on a date other than December 31, your tax return deadline is the fifteenth day of the fourth month after the end of your tax year.
Know your extensions
Need to push back your deadline? You can file for a business tax extension to send it in later. Just make sure you get the extension filed before the deadline so you won’t pay penalties.
Tax filing for small businesses
E-file your taxes for quicker service with the IRS. E-filing is easier and faster than mailing, which means you can get your tax refund faster too.
Remember, if you’re concerned about filing your taxes correctly, it’s worth the expense to enlist the help of a licensed tax professional.
With the help of a pro, you can ensure that you’re compliant with tax laws, make the appropriate tax payments, and understand your tax refund.
Getting extra help: It’s time for a virtual accountant
Want to face your business taxes with total confidence? You can rely on QuickBooks Live, a comprehensive digital bookkeeping experience that makes reporting and filing taxes a breeze. A customized setup helps you personalize your experience and guides you through connecting to your bank. Your online bookkeeper will provide you with key reports to help you make solid financial decisions.
Wrapping up: Make quick work of your small business taxes
Paying your small business taxes is one of the standard expenses you’ll need to handle when you have your own business. Although it can be confusing to navigate on your own, QuickBooks is here to help. With intuitive software that delivers reports, earnings, and other helpful data, you can have peace of mind that tax season won’t leave you confused and concerned.
You have a lot on your plate as a small business owner, so why not rely on the software that can help you make the most of your time?