Filing taxes for your small business doesn’t have to be daunting, but understanding what you owe is crucial to staying in good legal standing. Every small business has unique tax forms and due dates depending on its specific structure. Learn about the types of taxes you’ll encounter and how to handle them based on how your business operates.
There are five types of business taxes you may need to pay, and each has specific IRS forms for filing. Different business types will need to fill out different forms. For example, a sole proprietorship will have different forms than a limited liability company.
Income tax is a tax on your business’ profit over the year. Every small business must file an income tax return every year — except for partnerships, which file an information return. The specific form you need to use varies based on your business structure. For example, if your business is a corporation, you would need to use Form 1120 or Form 1120-S if it’s an S-corporation.
Estimated taxes are payments you make to the government throughout the year on income that isn’t subject to withholding taxes. Instead of paying all your taxes at once, you pay in smaller amounts every few months.
They’re calculated based on your expected income for the year and sometimes use your previous year’s taxes as a projection. These estimated payments consider your profits, deductions and tax rates.
People who work for themselves are subject to self-employment tax, which covers Social Security and Medicare. If you ever worked for a company, you also paid a portion of your paycheck to Social Security and Medicare, and so did your employer. However, when you’re your own boss, you pay both the employee and employer parts. This tax ensures you’re covered for Social Security and Medicare benefits in the future.
If your business has employees, you need to pay employment taxes. This tax comes out of an employee’s earnings to cover their income taxes, including federal, state and local taxes, and Social Security and Medicare, known as FICA. Business owners must also pay a part of these Social Security and Medicare taxes too and taxes for unemployment benefits.
Excise tax is a special tax that applies to specific goods, services, and activities, like gasoline, airline tickets, and products like tobacco and alcohol. It’s important to know if the products or services you sell are subject to excise tax and understand how much to charge. You must calculate and include this tax in the price or charge it separately and then pay it to the government.
Your business structure significantly impacts the forms you need to file with the IRS. Whether you operate as a Sole Proprietorship, Partnership, Corporation, S Corporation, or Limited Liability Company (LLC), each business type has specific tax forms and filing requirements.
A Sole Proprietorship is owned and operated by one person and isn’t required to be registered as a specific business entity.(1) The owner is entitled to all profits and is responsible for all the business’ debts, losses and liabilities. There’s no legal distinction between the sole proprietor and the business, so the income earned gets reported on the owner’s personal income tax return.
Here’s a table outlining the different forms a Sole Proprietor may need to file based on the type of tax:
| Tax Type | Form(s) |
|---|---|
| Income Tax | Form 1040 (US Individual Income Tax Return) and Schedule C (Profit or Loss from Business) to report income or loss from the business. |
| Estimated Tax | Form 1040-ES (Estimated Tax for Individuals) if the sole proprietor expects to owe $1,000 or more in taxes for the year. |
| Self-Employment Tax | Schedule SE (Self-Employment Tax) must be filed with the Form 1040 to pay Social Security and Medicare taxes. |
| Employment Tax | If the sole proprietor has employees, Forms 941 (Employer’s Quarterly Federal Tax Return), 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return), and W-2 (Wage and Tax Statement) must be filed. |
| Excise Tax | Form 720 (Quarterly Federal Excise Tax Return) if the business is involved in activities that require excise tax collection. |
Sole Proprietorships might also need to file additional forms, like Form 1099-NEC for reporting payments to non-employees.
In a partnership, two or more people share ownership of a business and each contributes money, property or labor.(2) They also share the profits and losses. Unlike corporations, partnerships don’t file business income tax. Instead, they submit an “information return” that reports the business’ profits, losses and other relevant information. Since the business’ revenue passes through to the partners, they report this income on their personal tax returns.
Here’s a table outlining the different forms a Partnership may need to file based on the type of tax:
| Tax Type | Form(s) |
|---|---|
| Information Return | Form 1065 (US Return of Partnership Income) to report income, gains, losses, deductions and credits from the partnership.(3) Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) is provided to each partner to report on their personal tax returns. |
| Estimated Tax | While partnerships themselves don’t pay tax, they may need to make estimated tax payments if they expect to owe $1,000 or more when their return is filed. Partners may need to pay estimated taxes on their share using Form 1040-ES (Estimated Tax for Individuals). |
| Employment Tax | If the partnership has employees, it must file Forms 941 (Employer’s Quarterly Federal Tax Return), 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return), and provide Form W-2 (Wage and Tax Statement) to employees. |
| Excise Tax | Form 720 (Quarterly Federal Excise Tax Return) if the partnership engages in activities subject to federal excise taxes. |
A corporation forms a legal entity separate from its owners and offers them limited liability protection, so they aren’t personally liable for the debts or legal troubles of the business.(4) Corporations pay taxes on any profit. They can also choose to distribute profit to the owners as dividends, where they pay taxes on it again when they file their personal taxes. However, this business structure benefits those seeking to raise capital by selling shares.
Here’s a table outlining the different forms a Corporation may need to file based on the type of tax:
| Tax Type | Form(s) |
|---|---|
| Income Tax | Form 1120 (US Corporation Income Tax Return) for reporting the corporation’s income, gains, losses, deductions, and credits. |
| Estimated Tax | Form 1120-W (Estimated Tax for Corporations) for corporations that expect to owe tax of $500 or more. |
| Employment Tax | Forms 941 (Employer’s Quarterly Federal Tax Return), 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return), Form W-2 (Wage and Tax Statement), among others, if the corporation has employees. |
| Excise Tax | Form 720 (Quarterly Federal Excise Tax Return) for businesses involved in activities subject to federal excise taxes. |
Corporations may need to file additional forms based on their specific activities or other conditions within the corporation.
An S Corporation is a special type of corporation where the profit, losses, deductions and credits of the corporation pass through to the shareholders.(5) These shareholders then report these items on their personal tax returns to be assessed under individual tax rates.
To maintain this status, an S Corporation must adhere to the following regulations, including filing the appropriate tax forms with the IRS:
Here’s a table outlining the different forms an S Corporation may need to file based on the type of tax:
| Tax Type | Form(s) |
|---|---|
| Income Tax | Form 1120S (US Income Tax Return for an S Corporation), Schedule K-1 (Shareholder’s Share of Income, Deductions, Credits, etc.) |
| Estimated Tax | Form 1120-W (Estimated Tax for Corporations), and individual shareholders may need to make estimated tax payments using Form 1040-ES |
| Employment Tax | Forms 941 (Employer’s Quarterly Federal Tax Return), 940 (Employer’s Annual Federal Unemployment [FUTA] Tax Return), Form W-2 (Wage and Tax Statement), among others |
| Excise Tax | Various forms depending on specific products or services subject to excise taxes, such as Form 720 (Quarterly Federal Excise Tax Return) |
S Corporations might also need to file other forms depending on their specific circumstances, such as shareholder agreements or changes in corporate structure.
A limited liability company (LLC) blends aspects of a partnership and a corporation.(6) It offers its owners, known as members, personal protection against the company’s legal or financial hardship. An LLC can choose to be taxed as a sole proprietorship, partnership, S Corporation or C Corporation, depending on the number of members and other factors. LLC laws are governed by individual states, and each state has different regulations.
Here’s a table outlining the different forms an LLC may need to file based on the type of tax and the chosen tax classification:
| Tax Type | Form(s) |
|---|---|
| Income Tax | Single-member LLCs: Form 1040 or 1040-SR Schedule C, E, or F. Multi-member LLCs: Form 1065 (US Return of Partnership Income) and Schedule K-1 for each member. |
| Estimated Tax | Single-member LLCs: Form 1040-ES (Estimated Tax for Individuals). Multi-member LLCs: Form 1040-ES for each member, if required. |
| Employment Tax | Forms 941 (Employer’s Quarterly Federal Tax Return), 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return), and Form W-2 (Wage and Tax Statement), if the LLC has employees. |
| Excise Tax | Form 720 (Quarterly Federal Excise Tax Return) for certain engaged activities subject to federal excise taxes. |
The filing requirements for limited liability companies can vary significantly, depending on their tax classification and the nature of the business. LLCs must consider their classification carefully and understand the filing obligations of each class to ensure they meet IRS regulations.
When your business taxes are due depends on your specific business structure. This table outlines the due dates for filing various business tax forms and available extensions.(7) Be sure to check IRS guidelines for the most up-to-date information.
| Form Type | Business Type | Due Date | Extension Available |
|---|---|---|---|
| Form 1040 (Schedule C) | Sole Proprietorship, Single-Member LLC | April 15 | Yes, until October 15 |
| Form 1065 | Partnerships, Multi-Member LLC | March 15 | Yes, until September 16 |
| Form 1120 | C Corporation | April 15 | Yes, for 6 months |
| Form 1120-S | S Corporation | March 15 | Yes, until September 16 |
| Form 1041 | Estates and Trusts | April 15 | Yes, for 5.5 months |
| Form 990 (Nonprofit) | Tax-Exempt Organizations | May 15 | Yes, for 6 months |
| Form 7004 (Extension) | Business Tax Extension | Varies (See specific form instructions) | N/A |
These dates don’t include every tax deadline. Visit IRS Publication 509 for all essential tax deadlines applicable to your specific type of business.
Filing an extension for business taxes gives you more time to prepare your return.(9) To request one, use Form 7004, “Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns.”(8)
While Form 7004 may grant you extra time to file your business taxes, it doesn’t extend the time to pay any taxes owed. You still need to pay any taxes due by the original date to avoid penalties and interest.
You can submit Form 7004 electronically or by mail, and it must be filed by the due date of your business tax return. If your extension is granted, you may receive up to six additional months to file your return.
Before you file, be sure to check the latest IRS guidelines and deadlines to stay compliant with current regulations.
How to file your small business taxes depends on your specific business structure and involves understanding various tax forms, due dates and extensions to avoid penalties and fees. With the right preparation, small business owners can manage their tax obligations effectively.
Consult a financial expert to understand which taxes apply to your company, how to file them and how to lay a strong foundation through small business accounting. And if you have trouble saving taxes at the end of the year, look for business bank accounts that separate your taxes for you.
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