One of the major challenges of running a small business is managing and paying taxes. But here’s an important fact: Your business must meet its obligations to pay its federal, state, and local taxes to remain in good standing and to avoid costly penalties. The form your business entity takes will determine the types of tax forms that are applicable to your business.
About Business Taxes
Tax rates and the types of tax forms utilized depend on the structure of a business. A sole proprietorship pays business taxes at the personal tax rate. In a partnership or limited liability corporation (LLC), the members of those structures pay taxes based on the personal tax rate for their share of business net income. Corporations pay taxes on their net earnings at the corporate tax rate.
In addition to self-employment and income tax, small businesses make regular payments of estimated tax during the year. They pay employment taxes for their employees, Social Security and Medicare tax, Federal Unemployment (FUTA) tax, and various federal excise taxes that can include environmental taxes, communications and air transportation taxes, and fuel taxes.
Different Types of Tax Forms for Businesses
Here are the different types of tax forms that will be used, based on the type of business entity.
- Businesses in general use these forms for employee tax purposes: W-2, 1099-NEC, 1095-C, and 1096.
- Sole proprietorships generally require the owner to submit tax forms for the business and to file self-employment taxes. Form 1040 is used to file an individual income tax return. Schedule C (Form 1040) is used to report the business’s annual income or loss. Schedule C-EZ was a simplified version for smaller businesses but has been discontinued. Form 1040-ES is used to calculate and pay estimated quarterly taxes. Schedule SE (Form 1040) is used to calculate and report self-employment taxes owed.
- Partnerships are required to complete a Schedule K-1 to determine each partner’s share of the business income and losses, deductions, and credits for the business. Those calculations will be used to complete Form 1065. Each partner will need to complete the above personal forms.
- Limited liability companies (LLCs) have more complicated filing rules involving the standard partnership and personal forms.
- Corporation tax forms will depend on whether the entity is an S corporation or a C corporation. A C corporation employs Form 1120 plus Form 1040 for shareholders. An S corporation uses Form 1120S and Form 11205 Schedule K-1.
- There are nine other types of tax forms that apply to farming, excise tax liability, depreciation or amortization of property, deduction of home expenses, taxes on retirement plans, and more.
Why Hire Accounting and Tax Professionals?
Hiring accounting and tax professionals to handle your small business taxes makes great sense because they will save you time and money. They will know what types of tax forms to use. They will be able to answer your questions and resolve issues. They will help you avoid costly mistakes and reduce your risk of an audit.
Seek Professional Accounting Assistance
Contact Orcutt & Company, based in Milford, OH. We deliver comprehensive financial management for small business owners & individuals, providing strategic solutions that best address client needs and aspirations. Our comprehensive accounting services keep you organized and give you the data you need to make prudent business decisions, including payroll, bookkeeping, and tax services.
