Small Business Tax Forms 101: A Guide to Tax Preparation for Small Business Owners
Updated: 3 days ago
Staying on top of all the different types of business and tax forms required for a small business owner is a challenging task. It can feel like a never-ending cycle, from the initial Form SS-4 to quarterly estimates, 1099s, and W-2s.
Meeting IRS obligations is crucial for business owners, which includes completing various business forms to fulfill federal requirements and safeguard against IRS audits. Although audits are rare, it's important to be alert by knowing the different types of IRS small-business forms that may apply to your business.
As experts in small business tax services, we will demystify these forms by providing a comprehensive look into each one. No need to dread tax time, we are here to help.
Let’s start from the beginning. The first business form you'll need to complete as a new small business owner is the IRS Form SS-4. This is used to apply for your tax ID number or otherwise known as your employer identification number (EIN). Once you submit your Form SS-4 to the IRS, they will assign you your nine-digit EIN. The IRS uses this number to identify your business on all tax returns, forms, and other documents you file.
Pro tip! It's important to note that you must provide this number to banks, vendors, and other companies you do business with. Also, having an EIN makes keeping track of your finances more manageable and should be attained as a best practice, even if the government does not require one.
Small Business Tax Forms
Which business tax forms you have to file depends on the specific classification of your entity type. The four most common types are:
If your business is a sole proprietorship, this means it is a one-person show and you are running and operating the small business by yourself. If this is the case, then you're likely familiar with the idea of filing personal taxes for yourself and business taxes. Here are some key IRS business tax forms that come into play when tackling this responsibility:
1040: Form 1040 is used to file annual individual tax returns. Besides the 1040 form, you will also need to complete the 1040 Schedule C or Schedule C-EZ, depending on the size of your business, to report your company’s annual profit or losses.
1040-ES: This form helps determine your estimated tax payment. Estimated taxes are used to pay taxes on income not subject to withholding. Note: as a self-employed business owner, you must make quarterly estimated tax payments because you do not work for an employer who withholds your taxes.
1040-SE: This form aims to determine what you owe in self-employment taxes. These taxes are your share of Social Security and Medicare taxes since there's no employer to deduct them from your pay regularly. You will need to record this number on your 1040.
Partnerships are classified as businesses run and operated by two or more people. These individuals are responsible for the business's profit, loss, and inner workings and are also tasked with filing taxes on the partnership.
Partnership tax forms differ from sole proprietorships. For partnerships, you'll need to file Form 1065, an annual information return that details your business's income, gains, losses, deductions, and credits. To determine the distribution of income and losses among partners, each partner will complete a Schedule K-1. Note: you'll need to use information from your completed K-1 to submit your 1065.
Partnerships are also not subject to federal income tax, but instead, their income, deductions, and credits flow through to their partners' personal income tax returns.
Each state may have different tax forms and requirements, so consulting with a tax expert or the state's tax authority is a good idea to ensure you are filing the correct forms for your small business.
A corporation is a legal entity that is separate from its owners, known as shareholders. Corporations are split between s-corps and c-corps and require different business tax forms.
C-corporations pay income tax on their profits using Form 1120. This annual report determines the corporation's income tax liability, but as a shareholder, you're not taxed on the corporation's profits directly. Instead, you'll be taxed on any dividends that the corporation distributes to you, and they'll be reported on your personal tax return and are taxed at your individual income tax rate.
For S-corporations, Form 1120S reports the corporation's income, gains, losses, deductions, and credits annually. The Schedule K-1 for Form 1120S calculates each shareholder's responsibility for profit or loss and is used in their individual tax returns. S-corporation shareholders may also need to file Form 1040 Schedule E and Form 1040-ES.
Both C and S-corporations must file Form 1120-W to calculate estimated quarterly taxes. These estimated taxes are paid throughout the year to help the corporation avoid penalties and interest charges for underpayment of taxes.
Business tax forms are a little tricky when it comes to LLCs, and this is because the IRS can consider your business in three categories.
Disregarded entity: If your LLC is considered a disregarded entity, you'll report income and expenses on Form 1040 Schedule C or E.
Partnership: If your LLC has two or more members, you'll be regarded as a partnership, meaning you'll have to file Form 1065 and a Schedule K-1 for each partner. Note: LLCs filing partnership returns must pay self-employment tax on their share of earnings using Form 1040-ES or Form 1040-SE.
Corporation: If the IRS regards your LLC as a corporation, you'll use Form 1120 or 1120S.
Pro tip! If you want to change the classification of your LLC, complete Form 8832.
Additional Business Tax Forms
Depending on your business, the number of tax forms you need to file with the IRS is still significant. But as we wrap up, we’ll discuss a few that pertain to managing employees, like the W2, W3, and 1099.
The W-2 form must be sent to each of your employees and submitted to the IRS annually to report employee wages. In comparison, the W-3 form is used to send the W-2 forms of employees to the Social Security Administration.
A 1099 form may be required to report any non-employment income, such as work done by an independent contractor. This is generally required for any vendors paid more than $600 throughout the year.
At Ceterus, our small business tax services deliver a done-for-you accounting and benchmarked reporting solution that would help business owners like you. With our tech-enabled accounting solution Ceterus Edge, tax preparation and filing are done for you. Let our top-of-the-line technology with a team of highly experienced accountants handle the tricky task of filing your primary tax forms for an e-filed return. Plus, we handle the additional tax forms like Schedule K-1 and your 1099s, so you can focus on other areas of growth for your business.
Take your finances off your plate and keep your concentration on your future as a small business owner. Talk to an expert at Ceterus today.