Small Business Tax Filing: Your Guide to Filing Business Taxes

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise US Inc. or its affiliates, and it is not intended as a substitute for obtaining business advice from a Certified Public Accountant (CPA) or tax lawyer

Tax season is a given every year, but if you're running a small business, you've got more to handle than just your personal return. Business taxes come with their own forms, deadlines, and requirements, and getting them wrong can cost you.

However, once you know which forms apply to your business and when they're due, the process becomes a lot more manageable. This guide walks you through how to file small business taxes, from figuring out which forms you need to understanding your payment obligations.

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Table of contents

Small business taxes for beginners: What you need to know Four types of taxes small businesses pay Preparing taxes for small business: Forms you'll file Income tax forms Employment tax forms Forms for contractors and vendors International Angle: Foreign Businesses and Foreign-Owned US Businesses Tax filings for US-owned foreign business entities Foreign corporations (regardless of the citizenship/residency of their owners) Tax filings for non-resident owners of a US business How to file small business taxes: The step-by-step process Staying on top of tax obligations

This article has been written in collaboration with Vincenzo Villamena, CPA and co-founder of Online Taxman and Entity Inc.

Small business taxes for beginners: What you need to know

Your business structure determines everything about your tax filing. A sole proprietor files differently from a corporation, and partnerships have their own requirements too.

Here's the basic breakdown:

• Sole proprietors and single-member LLCs report business income on Schedule C, which attaches to your personal Form 1040.
• Partnerships and multi-member LLCs file Form 1065 as an information return, then issue K-1s to each partner showing their share of income.
• C corporations file Form 1120 as a separate corporate tax return.
• S corporations file Form 1120-S and also issue K-1s to shareholders.

Most sole proprietors follow the standard April 15 tax deadline. Partnerships and S corporations typically file by March 15, while C corporations using Form 1120 also file by April 15.¹

Four types of taxes small businesses pay

Federal business taxes fall into four main categories:

• Income tax: Nearly all businesses file an annual income tax return (partnerships file an information return instead).
• Self-employment tax: If you work for yourself, you pay social security and Medicare taxes through self-employment tax rather than having an employer withhold them.
• Employment taxes: Businesses with employees withhold federal income tax, Social Security, and Medicare from paychecks, plus pay federal unemployment tax (FUTA).
• Excise taxes: Certain industries pay excise taxes on specific goods, services, or activities like fuel sales, indoor tanning services, heavy vehicle use, and more.

Most small businesses deal with income tax and self-employment tax. Add employees to the mix, and employment taxes become part of your regular routine too.

Preparing taxes for small business: Forms you'll file

The forms you file depend on your business structure and whether you have employees. Here are the most common ones:²

Income tax forms

• Form 1040 with Schedule C: Sole proprietors report business profit or loss on Schedule C, which flows to your personal return.
• Form 1065: Partnerships use this to report income, deductions, and credits. It's an information return, meaning the partnership doesn't pay tax, and individual partners report their share on their personal returns.
• Form 1120: C corporations file this separately from owners' personal taxes. The corporation itself pays tax on its profits.
• Form 1120-S: S corporations file this form. Like with partnerships, income passes through to shareholders who report it on their personal returns.

Employment tax forms

If you have employees, you'll file these throughout the year:

• Form 941: Filed quarterly to report income tax, social security, and Medicare taxes withheld from employee paychecks.
• Form 940: Filed annually to report and pay federal unemployment (FUTA) tax.
• Form W-2: Issued to each employee by January 31, showing their annual wages and taxes withheld.
• Form W-3: Sent to the Social Security Administration along with copies of all W-2s.

Forms for contractors and vendors

• Form 1099-NEC – If you paid an independent contractor $600 or more during the year, send them this form by January 31.
• Form 1096 – This summary form goes on top of your paper 1099s, which you’ll also mail to the IRS (not required for electronic filing of form 1099).

Note: Write these deadlines down. Missing filing deadlines carries penalties.

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International Angle: Foreign Businesses and Foreign-Owned US Businesses

When non-US entities or business owners are involved, the IRS has additional filing requirements for entrepreneurs abroad. These filings are information returns, meaning they disclose information about the owners and business to the US. Missing or incorrect filings can lead to penalties of $10,000 per form.

Tax filings for US-owned foreign business entities

US owners of foreign corporations must disclose their ownership to the IRS with Form 5471. This is one of the most complex and frequently changing US tax forms. It generally applies when a US person, including a US company, has at least 10% ownership or control over the foreign entity. This can be direct or indirect ownership or control.

• Form 5471 - This form has multiple categories and complex attribution rules. It must be filed annually.

Note that his form is best filed by a tax advisor with expertise in international US tax.

Foreign corporations (regardless of the citizenship/residency of their owners)

If a foreign corporation is engaged in a trade or business in the United States and has US-sourced income, it may also have to disclose it on Form 1120-F, no matter if their owners are US persons or foreign.

• Form 1120-F - For foreign corporations engaged in a U.S. trade or business or that have U.S.-sourced income.

Tax filings for non-resident owners of a US business

Foreign-owned US businesses must disclose business information and transactions with Form 5472 if at least 25% of the share is controlled by non-US shareholders.

• Form 5472 + pro forma Form 1120 - Foreign-owned single member LLCs file this information return to disclose reportable transactions. They usually do not file a Form 1040 - unless their LLC has US-sourced income. Then they may have to file Form 1040-NR
• Form 5472 + Form 1120 - Corporations with 25% or more of their shares owned or controlled by non-US persons file Form 5472 together with their corporate tax return.

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How to file small business taxes: The step-by-step process

Filing business taxes involves a few key steps.

1. Keep good records throughout the year

Your accounting system should track income and expenses in categories that match your tax forms. This makes preparing taxes significantly easier when filing season arrives.

The IRS may ask you to substantiate your income and deductions, so maintain records of:

• All business income (invoices, bank statements, payment records)
• Business expenses (receipts, invoices, credit card statements)
• Mileage logs if you claim vehicle deductions
• Asset purchases and depreciation schedules

2. Make estimated tax payments

Federal income tax operates on a pay-as-you-go system. If you're not having taxes withheld from a paycheck, you'll likely need to make quarterly estimated tax payments.

Estimated tax covers both income tax and self-employment tax for sole proprietors. Deadlines fall on:

• April 15 (for income earned January through March)
• June 15 (for income earned April through May)
• September 15 (for income earned June through August)
• January 15 of the following year (for income earned September through December)¹

Use Form 1040-ES to calculate and pay estimated taxes. Not paying enough throughout the year can result in penalties when you file your annual return.

Corporations may also need to make estimated tax payments if they expect to owe $500 or more when their return is filed. Keep in mind, businesses do not pay through 1040-ES. They can pay through their business tax account, Direct Pay for business, or EFTPS, depending on the tax year.

3. File your annual return

When your tax year ends, file your annual return by the deadline for your business structure:

• March 15 for partnerships filing Form 1065 and S corporations filing Form 1120-S.
• April 15 for sole proprietors filing Schedule C and C corporations filing Form 1120.

You can request an extension if you need more time, but any tax owed is still due by the original deadline.

4. File employment tax returns (if applicable)

Employment taxes follow their own schedule. Form 941 is due quarterly (April 30, July 31, October 31, and January 31). Form 940 is due annually by January 31. Employee W-2s and contractor 1099-NECs must be issued by January 31.³

Don't forget state and local taxes

Your federal tax obligations are only part of the picture. Most states also require:

• State income tax returns (if your state has state income tax)
• Sales tax filing (if you sell taxable goods or services)
• State unemployment insurance tax

State filing requirements vary widely. Check with your state's Department of Revenue or taxation authority for more details.

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Staying on top of tax obligations

Filing business taxes correctly requires tracking deadlines, maintaining good records, and understanding which forms apply to your business structure. From the get-go, set up systems that work: Use accounting software that categorizes income and expenses correctly, mark all tax deadlines on your calendar, and make estimated payments on time.

Tax laws can change, and specific situations may require professional guidance. Consider working with a tax advisor who understands your business structure and industry, as they can help you navigate complex situations and ensure you're meeting all requirements.

This article has been written in collaboration with Vincenzo Villamena, CPA and co-founder of Online Taxman and Entity Inc.. Originally from Michigan, Vincenzo began his career at PwC before moving abroad in 2005. He founded Online Taxman to help other expats file and optimize their US taxes securely and easily from abroad and Entity Inc., which focuses on US companies for global entrepreneurs, from setup to compliance. He currently resides in Brazil. Online Taxman and Entity Inc. now proudly serves US expats and international entrepreneurs in almost every country in the world.

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Sources:

1. Starting or ending a business | IRS
2. Forms, instructions, and publications | IRS
3. Employment tax due dates | IRS