Your Complete Small Business Income Tax Guide

Small Business Tax Forms, Tax Rates, Tax Filing Information

Complete Small Business Tax Guide
Complete Small Business Tax Guide. DNY59/Getty Images

Your Small Business Tax Guide 

Small businesses calculate their business profit or loss for income taxes, then include this information on their personal tax returns. This small business tax guide will help you determine which forms to use and how to compile information for these forms.

This guide is for small businesses filing their tax returns on Schedule C with their personal returns (Form 1040).

This includes sole proprietors and single-member LLC owners. I have a separate Complete Guide for corporations and S corporations, and a Guide for Business Taxes for Partnerships. 

Small Business Tax Return Due Dates

Because small businesses file their business tax returns with their personal returns, the due date is the same as the personal income tax return due date: April 15. If the due date falls on a holiday or weekend, the next business day is the due date for that year.

For 2016 taxes, the personal tax return due date is April 18, 2017. (April 15 is a Saturday, and Monday, April 17, is a holiday in the District of Columbia.)

Check this article for updated tax return filing deadlines for future years. .

Do I Need a Tax Preparer for My Small Business Tax Return?

A very simple small business with no cost of goods sold or assets to be depreciated might be able to use a tax software program, but most small businesses need a tax preparer.

Partnership income taxes can be very complicated and even a simple Schedule C might be more difficult than you think. Before you enlist the help of a CPA, Enrolled Agent, or other qualified tax preparer to prepare your business taxes, use the information in this Guide to help you get ready for business taxes.

Read more about Getting Help with Small Business Taxes.

Types of Small Businesses and Income Tax Forms

A small business that is not a corporation can be one of three major types, with some differences for individual U.S. states:

  • A sole proprietorship is the default business type if no other business type is registered with a state. A sole proprietorship pays income taxes through the owner's personal tax return. Schedule C (Profit or Loss for a Small Business) is used to calculate the business profit, which is included with other income on the individual business owner's Form 1040. Read more about How a Sole Proprietorship Pays Income Taxes.
  • A partnership is registered with a state and consists of several partners. The partnership files an information tax return on Form 1065 and individual partners receive a Schedule K-1 showing their share of the partnership's profits or losses. Schedule K-1 income or loss is included along with the partner's other income on his or her Form 1040. Read more about How a Partnership Pays Income Taxes.
  • A limited liability company (LLC) is not a taxing form for federal income tax purposes. A single-member (one person) LLC pay income taxes as a sole proprietorship. A multiple-member LLC pays income taxes as a partnership. Read more about How an LLC Pays Income Taxes.

     

    Copies of Small Business Income Tax Forms

    Here are the forms you will need for each type of small business (these are PDF documents):

    Business Financial Documents Needed to Prepare Small Business Tax Returns

    To file your small business income taxes, you will need to give some financial reports and other documents to your tax preparer. These documents include a balance sheet for the beginning of the corporation's fiscal year and the end of that year, a profit and loss statement for the end of the year, information to calculate cost of goods sold, and other documents.

    Below are the complete lists of information for filing sole proprietorship, partnership, and LLC tax returns.

    Don't Forget Self-Employment Taxes

    Small business owners must pay self-employment taxes (Social Security/Medicare taxes) at the rate of 15.3% on earnings from self-employment. For 2013, the 2% reduction in the self-employment tax rate is gone; so the 15.3% rate is back. Read more about how to calculate and pay self-employment taxes. A tax software program or tax preparer can calculate this tax for you. 

    Where and How to File Small Business Income Taxes

    You can file your tax return by mail or you can e-file the return. The last page of the instructions for Form 1040 lists the addresses to use for mailing your tax return to the IRS. 

    Filing an Application for an Extension on Your Taxes

    You may apply for an automatic extension of time to file your taxes, including small business taxes. The extension is for six months for non-corporate tax returns, so the due date for the return is October 15 (unless October 15 is a weekend or holiday).

    Your extension doesn't include an extension for payment.

    You must pay estimated taxes when by the April tax return due date.

    Read more about How to File an Extension for Your Taxes.

    • Filing an extension for personal tax returns (for sole proprietors and single-member LLCs), use Form 4868
    • Filing an extension for partnership tax returns (including multiple-member LLCs), use Form 7004.

    Filing an Amended Tax Return

    If you make a mistake on your tax return, whether the error is due to your business or to personal taxes, you must file an amended return. The form to amend your tax return depends on your business type.

    • To amend your personal return, including Schedule C, use Form 1040X-Amended Return.
    • To amend a partnership return. get another Form 1065 and check box G(5) on page 1. The IRS says you should attach a statement that identifies the line number of each amended item, the corrected amount or treatment of the item, and an explanation of the reasons for each change.
    • If you filed a partnership return and there is an error on Schedule K-1, or if the change to the 1065 causes a change in the information on the K-1, prepare an amended K-1. Check the "Amended K-1" box on the top of the Schedule K-1 to indicate that it has been amended. Then give the amended Schedule K-1 to the partner/member to file.

    Read more about Filing an Amended Tax Return.

    Paying Estimated Taxes

    If you don't pay enough taxes during the year, you must pay estimated taxes. Many small business owners must pay estimated taxes because they don't earn a salary so no taxes are withheld from their income from self-employment. Learn more about How to Pay Estimated Income Taxes.

    The Qualified Joint Venture: A Special Filing Case

    If you and your spouse are joint owners of a partnership, you may be able to file as a qualified joint venture. This means filing two Schedule C forms, for your respective shares of the business. It's complicated, so check with your tax professional to make sure you and your business qualify.