Small Business Tax Filing: What You Need Before You File

Introduction

With a variety of federal, state, and local tax regulations, it can get overwhelming to file taxes properly. This is especially true for small businesses that are just starting out and have to navigate the choppy waters of the tax season.

Despite it being a complex process, it’s crucial for businesses to file taxes on time. A failure to do so could result in fines, penalties, and IRS audits.

In order to simplify the tax filing process for businesses, we have created a guide that covers all the basics of small business tax filing, tax filing checklist, and everything you need to know to prepare for a stress-free tax filing.

Understanding Small Business Tax Filing Basics

Before you get to the actual tax filing process for your business, there are a few basics you should understand. This knowledge will help you make tax filing a lot easier and a lot less complicated.

Business structures

When you start a business, you need to identify your business structure. The type of business entity you establish will determine the type of tax form(s) you will need to file.

Here are the five common types of business structures:

• Sole proprietorships: You fall under this category is you own an unincorporated business by yourself.

• Partnerships: This is a relationship between two or more partners to conduct business together.

• Corporations: A C corporation involves conducting business where shareholders are included. This business structure is considered a single tax paying entity. Your business computes net income or loss, pays taxes, and distributes profits to shareholders.

• S corporations: S corporations choose to pass their income, losses, deductions, and credits through to their shareholders for IRS tax purposes. The shareholders of these corporations report their income and losses on their personal tax returns. This is done to prevent double taxation on the corporate income.

• Limited liability company (LLC): An LLC business structure is allowed by different state statutes in the US. Each state may have its own tax regulations, so you need to be aware of tax laws for the state that you are running your business in.

Depending on the type of your business structure, you will need to file different types of business taxes. You can find the information about the forms required for each business entity on the following official links of IRS:

• Sole proprietorships

• Partnerships

• Corporations

• S corporations

• Limited liability company (LLC)

Types of small business taxes

Small businesses are liable to pay different types of taxes, both federal and local. The exact types of taxes you need to pay depends on your business structure.

The following are the list of taxes businesses must pay. However, not every tax type is relevant to every business, and you should determine the types of taxes you need to pay based on your business structure.

1. Income tax

All types of business entities need to file federal income taxes each year except for partnerships.

Forms required:

• Sole Proprietorship: Schedule C (Form 1040)

• Partnership: Form 1065 (profits/losses flow through to partners)

• S-Corporation: Form 1120-S

• C-Corporation: Form 1120

2. Self-employment tax

Self-employment tax returns are filed by sole proprietors, partners, and LLC members.

Form required:

• Schedule SE (Form 1040)

3. Employment tax

Businesses with employees also need to file employment tax returns as directed by the IRS.

Forms required:

• 941

• 940

• W-2

• W-3

4. Excise tax

Businesses selling specific products or services, including fuel, alcohol, tobacco, transportation, and heavy trucks, need to file excise taxes.

Form required:

• Form 720

5. State and local taxes

Small businesses must also file state and local tax returns which imposed by state and local governments. These include:

• Income taxes

• Property taxes

• Franchise taxes

• Business license fee

Important tax due dates

Form No.	Title	Purpose	Due date
W-2	Wage and Tax Statement	Employers must provide employees with statements regarding total compensation and amounts withheld during year.	Must be sent to employees on or before 31 January.
1099 series	Various	Information returns to be provided to the IRS and recipients of dividends and distributions, interest income, miscellaneous income, etc.	Must be sent to the recipients on or before 31 January. Must be filed with the IRS on or before 31 January, 28 February, or 31 March, depending on the type of filing and whether the filing is electronic or on paper.
1120 series, including 1120S (for S Corps)	US Corporation Income Tax Return	Income tax returns for domestic corporations or foreign corporations with US offices.	15 April for C corporations, 15 March for S corporations (Form 7004 may be filed to obtain an automatic six-month extension).
Schedule K-1 (including Schedules K-2 and 3)	Partner's Share of Income, Deductions, Credits, Etc.	Information returns to be provided to partners.	15 March.
1065	US Return of Partnership Income	Information returns to be filed by partnerships.	15 March (Form 7004 may be filed to obtain an automatic six-month extension).
State tax returns	Various	Income tax returns for states where corporation carries on trade/business.	Varies, often 15 April.

Source: PwC

Small Business Tax Filing Checklist

Here are the key documents and reports you need to have handy during the tax season to file your taxes properly:

• Business Information & Documentation

  • Employer Identification Number (EIN) / SSN

  • Business legal structure documents (LLC agreement, incorporation papers, etc.)

  • Prior year’s tax returns

• Income Records

  • Invoices and sales records

  • 1099-NEC, 1099-K, and other income statements

  • Bank statements showing deposits

  • Other income (grants, interest, etc.)

• Expense Records

  • Business expense receipts and invoices

  • Office rent/utilities bills

  • Employee payroll records

  • Marketing/advertising expenses

  • Vehicle/mileage logs

  • Travel and meals documentation

• Asset & Liability Information

  • Equipment purchases (with depreciation details)

  • Loan agreements and interest statements

  • Property or vehicle records

• Tax Forms & Deductions

  • Forms required by business type (Schedule C, 1120, 1120-S, 1065, etc.)

  • Estimated tax payment receipts

  • List of deductions and credits applicable to small businesses (home office, insurance, retirement contributions, etc.)

Download our Year End Tax Preparation Checklist to ensure a hassle-free tax season

Why You Need to Organize Your Financials before the Tax Season

A key part of preparing for the tax season includes organizing all the financial information of your business. Below are the major benefits of having organized financial records before the tax season starts looming over your head:

• Save Time and Reduce Stress: When your documents are in order, you won’t waste hours digging through emails, folders, or old bank statements. Instead, you’ll be able to file quickly and confidently.

• Avoid Costly Mistakes: Disorganized records often lead to missed deductions, forgotten income, or incorrect entries. These mistakes can result in higher tax bills, penalties, or even an IRS audit.

• Maximize Deductions and Credits: Having clear records of expenses, like mileage, office supplies, or business travel, ensures you can claim every deduction you’re entitled to without second-guessing.

• Ensure Compliance and Stay Audit-Ready: Tax authorities expect accurate, well-documented records. By keeping your financials organized, you’ll be prepared if you’re ever asked to provide supporting documents.

• Make Better Business Decisions Year-Round: Organized financials aren’t just about tax filing—they help you understand cash flow, profitability, and growth opportunities, giving you better control over your business.

• Smooth Collaboration with Professionals: If you work with an accountant or tax preparer, having organized records saves them time (and reduces your billable hours). It also ensures they don’t miss key details when filing on your behalf.

Also read: How to Organize Your Financials for Tax Season

Common Mistakes to Avoid During the Tax Season

• Mixing Business and Personal Finances: Using a personal account for business expenses leads to missed deductions and inaccurate reporting. Always keep separate business bank accounts and credit cards and use accounting software to categorize transactions properly.

Checkout Practical Tips to Separate Your Personal and Business Finances for efficient tax filing.

• Poor Record-Keeping: Not maintaining organized records risks missed deductions and IRS audits. Save digital and physical copies of all receipts, invoices, and financial statements. Use software like QuickBooks or Xero for year-round accuracy.

• Failing to Report All Income: Omitting income from investments, asset sales, or third-party platforms (like PayPal) can trigger penalties and audits. Ensure that every income source is tracked and reported, including rare or one-off transactions.

• Overlooking Deductions and Credits: Many small business owners ignore eligible tax deductions (home office, retirement contributions, capital improvements) and credits. Research applicable write-offs and consult a CPA to maximize your savings.

• Misclassifying Employees and Contractors: Incorrect worker classification leads to IRS penalties. Use IRS guidelines to distinguish between employees and contractors, especially when hiring freelancers or remote staff. Seek professional advice if unclear.

• Filing or Paying Late: Missed filing deadlines bring penalties and interest. Mark key quarterly estimated tax deadlines (April 15, June 15, September 15, and January 15) and annual tax deadlines on your calendar. Consider a tax professional to ensure timely submission.

• Underpaying Estimated Taxes: Not paying enough estimated taxes quarterly can result in penalties. Calculate your estimated taxes accurately using IRS tools and pay by each due date.

• Making Incorrect Employment Tax Deposits: Late or incorrect deposits for employment taxes can trigger penalties. As an employer, ensure you withhold and deposit taxes promptly and accurately, referring to the IRS Employment Taxes guide.

• State Tax Filings Mistakes: Not filing in the correct states, especially if you have remote employees, brings compliance risks. File state taxes where your employees live and where your company operates. Consult tax professionals if unsure.

• Math and Data Entry Errors: Spelling mistakes, missing digits in account numbers, or arithmetic errors can delay processing and lead to audits. Double-check all details before submitting forms.

Quick tips to avoid these mistakes

• Separate business and personal expenses always.

• Implement robust bookkeeping and use digital tools.

• Track every income stream, even rare or small ones.

• Study eligible deductions for your business type.

• Follow IRS definitions for worker classification.

• Mark and respect quarterly and annual deadlines.

• Pay estimated and employment taxes accurately and on time.

• File required state returns for each state you and your employees work in.

• Carefully proofread every tax document before filing.

How Can Fincent Help with Tax Preparation

Fincent provides you year-round tax filing support so you don’t have to worry about tax preparation or filing returns.

Here’s how we help businesses with tax filing and prep:

• Year-round business tax advisory: Whether it’s S Corp, C Corp, federal/state income tax, franchise tax or even 1099s — our licensed tax specialists help you navigate tax season with confidence, start to finish.

• Filing tax returns: Fincent helps you stay ahead of tax deadlines, leave no deduction behind, and file timely and accurate returns. That means less stress and more money back in your pocket.

• Tax-ready financial statements every month: Your personal bookkeeper organizes transactions, closes your books and prepares tax-ready financial reports by the 15th of the month, so you’re always prepared.

• Financial organization and management: With a real-time view of income, expenses and profits, Fincent helps you manage your finances, track bills and invoices, even securely pay bills, all in one place.