Starting a small business may seem as simple as having a talent and the ability to sell it however, starting a small business means that there are taxes which is definitely not anyone’s favourite. It is up to every small business owner to tackle the taxes to ensure they stay legal and avoid any penalties.
Don’t worry, in this article we are here to break it down. You do not have to be a tax expert as there are aspects to finance that can aid you do your taxes. This tax form guide explains the key ones you’ll need, keeping things simple for novices. Let’s dive in!
Why Tax Forms Matter
Tax forms ensure your business follows IRS rules. They help the IRS track your income, expenses, and taxes owed. Slip up, and you might get slapped with penalties or face an audit. Different forms apply depending on your business type—sole proprietorship, LLC, or corporation. Knowing the right ones saves you time and worry. Let’s check out the key forms.
Form 1040 and Schedule C: The Solo Star
For sole proprietors, Form 1040 is your main form. It’s the standard individual tax return. But hold up! You also need Schedule C. This tracks your business’s earnings or losses. List your revenue and costs—like office supplies, rent, or ads. The result transfers to your 1040. Most sole proprietors file this annually. It’s straightforward but vital. Skip it, and the IRS could come calling.
Form 1065: Partnerships Need This
Running a partnership? Form 1065 is your form. It details your company’s revenue, deductions, and credits. Every partner receives a Schedule K-1, outlining their portion of profits or losses. Partners then include that on their personal 1040s. Partnerships don’t pay taxes directly—the owners do. Submit this by March 15 each year. It’s a bit complex, so verify your figures.
Form 1120: Corporations Stand Tall
Own a corporation? File Form 1120. This is the U.S. Corporation Income Tax Return. It records your business’s income, costs, and taxes due. Unlike partnerships, corporations pay taxes separately from their owners. Small C-corps rely on this form, with a deadline of April 15. Maintain accurate records—corporations get extra IRS attention. For S-corps, Form 1120-S is the one to use. Both keep you compliant.
Form 941: Payroll Powerhouse
Got employees? Form 941 is a must. It’s the Employer’s Quarterly Federal Tax Return, reporting income taxes, Social Security, and Medicare withheld from workers’ pay. You file it four times a year—due April 30, July 31, October 31, and January 31. Errors here can trigger hefty fines. Stay sharp with payroll taxes to keep the IRS off your case.
Form 1099-NEC: Freelancer Friend
Hire freelancers or contractors? If you pay any $600 or more annually, you’ll need Form 1099-NEC. It tracks non-employee payments. Provide one copy to the contractor and send another to the IRS by January 31. This ensures the IRS knows who’s earning what. Overlook it, and you could face penalties. It’s fast to complete, but don’t skip it.
Form W-2: Employee Essentials
Employing workers? Form W-2 is required. It shows wages paid and taxes withheld for each employee. Deliver it to workers and the IRS by January 31. Employees use it for their personal taxes. It’s a basic form but critical. Mistakes can cause trouble for everyone. Keep payroll records organized to simplify this.
Estimated Taxes: Stay Ahead
Many small businesses pay estimated taxes. These quarterly payments cover income not taxed through withholding, like self-employment earnings. Use Form 1040-ES to figure and submit them. Payments are due April 15, June 15, September 15, and January 15. Sole proprietors and partners often need this. It helps avoid a huge tax bill later. Be proactive to stay stress-free.
State Tax Forms: Don’t Forget These
States have their own tax requirements. Some demand sales tax forms if you sell products. Others require state income tax forms. Visit your state’s revenue department website for details. For instance, California’s Form 100 mirrors the federal 1120 for corporations. State deadlines vary, so stay vigilant. Ignoring these can lead to local fines.
Tips to Stay Organized
Tax forms can feel like a lot but staying organized helps. Sort receipts, invoices, and bank statements. Try accounting software like QuickBooks to track everything. If you’re confused, hire a tax professional, errors cost more than their fees. Always file on time. The IRS loves promptness. Use calendar alerts to meet deadlines and keep stress low.
Final Thoughts
Taxes aren’t the fun part of running a small business, but they’re doable. Forms like 1040, 1065, 1120, 941, 1099-NEC, and W-2 cover most needs. Estimated taxes and state forms round things out. Know your business structure to choose the right forms. Stay organized, meet deadlines, and seek help if needed. With these forms handled, you can focus on growing your business. You’re ready for this!
