Tax Forms Every Small Business Owner Should Know

Tax Forms Every Small Business Owner Should Know

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There are tax forms for every conceivable business entity, type of employee, and expense. It’s important to learn which ones apply to your company’s needs. — Getty Images/damircudic

Small businesses must submit various tax forms annually and throughout the year. The requirements vary based on your business entity type, industry, employees, and more. Fortunately, most free and paid tax software identifies necessary documents. Many also provide links for more information or guides to filling them out.

However, understanding the various forms helps you gather the correct information and better estimate tax liabilities. In short, knowledge can make tax season go smoothly, prepare you for potential audits, and help you avoid surprises. Learn which tax forms you should know.

Types of tax forms for businesses

Your business structure has the biggest impact on which tax forms you use. According to the National Federation of Independent Business (NFIB) tax survey, 47% of respondents “structure their business as an S-Corp,” 27% are limited liability companies (LLCs), and 17% use the C corporation entity. LLCs can file federal taxes as sole proprietorships, partnerships, or S corporations.

Nolo reported on 2021 IRS data showing that, on average, business owners spent 23 hours preparing tax returns. Yet NFIB found, “Nearly all owners (91%) reported using a professional tax preparer to file their most recent tax returns.” Record keeping consumes the most time, and knowing which tax forms (and data) you need could simplify the process.

The IRS groups the five general types of business taxes into the following categories:

  • Income tax.
  • Estimated taxes.
  • Self-employment tax.
  • Employment taxes.
  • Excise tax.

[Read more: 10 Tax Deductions Your Business Should Know About]

Income tax forms

Sole proprietorships, partnerships, and LLCs filing as sole owners or partners file Form 1040, Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors. These entities pass income and losses through to the individual (flow-through structure), which is why you use an individual tax form. Sole business owners must also submit a Schedule C (Form 1040 or Form 1040-SR), Profit or Loss from Business.

Additionally, partnerships must file an information return (Form 1065, U.S. Return of Partnership Income, and Form 965-A, Individual Report of Net 965 Tax Liability). These report partnership data, including income, gains, deductions, and losses. But the actual income tax owed or returned goes on personal tax forms. Each partner should receive a copy of Form 1065 (Schedule K-1). Sometimes, you may need Schedule E (Form 1040), Supplemental Income and Loss.

Record keeping consumes the most time, and knowing which tax forms (and data) you need could simplify the process.

C corporations file Form 1120, U.S. Corporation Income Tax Return. S corporations and LLCs filing as S corporations file a Form 1120-S, including Schedule K-1. Each shareholder receives a Schedule K-1, which references any forms they may need to file. Shareholders also file Form 1040 or Form 1040-SR and Schedule E.

Other forms you may file include:

  • Form 4562: A deduction for depreciation or amortization of business vehicles or property.
  • Form 8829: Used to calculate home office expenses for Schedule C (Form 1040).
  • Form 8283: Sole proprietors, partnerships, and corporations can claim non-cash charitable gifts of over $500.
  • Form 7004: Used to request an extension for filing certain business returns.

Forms for estimated taxes

Generally, the IRS requires sole proprietors, partners, and S corporation shareholders to pay tax installments if they expect to owe $1,000 or more to the federal government. You can use Form 1040-ES to calculate estimated tax, or if you’re a nonresident alien, use Form 1040-ES(NR).

C corporations that could owe $500 or more when filing a return must also make estimated tax payments using Form 1120-W, Estimated Tax for Corporations. In this case, business owner income is separate from the corporation, and typically taxes come out of their paycheck based on their W-4 information.

Self-employment tax forms

Filers using pass-through methods need to pay self-employment tax on their earnings. This amount includes Social Security and Medicare taxes. The information goes on Schedule SE. Business owners with a corporation or LLC taxed as an S corporation have payroll taxes taken from their salary or wages.

Forms for employment taxes

Any business with employees, regardless of entity type, must file Form 941, Employer’s Quarterly Federal Tax Return, or Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, and Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. In addition, employers must send W-2s to workers and W-3s to the Social Security Administration. Send Form 1099-NEC to vendors, freelancers, or independent contractors who received $600 or more from your company.

[Read more: 10 Legal Requirements for Hiring Employees]

Excise tax forms

According to the IRS, “Excise taxes are taxes that are imposed on various goods, services, and activities.” There are over a dozen types of excise taxes. Report excise taxes on Form 720, Quarterly Federal Excise Tax Return.

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Published March 06, 2023