Filing business taxes shouldn’t be stressful or complex – with proper preparation and an organized system in place, filing taxes for your business shouldn’t be difficult or complicated. By eliminating penalties and optimizing deductions, filing can become straightforward.
From understanding your tax obligations based on your business structure to discovering potential deductions, this article covers all the essentials.
1. Tax deductions
Use tax deductions as one of the key strategies for lowering business taxes. Deductions lower taxable income and can release money that you can invest elsewhere or put away into your personal account.
Small-business owners can take advantage of various tax deductions available to them when running a small-business, including professional software subscriptions, marketing expenses, client outreach expenses and education for employees. Service-based companies such as law firms or marketing agencies may be able to write off employee salaries, equipment purchases and inventory purchases while retail stores may claim store rent, unsellable inventory purchases and professional software purchases as tax deductions.
The IRS taxes companies based on their taxable income, which is calculated by subtracting deductions and credits from annual revenue. Therefore, it’s crucial that businesses closely track their profit and loss throughout the year.
In order to maximize tax deductions, careful record-keeping is key. Utilizing accounting software and maintaining logs of receipts are great starting points, but for a deeper understanding of which deductions you’re eligible to take and their effects on your business, consider hiring a CPA or enrolled agent who will understand your specific company and offer tailored advice.
2. Tax payments
Keep track of small business tax payments throughout the year to help owners remain organized and plan ahead, while also avoiding unexpected penalties or fees that might pop up unexpectedly.
Federal taxes vary based on a business structure and industry. The IRS offers resources for owners looking for forms suitable for their specific businesses; small companies often opt for structures like sole proprietorships, partnerships and limited liability companies (LLCs) because they provide benefits like pass-through taxation; larger businesses typically utilize C corporations which must adhere to more stringent compliance standards.
Additionally to income taxes, businesses may also owe state sales and use taxes, payroll taxes and other state obligations depending on whether they have physical presence in that state or not as well as transaction thresholds that trigger those obligations.
Tax information will enable business owners to make informed decisions regarding how their capital should be utilized. For instance, if there is extra cash lying around, owners could invest it into equipment or assets that can increase productivity.
Accounting software is essential for small business owners, as they can use it to keep an accurate record of their income, expenses and profit while getting insight into which expenses may be tax deductible. Furthermore, these tools help calculate any outstanding taxes.
3. Forms
The IRS provides small business tax forms that enable you to accurately report income and pay any owed taxes. Depending on your company’s legal structure, industry and number of employees, certain IRS forms must be filled out for reporting purposes.
Form SS-4, Application for an Employer Identification Number (EIN). An EIN is a nine-digit number assigned by the IRS to companies, partnerships, trusts, estates and certain individuals that identifies them as separate tax accounts. Many states and localities also require business owners to apply for state-specific EINs.
Form 941, Employer’s Quarterly Federal Tax Return, will enable you to report payroll taxes on employees. It must be submitted four times each year: at the ends of April, July, October, and January. You may also require other employer-specific forms for performance bonuses and insurance premium deductions or quarterly estimated tax payments.
Finally, your company will require state and local tax forms if it pays property or sales taxes. Property tax obligations depend on location and business structure while sales tax laws change constantly in different states; your state’s taxing authority should have more information. Keep detailed records of your expenses related to equipment, office space and employee salaries in case a tax audit takes place – you’ll likely need them for verification purposes!
4. Filing deadlines
Keep filing deadlines in mind regardless of whether you operate as an LLC, S corporation, C corporation or traditional corporation to avoid surprises come tax season and ensure that any deductions, credits or payments that you’re eligible for won’t slip away.
If you’re self-employed and don’t have taxes withheld from your paychecks, quarterly estimated tax payments must be made by the 15th of each month (or the next business day if that date falls on a weekend or holiday). Use IRS Form 1040-ES to calculate and submit online.
Additionally, you should understand any state or local taxes applicable to your small business, including sales and excise taxes as well as property and franchise taxes.
The information in this article is intended for general educational use only and should not be taken as legal, business, or accounting advice. You should seek guidance from an appropriate advisor regarding any specific business, financial, or tax matters you have. For more information about how Bench can assist your books today, schedule a free consultation with one of their tax specialists now! The deadline to file personal income taxes for 2025 in most time zones is April 15, midnight in your timezone; as for businesses there may be additional payments such as quarterly income taxes payments or payroll taxes due.
