The Complete Guide To Filing Small Business Taxes For The First Time

If you’re a freelancer, filing small business taxes is simple. In addition to the traditional forms you file annually (like Form 1040), there are a few other forms that must be filed with your individual tax return. Those include:

• 1099-MISC: The 1099-MISC form reports self-employment earnings from a single person or business. Income is reported in Box 7, Nonemployee Compensation. If you made over $600 with a client, the client is required to send you a 1099-MISC. However, all income must be reported on your tax return, even if you do not receive a 1099-MISC form. These forms are required to be sent out by January 31 and are used to report income on your annual tax return due on April 15.
• Schedule C: Schedule C is used to report your profit or loss from your business. On this form, you will provide your business name (or your legal name, if you don’t use a separate business name), contact information, gross sales, expenses, and cost of goods sold (COGS). This form is part of Form 1040 and is submitted with your annual tax return due on April 15.
• Schedule SE: Schedule SE is used to calculate your self-employment tax. This form is used to calculate the amount of Social Security and Medicare taxes you must pay on the income you’ve earned. This form is filed along with your 1040 on or before April 15.

Many self-employed individuals are sole proprietors. If you operate a business, a sole proprietorship is the default entity.

Sole proprietors aren’t required to file separate tax returns. They must simply add the required forms to their tax returns. These forms include:

• 1099-MISC: Sole proprietors may receive 1099s from their clients with Box 7, Nonemployee Compensation, filled out. This income information will need to be included in the sole proprietor’s tax return due on April 15. If contract or freelance labor is used within the business, the sole proprietor will need to send out their own 1099s by January 31.
• Schedule C: Schedule C is filed with an individual income return to show the profit or loss of the business. This form is submitted with the tax return due on April 15.
• Schedule SE: Schedule SE is used to calculate the Social Security and Medicare taxes owed by the sole proprietor. This form is included with the individual income tax return due on April 15.
• Form 1040-ES: If you owe the IRS, you may be subject to paying quarterly taxes. Form 1040-ES, Estimated Taxes for Individuals, is used to calculate estimated taxes owed. This form is completed and submitted each quarter, along with the estimated payment. Due dates remain roughly the same each year: April 15, June 15, September 15, and January 15 (of the following year). Dates may change if they fall on a weekend or holiday.

As an entity, a partnership may need to file the following tax forms:

• Form 1065: Form 1065 U.S. Return Of Partnership Income (also known as a Schedule K) must be filed by a general partnership each year that it is in business. This is an informational return that must be completed and signed by at least one partner. Partnerships operating on a calendar year must submit this form to the IRS by March 15 (or the next business day if March 15 falls on a weekend or holiday). Partnerships with a tax year must complete and submit the form on the 15th day of the third month after the tax year-end date.
• Schedule K-1: A Schedule K-1 must be filed with the IRS for each partner. This form breaks down the income, credits, and deductions of each partner. All partners should receive a copy of their Schedule K-1. Copies must also be sent to the IRS along with Form 1065.
• Form 941: If the partnership has employees, Form 941 Employer’s Quarterly Federal Tax Return, will need to be filed. This form is used to report income taxes, Social Security taxes, and/or Medicare taxes withheld from an employee’s pay. It is also used for paying the employer portion of Social Security and Medicare taxes. This form is filed quarterly and per the IRS is “generally due by the last day of the month following the end of the quarter.”
• Form 940: Partnerships with employees will also be required to file Form 940 Employer’s Annual Federal Unemployment (FUTA) Tax Return. This form is used to report annual Federal Unemployment Tax Act taxes. This form must be filed on or before January 31.

While these forms should be filed by the partnership, each partner will also need to complete an individual income tax return. In addition to filing Form 1040, you may also be required to file:

• Schedule E: Schedule E Supplemental Income & Loss is used to report income or loss from a partnership. It is also used to report income or loss from royalties, rental real estate, trusts, and S corporations. This form is filed with an annual tax return due on or before April 15.
• Schedule SE: A Schedule SE that calculates taxes due on net earnings by self-employed individuals should also be filed with an individual’s income tax return. This form is due on or before April 15.

Corporations are the most complicated business structure, so it should come as no surprise that filing taxes can be a bit more difficult, too. There are two different types of corporations: S corporations and C corporations.

S corporations have a limitation on the number of shareholders it has. Shareholders pay taxes on the profits received from the corporation. A C corporation has no limitations on shareholders. However, the business pays corporate taxes, and the shareholder also pays taxes on the income they’ve received.

The forms that may be required for filing taxes for a corporation include:

• Form 1120: Form 1120 U.S. Corporation Income Tax Return is used to file and pay corporate taxes for C corporations. Per the IRS, “a corporation must file its income tax return by the 15th day of the 4th month after the end of its tax year.”
• Form 1120-S: Form 1120-S U.S. Income Tax Return for an S Corporation is used to report income, gains, losses, credits, and deductions of an S corporation. This must be filed on or before March 15.
• Schedule K-1: A Schedule K-1 for each shareholder must accompany Form 1120-S. This form shows the shareholder’s share of income, deductions, and credits. A copy is provided to each shareholder and is also filed with the 1120-S on or before March 15.
• Form 1120-W: Form 1120-W Estimated Tax for Corporations is used to estimate and pay a corporation’s tax liability. These forms are filed quarterly on April 15, June 15, September 15, and January 15 (of the next year).
• Form 941: Form 941 Employer’s Quarterly Federal Tax Return will need to be filed. This form is used to report income taxes, Social Security taxes, and/or Medicare taxes withheld from an employee’s pay. It is also used for paying the employer portion of Social Security and Medicare taxes. This form is filed quarterly and per the IRS is “generally due by the last day of the month following the end of the quarter.”
• Form 940: Corporations will also be required to file Form 940 Employer’s Annual Federal Unemployment (FUTA) Tax Return. This form is used to report annual Federal Unemployment Tax Act taxes. This form must be filed on or prior to January 31.

Corporation shareholders must file their individual income tax returns. In addition to Form 1040, shareholders also need to file:

• Schedule E: This form is used to report income or loss from an S corporation.
• Form 1040-ES: This form is used to estimate and pay quarterly taxes. It is filed quarterly on April 15, June 15, September 15, and January 15 (of the following year).

A single-member limited liability company (LLC) is treated similarly to a sole proprietorship. The activities of the business are reported on the owner’s tax return. In addition to filing a Form 1040, the owner will also need to file:

• Schedule C: This reflects the profit or loss of the business and should be filed with the tax return due on April 15.
• Schedule SE: This calculates taxes due on income earned by self-employed individuals. This is filed with the tax return due on April 15.

Some LLCs are partnerships. In this case, partnership tax rules apply. Other LLCs are corporations and are treated as such in terms of filing and paying taxes.

Regardless of what business structure you have, you can obtain the necessary tax forms and instructions directly from the IRS.