Compliance may be intimidating when it comes to taxes, especially for busy small business owners. But with some education and a detailed checklist, this doesn’t have to be the case. With the proper roadmap, tax compliance for small businesses can be easy.
Small business owners who maintain detailed records and are well-versed in the ins and outs of tax types, critical filing deadlines, and required forms can take steps throughout the year to make the tax preparation process smoother.
This article will offer a comprehensive checklist for small businesses to ensure they are tax-compliant.
Your Tax Compliance Checklist
Here are some essential tasks to include in your tax compliance checklist:
Know Your Tax Types
Small business owners are required to file both federal and state taxes. Depending on how your business is structured, you may be liable for four types of taxes.
- Income Tax: Income taxes are collected at local, state, and federal levels from the earnings of both individuals and businesses.
- Self-Employment Tax: According to the IRS, if you are a small business owner and work for yourself, you must pay a self-employment tax if your net earnings from your business are $400 or more.
- Employment Taxes: If your small business has employees, you’ll have employment tax responsibilities, which include withholding income taxes on wages and deducting social security and Medicare taxes.
- Excise Taxes: Some businesses are subject to excise taxes, which are taxes on the sale of specific goods or services like fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires, and tobacco.
Use The Right Forms
Searching through IRS forms can be confusing, so here are some of the most commonly used forms for small business taxes and who they apply to:
- Form 1040: For annual individual tax returns.
- Schedule C: Use this form if you’re a sole proprietor and must report your annual profit and loss. File this form along with Form 1040.
- Form 1040-ES: This is your voucher for making estimated tax payments.
- Form 1040-SE calculates the tax due on net earnings from self-employment.
- Schedule K-1: Business partners, S corporation shareholders, and investors in limited partnerships and certain exchange-traded funds (ETFs) use Schedule K-1 to report their earnings, losses, and dividends.
- Form 1120-S: For S corporations. They are used to report income or gains, losses, tax deductions, and business tax credits.
- 1099-Misc: Typically, this is required by landlords who have paid non-employee professionals for their service on the landlord’s property.
- 1099-NEC: Use this form to report non-employee compensation.
- Form 1120: C corporations are required to use this to report income, gains, losses, deductions, and credits and to figure out the income tax liability of the cooperative.
- Form 720: This form is used for reporting excise taxes related to your business.
- Form 1065: Partnerships file this form separately from their personal income tax returns to report their financial performance—profits, losses, deductions, and credits- to the IRS.
It’s important to note that you should always consult a tax professional when you have doubts about which forms your small business type should use.
Know Your Tax Deadlines
The IRS requires most small businesses to make quarterly estimated payments. If your company expects to owe a tax of $1,000 or more, these estimated payments are due on the following dates:
- Jan. 15, 2024: Fourth-quarter 2023 estimated tax payment due.
- April 15, 2024: First-quarter 2024 estimated tax payment due.
- June 17, 2024: Second-quarter 2024 estimated tax payment due.
- Jan. 15, 2025: Fourth-quarter 2024 estimated tax payment due.
Several other tax deadlines are essential for small business owners to be aware of:
- January 31, 2024: This is the deadline for employers to provide employees and independent contractors with W-2, 1099-NEC, or 1099-MISC tax forms.
- March 15, 2024: Deadline for partnerships, S corporations, or LLCs taxed as partnerships to file business tax returns. This is also the deadline to file Form 2553 for S corporations for the tax year 2023.
- April 15, 2024: This deadline is for C corporation tax returns, personal returns, and any necessary extensions.
- September 15, 2024: Deadline for partnership or S corporation returns if an extension was requested.
- October 16, 2024: Deadline for sole proprietorship corporate returns if an extension was requested.
Add these dates to your calendar to stay on your business tax checklist and avoid missed quarterly tax payment penalties.
Conclusion
If your small business follows this checklist, you’ll be poised for a smooth, headache-free tax season. Several business accounting software programs help you navigate the correct forms for your business type and discover eligible business tax deductions to reduce your taxable income.
But your best strategy to avoid non-compliance issues is to hire a certified public accountant like the professionals at AA Tax & Accounting Services to handle the filing process for your small business. Contact us today.
