If you’re new to filing taxes as a small business owner, you might feel a little intimidated by the process. You may find yourself asking questions like: How can I be sure I’m using the correct forms? How do I prepare my business financial statements for tax season? What deductions am I eligible for? What if I need to file an extension?
If you’re asking these questions, you aren’t alone. This guide covers all the answers to those common questions and tips on how to file small business taxes in 2024.
What are business taxes?
Let’s start with the basics. What are business taxes and how do they differ from personal taxes?
At the most basic level, you need to file your tax return each year through the IRS to figure out your tax liability. Just like a personal income tax return, small businesses also have a tax obligation to the federal government and the state (depending on where you live). In some cases, you’ll also need to pay local taxes.
A business tax return documents your business income, and business 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: Social Security and Medicare taxes for independent contractors and self-employed individuals.
- Estimated tax: Quarterly federal and state tax payments made throughout the year that aren’t subject to federal tax withholding.
- Sales tax: Taxes collected from taxable goods and services.
- Property tax: Taxes paid on the value of a business property.
- Excise tax: Taxes that are imposed on specific goods or services.
- Employment taxes: Social Security, Medicare, federal income tax withholding, and federal unemployment tax—or FUTA.
Small business tax deduction examples
For those wondering how to file small business taxes and lower your tax bill, itemizing your expenses can help you do just that.
Small businesses are allowed “ordinary and necessary” deductions that can help reduce your taxable income. A lower taxable income means you and your business may owe less money during the tax year.
Some examples of small business tax deductions include:
- Business meals
- Work travel expenses
- Home office costs
- Business insurance
- Work-related car use
- Retirement contributions
- Rent
- Office supplies and expenses
- Business interest expenses
- Startup expenses
These are just a few of the potential small business tax deductions that might apply to your business—a tax preparer may be able to help you find even more. This is why it’s important to keep a detailed record of all of your business expenses to maximize your tax deductions and reduce your taxable income.
How to itemize business expenses
Itemizing your expenses can help small businesses file taxes and lower their tax bill. Because small businesses need to detail their expenses to claim them with the IRS, record-keeping is crucial. You can itemize businesses expenses in a few steps:
- Note the amount paid for every business expense and the payment method.
- Hold onto receipts from business expenses for accurate record-keeping and IRS verification.
- Organize purchases by date.
- Write out why each purchase counts as a business expense or qualifies for a certain deduction.
A small business stands a better chance of receiving a tax deduction with detailed records. Additionally, if the IRS audits a business’s write-offs, these records will help avoid penalties and fines.
7 steps to filing small business taxes
Ready to own small business tax filing this tax season? Here’s how to file small business taxes in seven easy steps.
1. Gather your records for tax filing
As mentioned above, detailed records of business expenses you paid throughout the year can help lower your taxable income. You’ll need to get all of your company records together to report your business income and qualified business expenses.
This means gathering supporting documents related to payroll, sales, purchases, and other qualified business expenses. Some of the small business documents you should gather when preparing your taxes include:
- Invoices
- Paid and outstanding bills
- Canceled checks
- Deposit slips
- Sales slips
- Cash register tapes
- Credit card statements
- Bank account statements
- Employment tax records
- Year end payroll reports
Pro tip: Utilizing tax preparation or tax software to track business expenses and transactions throughout the year is much easier than trying to figure it all out at the end of the fiscal year.
2. Know what IRS forms you need to file
The types of IRS forms you’ll need to fill out to file small business taxes depend on your business structure. Here are the small business tax forms you may need to file your return:
- 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.
- Partnerships: Partnerships file their business tax returns using Form 1065. Partners and the partnership need to report business activity 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 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 elects to be taxed.Typically, most multi-member LLC’s default to be treated as a partnership. If the LLC is a single member LLC, then the entity is considered disregarded for federal purposes. What this means is that the owner will file a schedule C to report the business income and losses. However, if you want your business taxed as a corporation (C Corporation), then you use Form 1120. If you want your LLC to elect to be treated as an S Corporation then the LLC must timely elect to be treated as an S Corporation using Form 2553 Election by a Small Business Corporation.
You can find all the forms you need to file small business taxes on the IRS website.
3. Fill out your small business tax forms
When filling out your small business tax forms, it’s important to carefully follow each step and provide accurate information. If you’re filing using Schedule C, the form is a bit less complex, as it is only two pages.
Forms 1065, Form 1120, and Form 1120S are more extensive and may require a bit more time to fill out. Be prepared with all of the required information and make sure to have your supporting documents handy before filling out your form.
For a typical taxpayer, filling out tax forms can be tough. To ensure you don’t miss any required information, accounting software and other resources to stay organized.
4. Know the small business tax deadlines
During some tax years, the due date for sending in your personal income tax return or small 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.
Here are the key tax filing dates and deadlines you’ll want to be aware of in 2024:
- March 15, 2024: For partnerships and multiple-member LLCs that file a Form 1065 with the federal government and give out a Schedule K-1 to partners and S Corps filing Form 1120-S.
- April 15, 2024: For sole proprietors or single-member LLCs filing Schedule C.
- April 15, 2024: Corporations with a fiscal year that ends on December 31 submitting Form 1120.
- April 15, 2024: 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—or April 15, 2024.
Our small business tax prep checklist can help you get clear on the dates you need to file to make filing small business taxes easier.
5. File for a business tax extension if needed
Need to push back your deadline? You can file for a business tax extension to send it in later with Form 7004. This form grants a six month extension to file, but won’t provide extra time to pay. Make sure you get the extension filed before the deadline so you won’t have to pay any penalties.
The tax extension deadlines for small businesses in 2024 are:
- March 15, 2024: Deadline for partnerships, S corporations
- April 15, 2024: Deadline for sole proprietors (extension form is Form 4868 for individual tax returns), C corporations
If you don’t file an extension and miss your tax filing deadline, you may face the Failure to File Penalty. The Failure to File Penalty is a penalty you must pay if you fail to file your taxes on time. The penalty is 5% of your unpaid taxes for each month or part of the month that your small business tax return is late.
Pro tip: State tax and extension deadlines vary by state. Research your local tax guidelines and due dates early in the filing process.
6. File small business taxes
E-filing is easier and faster than mailing, meaning you can get your tax refund faster too. The IRS offers many different filing options for small businesses to choose from.
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:
- Being compliant with tax laws
- Making the appropriate tax payments
- Understanding your tax refund
7. Stay on top of small business tax payments
Many businesses are required to make estimated tax payments throughout the year. If you’re a sole proprietor, partnership, or S corporation and expect to owe over $1,000 on your individual tax return, or are a corporation and expect to owe over $500 or more when the return is filed, you are responsible for making estimated tax payments each quarter.
You can pay your estimated taxes on the IRS website, from your mobile device using the IRS2Go app, or by mailing in Form 1040-ES. Not making estimated tax payments or underpaying your taxes could result in a penalty from the IRS.
You are still required to file an annual small business tax return and calculate your tax liability for the year, even after paying quarterly taxes. If you didn’t pay enough through your quarterly tax payments, you’ll be responsible for paying the remainder when you file your tax return.
Though you may still owe money at the end of the year, making quarterly small business tax payments can help lower your end-of-year tax bill significantly.
Make filing small business taxes easy with QuickBooks
Still confused about how to file small business taxes? Why not rely on software that can help you make the most of your time?
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.
To face your business taxes with total confidence, rely on virtual bookkeeping services like 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.
With TurboTax Live Business, get unlimited expert help while you do your taxes, or let a tax expert file completely for you, start to finish. Get direct access to small business tax experts who are up to date with the latest federal, state and local taxes. Small business owners get access to unlimited, year-round advice and answers at no extra cost, maximize credits and deductions, and a 100% Accurate, Expert Approved guarantee.