Most business owners would agree that the biggest challenge to starting your own company—above the ideation, funding, and execution—is the paperwork that’s required behind the scenes. Pursuing your dream and bringing a vision to life is a fulfilling, aspirational endeavor, but juggling all the loose ends and filing the necessary business tax forms can seem like too large of a hassle to even approach.
We’ve collected the most essential documents from our tax form database that small business owners need to know about if they want to stay out of hot water with the IRS. Individual taxpayers are under the impression that tax season rolls around “once a year”, but business owners are tasked with navigating the complex sea of tax code all year round.
Click on a link below to learn more about necessary tax forms for small businesses, including what to file, when, and why.
- Tax Forms for Starting a Business
- Small Business Tax Return Forms
- Tax Forms for Business Expenses
- Tax Forms for Small Business Employers
- General Tax Forms for Small Businesses
- Specialized Tax Forms for Small Businesses
Tax Forms for Starting a Business
Every month, a growing amount of entrepreneurs make the leap and decide to open their own business. If you’re thinking about launching your startup, these are the essential business tax forms you’ll need to begin operating.
- Form SS-4, Application for Employer Identification Number: If you have employees, or if you’re forming a business structured as a sole proprietorship, partnership, or corporation, you need to apply for an employer identification number (EIN) with this form. Similar to a Social Security number, a nine-digit EIN is assigned to businesses and entities (such as trusts and estates) for tax filing and reporting purposes.Note: You may not require an EIN if you are a sole proprietor with no employees and do not owe excise taxes.
- Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding: For entrepreneurs just getting their start, it can sometimes be tricky to determine the difference between an employee and an independent contractor. For that reason, both workers and employers may file Form SS-8 to request a determination of worker status.Knowing the difference between the two titles matters severely in terms of taxation responsibility. Employers must withhold income and FICA taxes on behalf of their employees, whereas independent contractors are tasked with fulfilling this obligation independently.
- Form 2553, Election By a Small Business Corporation: The majority of small businesses (42%) are structured as an S Corporation, which is a hybrid between a partnership and a C Corporation. S corporations are unique because they pass income, losses, deductions, and credits through to their shareholders for income tax purposes.
In order to achieve this status, a business will need to do more than file Form SS-4 and check the box with the structure of their choosing. They must elect to become an S Corporation by submitting Form 2553, signed by all shareholders, and in many community property states, by the shareholders’ spouses.
- Form 8832, Entity Classification Election. This business tax form also allows owners to choose how the entity will be classified. Taxes will be assessed differently depending on whether the business is structured as a corporation, partnership, or an entity disregarded as separate from its owner.
Small Business Tax Filing Forms
Which small business tax form you will need to use when filing your income tax return depends on how your organization is structured.
- Form 1040, U.S. Individual Income Tax Return: If your small business operates as a sole proprietorship, then your company’s income “passes through” to you. You’ll report your business’s profits and losses on Form 1040, which is the standard income tax return form used by most individual taxpayers.
- Schedule C, Profit or Loss from Business: This business tax form is for sole proprietors who need to report income or loss, unless they are using Schedule C-EZ, Net Profit from Business.
- Schedule E, Supplemental Income and Loss: If your small business is a partnership or an S Corporation, report annual income or loss on Schedule E of your Form 1040.
- Schedule F, Profit or Loss from Farming: Schedule F (1040) is tax form for business owners who are involved with cultivating, operating, or managing a farm for profit. Once Schedule F is completed, all losses are deducted from the total income to determine the net income of the farming activity, which is then reported on page one of Form 1040.
- Form 1040-ES, Estimated Tax for Individuals: Most businesses that expect to owe $1,000 or more in federal taxes are required to make quarterly estimated tax payments. Estimated tax is the method used to pay tax on income that is not subject to withholding (for example, earnings from self-employment, interest, dividends, rents, etc.).
In many small businesses, the owner is responsible for paying the income tax—not the business itself. This is done by mailing a check or money order with the payment voucher found on Form 1040-ES, or by submitting a payment online or via phone. Be sure to submit timely deposits, or you might be assessed a penalty fee for missing the deadline.
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- Form 1065, U.S. Return of Partnership Income: Before partners can file profits or losses passed through their business onto their individual tax return, they must first submit Form 1065 (also known as the “Partnership Tax Return”).
- Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.: Use this small business tax form to distribute shares of the partnership’s income and losses; each partner will then use the information on the Schedule K-1 to complete their own Form 1040, where they will be taxed based on their portion of the profit.
- Form 1120, U.S. Corporation Income Tax Return: Domestic corporations use this business tax form to report their income, gains, losses, deductions, and credits, as well as to calculate their income tax liability.
- Form 1120-S, U.S. Income Tax Return for an S Corporation: If you’ve elected to become an S Corporation, then your business will use this tax form for the same purpose as above.
Tax Forms for Business Expenses
In most cases, expenses are claimed and itemized on the partner’s, owner’s, or shareholder’s individual return, but there are a couple of small business tax forms you may need to file separately to reduce your tax obligation.
- Form 4562, Depreciation and Amortization: When businesses purchase property, the IRS does not allow the business to claim the full cost as a deduction within the first year. However, they can deduct a portion of the cost by reporting depreciation or amortization using Form 4562. The former refers to the decline in value of tangible assets, such as a building or new piece of equipment, while the latter refers to intangible assets, such as patents and copyrights.
For example, if your business purchased a piece of equipment that cost $5,000 and had a “useful lifespan” of five years, you could deduct $1,000 each year using standard depreciation on Form 4562.
Form 8829, Expenses for Business Use of Your Home: If you’re like 69% of U.S. entrepreneurs who start their business at home, then you may be eligible to claim your home office as a deduction on your tax return. Form 8829 is used to figure the allowable deduction for business use of your home, which is then reported on Schedule C (1040).
Although this is one of the most common small business deductions, you must be sure that you meet the strict IRS requirements before claiming home office expenses. The space must be used regularly and exclusively for business purposes only, so an office that is shared with other members of the family would not qualify.
Tax Forms for Small Business Employers
Once your small business hires its first team member, you may need to use these tax forms for contractors and employees.
- Form I-9, Employment Eligibility Verification: All employers must ensure proper completion of Form I-9 for each individual they hire within the United States. To complete the form, employees must provide you with acceptable documents that provide evidence of identity and employment authorization.
- Form W-2, Wage and Tax Statement: You must file a W-2 for any employee whom you pay $600 or more within a year. This document informs the IRS of the employee’s Social Security, Medicare, and income tax withheld.
- Form W-4, Employee’s Withholding Allowance Certificate: Give this to your employees at the beginning of their employment to calculate how much income tax to withhold from their paycheck on a weekly, bi-weekly, or monthly basis.
- Form W-9, Request for Taxpayer Identification Number and Certification: If your small business hires contractors, not employees, then a W-9 will allow you to keep track of your external workforce. This document signals to the IRS that a taxpayer is not subject to backup withholding and is responsible for paying his or her own taxes, unlike standard employees.
- Form 1099, Miscellaneous Income: If you are self-employed as an independent contractor, your clients may be required to issue Form 1099-MISC if they pay you more than $600 in a year for your Because this income is not subject to employment-tax withholding, you will need to pay the self-employment tax yourself..
Note: If you are self-employed, you are required to report any income earned over $400, regardless of whether or not you receive a 1099-MISC.
- Form 940, Employer’s Annual Federal Unemployment Tax Return: Employers who have more than one employee for over 20 total weeks (not necessarily consecutive) in a calendar year, and employers who pay employees more than $1,500 in wages during a calendar quarter, must file Form 940 at the end of the year to satisfy the Federal Unemployment Tax Act (FUTA).
- Form 941, Employer’s Quarterly Federal Tax Return: This is a mandatory tax form for small business owners with employees. If you pay anyone wages, you must use Form 941 to notify the IRS of your employees’ taxable income and liability, which should reflect the information on their W-2. All businesses are expected to submit this form four times per year, at the end of April, July, October, and January. Seasonal employees do not require Form 941 if, and only if, they do not work an entire quarter.
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- Form 944, Employer’s Annual Federal Tax Return: This tax form for business owners is reserved for the smallest employers whose annual liability for Social Security, Medicare, and withheld federal income tax is less than $1,000. In this case, you are only required to pay these taxes annually using Form 944 instead of quarterly with Form 941.
- Form 5300, Application for Determination for Employee Benefit Plan: 79% of employers believe that offering benefits to employees is a critical for attracting talent. If you agree and would like to offer your employees benefits, then use Form 5300 to request a favorable determination letter from the IRS regarding the qualification of a defined contribution or a defined benefit plan.
- Form 5309, Application for Determination of Employee Stock Ownership Plan: If you’ve considered an employee stock ownership plan (ESOP), which gives your workers ownership interest in the company, then you need to first apply using Form 5309 to ensure your plan meets the IRS criteria.
General Tax Forms for Small Businesses
Below are a few general tax forms that businesses may need throughout the year in order to keep current with the IRS.
- Form 8822-B, Change of Address or Responsible Party: Submit this form to notify the IRS that your business has changed location or mailing address. This form is also used to inform the IRS of a change in identity of your business’ responsible party within 60 days of the change.
- Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Return: Use Form 7004 to request an automatic extension of time to file your business return. Generally, this must be submitted on or before the due date of the applicable return. There may be a variety of reasons for why you’ve procrastinated on taxes, but an extension may be able to help you avoid or minimize late fee penalties.
- Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts: If you do not pay your estimated taxes on time or in full, you will be required to calculate your penalty using this small business tax form. Before you are forced to file Form 2210, remember that you have the option to request an extension for your return. If you’d like to dispute a payment penalty, you have the right to seek IRS abatement services.
Note: Farmers and fisherman are exempt from regular estimated tax requirements, as detailed in Form 2210-F.
Specialized Tax Forms for Small Businesses
These small business tax forms are less common, but may still be necessary under certain circumstances. If you’re not sure which forms you are responsible for, talk to a professional tax advisor who can provide clarification and ensure your good standing.
- Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts: If your small business offers a benefit package, you may need to file Form 5329 to report additional taxes on qualified retirement plans, IRAs, modified endowed contracts, Coverdell ESAs, QTPs, Archer MSAs, or HSAs.
- Form 8283, Noncash Charitable Contributions: Use this business tax form to report noncash charitable contributions amounting to $500 or more in order to have the donation deducted from your tax return. There are three categories of taxpayers who may need file Form 8283:
- Individuals who have contributed $500 or more in noncash donations
- Partnerships and S Corporations who have contributed $5,000 or more in noncash donations
- C Corporations who have contributed $5,000 or more in noncash donations
Because the donation is not monetary, the item(s) must be appraised at fair market value (FMV) when you prepare your taxes. If you plan to use Form 8283, be sure to keep proper documentation of your appraisal in order to protect yourself from an audit.
- Form 8606, Nondeductible IRAs: Business owners with an IRA may use Form 8606 to report their nondeductible contributions, which refers to any money you contribute to a traditional IRA that you do not deduct on your tax return. Although you do not deduct them, you must still report them on Form 8606; doing so will save you money down the road, as this form establishes that the money has already been taxed and thus cannot be subject to taxation at the time of distribution.
For help with preparing your small business tax forms, enlist the services of a Community Tax professional. Our team of tax experts can help minimize your business’s tax obligation, meet all federal deadlines, and maintain compliance with the IRS.