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- Reading Time: 5 Minutes
- Published: September 8, 2021
- Last Updated: January 14, 2025
Whether you have a budding small business or a start-up, the excitement of being self-employed is something else. But with growth, there also comes responsibility. One of those is filing small business taxes. If you are a first-timer in filing tax returns, this article might be of great help.
This article will tell you all about filing small business taxes, including the tips and tricks you need if it’s your first time.
What Does Filing A Business Tax Return Mean?
To define in simple terms, filing taxes means reporting the money made or lost by your business during the year. Both individual taxpayers and business owners have to file tax returns every year. Missing the tax filing deadline can result in penalties and can cost you more money.
The IRS has a specific tax calendar for small businesses that shows a timely distribution of filing taxes. The IRS has both deductions and credits, depending upon the time you file your taxes. Filing taxes at the right time can reduce your tax bill and even get you a refund.
(Note: For the year 2021, the IRS has extended certain tax filing deadlines. The deadline for individual tax returns has been extended to May 17th, 2021. (from April 15th). Estimated tax payments due on April 15th are not included in the extension. If your company is located in an area where FEMA declared a disaster due to winter storms, the deadlines for taxes due March 15th and April 15th, 2021, have been extended to June 15th, 2021. This covers both your 2020 tax returns and your first projected tax payment for 2021.)
Here Are Some Tips You Can Use to Progress Your Filing Smoothly:
- Use the correct forms
Filing taxes for small businesses include the usage of various forms you may not have known before. You cannot replace one form for the other as it depends upon the structure of your business. Here is a breakdown for you to understand better:
| Structure | Tax Liability | Required Forms |
| Sole Proprietor | A sole proprietor is the sole owner of a business entity. He is considered the same legal entity as the business. | Use form 1040 for individual tax return and Schedule C (Form 1040 or 1040-SR) |
| Partnerships | A partnership involves 2 or more owners. A partnership is also taxed at the income level, just like a sole proprietorship. | To record your share of the partnership’s income, expenditures, credits, and other things, file a copy of Schedule K-1 (Form 1065) with the IRS. |
| Corporation | A corporation is treated as a separate taxpaying entity for taxation purposes. | All domestic corporation must file Forms 1120.
For S corporations, use Form 1120-S.
Use Schedule K-1 (Form 1120-S) to report your share of the corporation’s income deductions, credits, etc. |
| LLC | A Limited Liability Company (LLC) is a legal entity that is permitted by state law. Its members may include individuals, corporations, other LLCs and foreign entities. The IRS will consider an LLC as a corporation, partnership, or part of the LLC’s owner’s tax return (a “disregarded entity”), based on the LLC’s election and the number of participants. | Based on the setup of an LLC, the company uses Form 8832 to classify as a partnership, corporation, or a disregarded entity separate from the owner. |
- Keep your personal and company expenses apart
If you’re a sole proprietor running a company out of your house, this can be extremely difficult. Nonetheless, it is necessary because the IRS prohibits personal expenses from being deducted as business expenses.
Try opening a dedicated checking account to keep your company expenses separate from your personal finances. A business account is not required; a different personal account will work.
- Do your calculation
Profit is the difference between your company income minus your expenses (or loss). In most cases, your share of the company benefit, as well as any personal taxes, and credits, deductions, are included on your personal tax returns. This affects how you file your taxable income.
The IRS has a tax table that shows how much you owe based on your taxable income. The tax is calculated by assessing it to other taxes you pay during the year.
You could get a refund if you paid more than necessary by personal deductions or quarterly business payments. You will owe if the tax is higher than what you’ve paid or had deducted from your personal income.
- Tax Eligible Business Deductions
It’s reasonable to be concerned about how much money you’ll owe the IRS, but the best part is that there’s a simple way to reduce your tax bill. Taking advantage of eligible business deductions will help you lower your tax bill and put more money your way.
There are a variety of deductions that could apply to your business. Many of the costs that you incur in the course of your business can be deducted. This can include, but is not limited to, the following costs:
Home office
Travel expense
Legal expenses
Business advertising
Telephone and internet bill
Don’t forget to take advantage of every write-off eligible for your business to lower your tax liability.
- Take help if you need it
Filing taxes for a small business is not the same as filing individual taxes. Different laws apply, and you’ll need different tax forms, most likely in more than you’ve ever thought. Most people do not appreciate the tax system because it is not easy or intuitive. As a result, hiring an outsourced accounting service might potentially save you money. Accountants devote years studying the IRS’s rules and regulations to assist people with their tax preparation. Effective utilization of their knowledge could save you money in the long run.
Conclusion
There is no denying that filing taxes for a small business for the first time is a daunting job. However, with the right planning and training, you can submit your first filing without a mistake. It is important to remember that you do not have to do it alone. A small business accountant can assist you with the tax reporting process and, if necessary, determine your business tax refund.
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