This is no sexy topic…
But if you’re a small business owner in the United States, you are required to file a tax return each year and you might be wondering “how the heck do I file taxes as a small business?”
It can be tempting to put off tax prep until right before the deadline, but setting aside a few hours now will save you time and headaches down the road — and give you space to focus more on the fun parts of your business.
I totally understand that taxes can feel overwhelming, especially if it’s your first time filing as a business owner. To help get you started, here’s a list of everything you need to do before you file:
- Gather your small business records
- Choose the right tax form for your business structure
- Make note of important tax deadlines
- Choose the right filing method for your biz
1. Gather your small business records
Gathering and organizing business records is the first step when filing a business tax return. Some of this information is personal, so the IRS can confirm your identity, but a lot of it is related to the finances of your biz.
Here are the documents you’ll need when filing your taxes:
Personal identification information
Your Taxpayer Identification Number (Employer Identification Number or Social Security Number) and your tax return from the previous year.
Financial records relating to your business
Financial statements like a balance sheet and income statement, 1099 forms you have received or sent, and the amount you’ve paid in estimated tax payments during the year.
These documents generally fall into two categories: earnings and expenses. Records that show your earnings can include:
- Invoices you’ve sent to clients
- Customer sales records
- Cash register tape
- Anything else that shows money coming into your business
Documents that show your expenses can include:
- Rent receipts for your small business
- Receipts for any online tools you use
- Payroll records
- Anything else that shows money coming out of your business
If you use a bookkeeping platform like Xendoo or Bench, you’ve already been keeping your books updated throughout the year, so collecting these documents won’t take much time at all. It’s a great investment for the long term because it creates space for you to focus on living your life and pouring your energy into the aspects of your biz that you’re passionate about. With Xendoo, your dedicated team can assemble a comprehensive Year End Financial Package with everything you need to file an annual tax return before it’s even tax time.
2. Choose the right tax form for your business structure
Filing the appropriate tax form for your business entity will help you avoid costly mistakes. Not sure which tax forms you need to file? Here are the most common business structures and the forms they require.
3. Make note of important tax deadlines
Once you know which forms to fill out, you’ll need to know how to fill them out correctly and keep an eye on when they are due.
Filing Deadline: March 15, 2023
Partnerships or LLCs with multiple members: If you are part of a partnership or a multiple member LLC, you should get a copy of Schedule K-1 at tax time—either from your accountant or the person responsible filing your Form 1065. Don’t forget that the IRS will only accept your personal tax return (Form 1040) with a Schedule K-1 attached.
S corporations: An S Corp needs to file its own tax return. At the same time, the shareholders of this business entity need to report their share of profit or loss with a Schedule K-1 on their personal taxes.
Filing for both of these business structures is more complex than filing as a sole proprietor, so it’s a good idea to get expert tax filing support if you can.
Filing Deadline: April 18, 2023
April 15, 2022 might be an easy date to remember, since it’s the same deadline for your personal tax return.
Sole proprietorship or LLCs with one member: The IRS considers business income from sole proprietorship entities the same as personal income, so filing for this business structure is relatively simple. If you’re paying $1,000 or more in income taxes, you’ll also be required to file estimated taxes.
C corporations or LLCs that elect to be corporations: Corporate income tax rate is a flat 21% for tax years beginning after December 31, 2017. On top of this, you are required to pay personal income taxes separately from your corporate taxes.
Tax extensions and late payments
Depending on the type of business you own, you can request a six-month filing extension by submitting Form 4868 on or before:
- S corps and partnerships: March 15, 2023
- Individuals: April 18, 2023
- C corps: April 18, 2023
Just remember that extensions give you more time to file your tax return—not more time to pay it. If your payment is past due, you’re looking at paying an extra 0.5% of unpaid taxes every month until you pay your original tax bill, up to a maximum 25% of your total tax bill. So get that shit in on time!
Other notable dates
If your small business has paid $600 or more to a contractor or professional, do not wait until March or April to start your taxes. You’ll need to file a 1099-MISC which must be ordered from the IRS and filed by January 31, 2023.
If you’re self-employed, the deadlines for estimated quarterly tax payments are:
- April 15, 2023
- June 15, 2023
- September 15, 2023
- January 16, 2024
If you’re worried about which forms you need to submit, or whether you’re missing out on any sizable tax deductions, investing in a tax professional is worth it. Having tax experts in your corner can give you the peace of mind that everything will be filed accurately and on time and save you hours of stress in the run up to tax deadlines.
With a premium subscription from Bench, you can get your federal and state taxes filed effortlessly. Plus, your dedicated tax team has the knowledge and expertise to help minimize your tax bill by making sure you receive every deduction and tax credit available to you.
4. Choose the right filing method for your biz
While you can fill out your tax forms by hand and mail them to the IRS, it’s simpler and more secure to file your taxes online through the IRS’s e-File system. Bonus: you’ll get your return back faster AND any tax refund will be electronically deposited into your online bank account.
You have three main options when filing your federal taxes online:
1: File with Free File
Free File is an IRS program designed for business owners who made $72,000 or less during the year. Sign up with one of 9 Free File providers to prepare and file your return at no cost. They offer guided tax preparation with online calculations, and they’ll automatically send a copy of your tax return to the IRS for you.
You should definitely double check the instructions from whichever Free File service you choose. If your filing needs are complex, you may have to add on paid features.
2: File with Free File Fillable Forms
Free File Fillable Forms are electronic forms you fill out and file yourself. You qualify for this option if your business made over $72,000 during the year. You’ll need to create a Free File Fillable Forms account with the IRS and fill out the relevant forms for your business.
While they offer basic calculations and some guidance, they won’t catch errors for you. Double and triple check your tax forms before submitting.
Options like Free File and Free File Fillable Forms may be cost effective, but they have their limits. For example, if you need to file state taxes or back taxes, Free File Fillable Forms is not an option.
3: Find an online tax pro to prep and file for you
For more complex businesses, the easiest and most pain-free tax filing method is handing your taxes over to a professional. I’m currently loving Xendoo!
They handle all your business bookkeeping and tax filing in one place to fully streamline your finances before tax time.
Plus, Xendoo provides additional services that free tax filing programs can’t, including:
- Customized tax support: Have rental income? Need to file back taxes? The Xendoo team knows exactly which tax forms you need and which deductions to claim for your small business.
- No additional cost for state tax filing: File your federal and state income taxes for one flat fee.
- Quarterly estimated taxes handled: Your dedicated team fills out every remittance form for your quarterly taxes, and lets you know how much to pay and when.
- Year-round tax filing support: Get on-demand and unlimited consultations with our in-house tax advisory professionals and research team.