Running a small business involves keeping track of finances, employees, expenses, and more. One critical task that all small business owners must stay on top of is tax filing. Navigating small business taxes can seem complicated, especially when it comes to picking the right tax forms.
This comprehensive guide breaks down the array of tax forms for small businesses that they need to file to remain compliant and avoid penalties.
Table of Contents
Understanding Business Structure
The first step to finding your required tax forms is understanding your business structure. Are you a sole proprietorship, partnership, corporation, S-corp, or LLC? Your business legal structure determines what forms you must file.
Sole proprietors can use their Social Security number and file taxes on their personal returns. Partnerships and corporations need their own Employer Identification Number (EIN) to file business returns. Know your entity to pick the accurate forms.
Key Tax Forms for Small Businesses
Here are some of the most common federal tax forms small businesses file:
Schedule C: This form reports income and expenses for sole proprietorships. Any profit or loss flows through to the owner’s personal 1040 return.
Form 1065 – Partnerships use this to detail their income, deductions, gains, losses, and partner distributions. The profit or loss passes through to the partners’ returns.
Form 1120: C corporations file this form to report income, gains, losses, deductions, and credits and to calculate income tax owed.
Form 940: Businesses with employees file this annual return for Federal Unemployment Tax Act (FUTA) tax.
Form 941: This quarterly return reports income tax withheld along with Social Security and Medicare taxes paid by employees and matched by employers.
Form W-2: Employers must furnish this annual statement to employees detailing wages paid and taxes withheld. It’s also sent to the IRS and Social Security Administration.
Form 1099-MISC – Self-employed contractors who received $600+ from your business get this form reporting their earnings. It also goes to the IRS.
State Tax Forms
In addition to federal returns, small businesses need to file taxes in the states where they operate. Common state tax forms for small business include:
State Income/Franchise Tax Return: Similar to the federal Form 1120, this reports corporate income and calculates tax owed based on state rates and rules.
Sales and Use Tax Return: Retailers collect sales tax from customers and file this periodically to remit it to the state.
Annual Report: Most states require corporations and LLCs to file an annual report and pay fees to maintain active business status.
Withholding Tax Forms: Businesses with employees withhold state income tax and file returns reporting taxes payable.
Specialized Small Business Tax Forms
Beyond the basics, some small businesses need to file industry- or situation-specific tax forms with the IRS and state. Real estate, transportation, agriculture, insurance agents, and nonprofits are some sectors with specialized forms.
The Ultimate Tax Prep Checklist
Follow this checklist to ensure you file all required tax forms and avoid IRS penalties:
- Know your business structure
- Obtain an EIN if needed
- Track income and expenses
- Issue 1099-MISCs to contractors
- Give employees W-2s
- File Schedule C, 1065, or 1120 by deadline
- Submit payroll tax returns
- File annual reports and pay fees for states of operation
- Complete any additional state and industry-specific forms
Tax Forms for Small Business: Closing Thoughts
Taxes don’t have to be taxing with this rundown of the key forms small businesses use to comply. Know what you must file, organize details, and check state requirements to smoothly handle small business taxes. With preparation and understanding of the various tax forms out there, you can tackle your filing obligations stress-free.