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Filing Small Business Taxes: A Quick & Easy Guide for Beginners

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Running a business involves more than selling products or services—it also means fulfilling various financial obligations, such as paying taxes. Navigating the complexities of tax laws can be overwhelming for many entrepreneurs, but it does not always have to be.

April 10, 2024
Author: NCH

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This guide will explore the types of taxes businesses face, the corresponding tax forms for each business structure, and important deadlines that every business owner should know.

Understanding the Tax Implications of Your Business

The most common structures for small businesses are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.

  • Sole Proprietorships: A single individual owns and operates a sole proprietorship. In terms of taxation, the income and expenses of the business are reported on the owner’s personal tax return. 
  • Partnerships: This structure involves two or more individuals who share ownership and management responsibilities. A partnership is not taxed at the entity level; profits and losses flow through to the individual partners’ tax returns.
  • Limited Liability Companies (LLCs): An LLC combines the liability protection of a corporation with the flexibility and tax advantages of a partnership. Depending on their specific circumstances and preferences, LLCs can choose to be taxed as a disregarded entity (like a sole proprietorship), a partnership, or a corporation (C or S).
  • Corporations: In S corporations, profits and losses flow through to the shareholders’ personal tax returns. C corporations are subject to double taxation, where the corporation is taxed on its profits, and shareholders are taxed on dividends received.

Types of Business Taxes

Regardless of the business structure, business owners must fulfill certain tax obligations to comply with federal and state regulations. These include the following:

Income Taxes 

Businesses are subject to federal income tax on their profits. The tax rate and the amount of taxable income may change from one business structure to another. Businesses may also be subject to state income tax, depending on the jurisdiction in which they operate.

Self-Employment Taxes 

Self-employed individuals, including sole proprietors and partners, must pay self-employment tax, which covers Social Security and Medicare taxes. The self-employment tax rate is 15.3%, 12.4% for Social Security, and 2.9% for Medicare. However, only the first $160,200 of net earnings is subject to the Social Security portion of the tax. 

Employment Taxes 

Businesses with employees are responsible for withholding and remitting federal income tax, Social Security tax, and Medicare tax from employee wages. This includes paying federal and state unemployment taxes, as well as any applicable state and local payroll taxes.

Sales Taxes 

Depending on the nature of the business and its location, small businesses may be required to collect and remit sales tax on taxable goods and services sold to customers. Bear in mind that sales tax rates and regulations vary by state.

Quarterly Estimated Taxes 

Self-employed individuals and businesses that expect to owe $1,000 or more in taxes at the end of the year must make quarterly estimated tax payments to the IRS. These payments help ensure taxes are paid throughout the year rather than in one lump sum at tax time.

Excise Taxes

Excise taxes are levied on alcohol, tobacco, gasoline, and firearms. These taxes are often included in the price of the product and are paid by the manufacturer, importer, or retailer. Federal, state, and local governments determine excise tax rates and regulations.

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Tax Forms by Business Structure

Type of Business Structure Required Tax Forms
Sole Proprietorship Schedule C (Form 1040)
Schedule SE (Form 1040)
Partnership Form 1065
Schedule K-1 (Form 1065)
C Corporation Form 1120
S Corporation Form 1120-S
Schedule K-1 (Form 1120-S)
Limited Liability Company (LLC) Schedule C (Form 1040)
Form 1065
Form 1120 
Form 1120-S

Sole Proprietorship

Sole proprietors report business income and expenses on Schedule C (Form 1040) of their personal tax returns. They use Schedule SE (Form 1040) to calculate self-employment tax, which covers Social Security and Medicare taxes for self-employed individuals. 

Partnerships

Partnerships are required to file Form 1065 to report the partnership’s income, deductions, and credits. Each partner receives a Schedule K-1 (Form 1065), which outlines their share of the partnership’s income, losses, deductions, and credits.

Corporations

C corporations file Form 1120, U.S. Corporation Income Tax Return, to report their income, deductions, credits, and tax liability. S corporations file Form 1120-S and provide each shareholder with a Schedule K-1 (Form 1120-S). 

LLCs

LLCs have flexibility in how they are taxed and can choose to be taxed as a sole proprietorship, partnership, or corporation. Single-member LLCs typically report their income and expenses on Schedule C (Form 1040), while multi-member LLCs file Form 1065 or elect to be treated as a corporation and file Form 1120 or Form 1120-S.

Important Business Tax Deadlines to Remember

Date Deadline
January 15 Q4 estimated tax payments due for individuals and corporations
March 15 Deadline for corporations (Form 1120) to file tax returns or request an extension
Deadline for partnerships (Form 1065) to file tax returns or request an extension
April 15 Deadline for individuals (Form 1040) to file tax returns or request an extension
Deadline for Q1 estimated tax payments for individuals and corporations
Deadline for corporations (Form 1120) to pay any taxes due
June 15 Deadline for Q2 estimated tax payments for individuals and corporations
September 15 Deadline for Q3 estimated tax payments for individuals and corporations.
Deadline for partnerships (Form 1065) to file tax returns if they requested a six-month extension
October 15 Final deadline for individuals and corporations to file tax returns if they requested a six-month extension

The Bottomline

Filing taxes for your small business may seem daunting, but it can be manageable and even rewarding with the right knowledge and preparation. By staying informed and proactive, you can ensure compliance with tax laws, minimize tax liabilities, and avoid penalties and interest.

When in doubt, don’t hesitate to consult a qualified tax expert from NCH for personalized guidance tailored to your specific needs and circumstances. 

Call 1-800-508-1729 to schedule your FREE consultation today!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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