When and How to File Your Small Business Taxes Efficiently
Small business taxes are filed quarterly, and it’s not uncommon for small business owners – especially first-time entrepreneurs – to be confused about when and how to file their small business tax.
At Addition Financial, we work closely with our small business clients to help them fulfill their financial obligations and avoid problems. One of the questions we hear most often is this:
What do I need to do to file my small business tax?
It’s essential to understand what to do and when to do it. Here’s the information that you need to file your small business tax accurately and in a timely manner.
What Are Your Small Business Tax Obligations?
The first thing to do is to learn what your small business tax obligations are. If the only taxes you have filed are personal income taxes, then you may be surprised by some of the things you’ll need to do when filing business tax.
There are five kinds of tax you may need to pay for your small business. They are:
Business Tax – This tax is determined by the type of business structure you have chosen for your business.
Self-Employed Tax – If you are a sole proprietor, a member of an LLC, or a partner, then you’ll need to pay the self-employed tax.
Estimated Tax – Income tax is on a pay-as-you-earn system. That means you must either withhold taxes from your paycheck or make estimated tax payments throughout the year.
Employment Taxes – If you have employees, then you are responsible for filing Social Security tax, Medicare tax, income tax withholding, and federal unemployment tax.
Excise Taxes – If you sell or manufacture certain products, you may be required to pay a federal excise tax on behalf of your business.
You can find a full explanation of each kind of tax with links to supporting documentation and forms on the IRS website, here.
Determine the Correct Forms to Use
Next, you’ll need to determine the correct IRS tax form to use for your taxes. If you are a sole proprietor or the sole owner of an LLC, you can use the Schedule C attachment to your personal income tax return to report your earnings. Keep in mind that if you have elected to file your LLC taxes as an S Corp, you may not use Schedule C for your taxes.
If you have a corporation, then the proper form to use is the 1120, the U.S. Corporation Income Tax Return form. If you are unsure which form to use, then your accountant should be able to help you figure it out.
You may have additional forms to file as well. For example, you will need to collect W-9 forms from your vendors, and, at the end of each year, send them a 1099 with their earnings listed.
Copies of all tax forms, as well as instructions for filling them out, may be found on the IRS website, here.
Determine the Right Timetable to Pay Your Taxes
Next, you’ll need to determine the right timetable for paying your taxes. If you are using Schedule C as a sole proprietor or the sole owner of an LLC, then your tax deadline is April 15.
However, keep in mind that you will need to make estimated tax payments throughout the year and then file your final return by the deadline. The final return is where you will calculate over-payments or underpayments and either request a refund or make a payment.
Here are some other important dates to keep in mind:
Estimated quarterly payments are due on April 15, June 15, September 15, and January 15 (for the fourth quarter of the previous year.)
January 31 is the deadline for Form W-2 filing (this is a recent change, in place since 2016)
1099-MISC Copy A filings are due on January 31
1099-MISC Copy B filings are due on February 15
1099-MISC Copy A filings for certain independent contractors are due on February 28
S-corporation and partnership tax returns are due on March 15
Corporate and personal income tax filings are due on April 15
You may have additional dates depending upon your company’s tax obligations. Keep in mind that March 15 is also the deadline to request an extension for filing returns for your S-corporation or partnership, as well. April 15 is the deadline for individuals and corporations.
Filing your small business tax can be a confusing endeavor, particularly if you’ve never done it before. It may make sense to hire a professional accountant to help you navigate your obligations, make payments, and file all returns on time.
To learn more about how Addition Financial’s business accounts can help you meet your tax obligations, please click here now.