The thought of dealing with tax returns is enough to bring dread into the hearts of any business owner, and understandably so—the IRS hasn’t always made it easy to get started with tax preparation. That said, as a small business owner, you want to make sure that you accurately and promptly file your tax forms and pay your dues. After all, no one wants to be slammed with interest charges, fines, or even jail time for unpaid taxes!
Today, most businesses are eligible to e-file their taxes, which is far quicker and also decreases the likelihood of data-entry error. And since you’re more likely to receive your tax refund more quickly via direct deposit or electronic payment, there’s plenty of benefits of using the IRS’ online services for your small business taxes.
If you’re not sure where to begin with small business taxes or self-employment taxes, we’re here to help. We’ll provide tips on what financial records you need to keep, insight into your potential business structure, how to choose the best online tax software, and more.
- Before you start with filing forms, one of the first things you should do is determine your business structure.
- Make sure you store all your financial documents to use when filing your taxes, like bank statements, payroll records, and previous tax returns. Then, choose the right tax software and use the appropriate tax form for your business situation.
- Carefully e-file your small business tax returns and make quarterly payments. When in doubt about your tax situation, contact a tax professional or accountant.
Determining Your Business Structure
Before you start with filing forms, one of the first things you should do is determine your business structure. If you’re not sure what business structure you have, we recommend reaching out to an attorney or tax accountant for more information. That said, here are the four most common structures:
- Sole proprietorship: As a sole proprietor, you solely own an unincorporated business.
- Partnership: Individuals are taxed based on their share of the business’ net income.
- Limited liability corporation (LLC): Also taxed based on the share of business net income, but members are generally not held personally liable for the company’s debts/liabilities.
- Corporation: The only entity that pays federal taxes based on net earnings, since it’s seen as separate from its owners. S corporations were specifically designed for small businesses, as it’s possible to avoid double taxation and owners have limited liability protection.
Gathering Financial Records
As you prepare for tax filing season, it’s important to always store your financial documents to use when filing your taxes. While the below isn’t an exhaustive list, here are the main documents you should keep for your taxes. If you’re in doubt about whether to keep it or not, err on the side of caution and keep it.
- Bank statements: Keeping records of your bank statements shows the IRS that you are generating revenue and income. Most banks will provide monthly statements and a year-end report, either physically or digitally—but make sure to download or store them somewhere safe for at least three years. If you work with a point of sales (POS) system, make sure to also keep those gross receipt documents; if you work with cash, keep the cash receipt books as well.
- Invoices: Make sure you keep both payable and receivable invoices. There should be a clear description on the invoice and they need to be kept for no less than seven years in the event you’re audited by the IRS.
- General expenses: Do you work from home and have an office set-up? Travel to clients using your personal vehicle? Did you buy a laptop that you use for your eCommerce store? These expenses are deductible, so keep the receipts when filing your small business income tax return.
- Payroll records: If you have employees working for you, you should have payroll records of them, which will include important info like their paychecks, timecards, PTO, and much more. Federal law requires payroll records be retained for at least three years. For tax records relating to unemployment taxes or social security, it’s four.
- Tax returns: If you work with a tax expert, they’ll probably want to check your returns from the previous year. Plus, the IRS cpould request them if audited, so make sure to keep them for no less than three years.
Remember, for all these records, it’s best to store them digitally: not just on your computer, but somewhere in the cloud, like on Google Drive or Dropbox. That way, they can always be accessed no matter what.
Choosing the Right Online Tax Software
With a plethora of popular tax software packages out there, it can feel almost as difficult as doing your taxes to find the right software that streamlines doing taxes with electronic filing. Here are our tips to help you get started in the right direction.
- TurboTax: Perhaps the most well-known option, TurboTax provides stellar live assistance, and can handle all small business structures. However, it’s a little pricier than other alternatives.
- Quickbooks: This solution integrates seamlessly with Stax, allowing you to securely auto-sync customer and business data across platforms, saving significant time when filing taxes.
- Cash App Taxes: If you’re self-employed or just on a tight budget, this option is completely free with no upsells or strings attached. The drawback is that they don’t offer phone support.
- H&R Block: Perfect for small or large business owners, H&R Block provides a solid mobile app and an easy-to-use desktop interface for uploading documents.
Note that if you have a complicated tax return or it’s your first year filing as a business owner, it’s best to pay a tax professional for your first tax year. Afterwards, you can consider doing it yourself. And if you’re unsure of what to look for in a tax software provider, see to it that they’re upfront with their pricing (tiers), have ample support options so you can contact them with any questions, and cover your specific tax situation.
What You Need to Know About Business Tax Forms
With literally dozens of tax forms you can use as a small business owner (with different due dates!), it’s no wonder that you might be stressed with figuring out which forms you should fill. Here are the top five forms you should be aware of, depending on your business activities and deductions.
- Form 1040: Virtually all U.S. taxpayers must file Form 1040. If you earn income (unless you’re tax-exempt), you will need to file this to report on profit and loss by April 18. Use Schedule-C to provide more information on your business income if you’re a sole business owner.
- Form 1065: Use this form if you’ve filed a partnership or a multi-member LLC treated as a partnership. Deadline is March 15.
- Form 1120: Use the U.S. Corporation Income Tax Return to report on your corporate income or losses if you’re a regular corporation. The due date is the 15th of the 4th month after your corporation’s tax year.
- Form 1120S: If you’re an S corporation, use this form, due on the 15th day of the 3rd month after the tax year ends.
If you have a more complicated business structure, it’s best to confirm with a tax professional on which form you should fill. The same applies if you’re unsure about tax deductions you could maximize, or credits you could be eligible for (like energy efficiency or R&D). And always make sure to keep the due date in mind!
Filling Out and Paying Your Small Business Taxes
When filing your tax forms, have all supporting documentation on hand and make sure to carefully follow each step and provide the most accurate information possible. Take your time and always make sure to double-check your entries to prevent any potentially costly mistakes.
Instead of doing it in one go, give yourself at least two sittings to fill out your taxes, and always check them with a fresh pair of eyes. Then, you can e-file your taxes and you’re good to go!
Don’t forget to stay abreast of your small business tax payments, which you can pay directly on the IRS website or with the IRS2Go app. Generally, you’re expected to make payments on your estimated taxes after the end of each quarter, based on the income expected to earn that year. If you overpay, you’ll be refunded—which is why e-filing is a great way to ensure you get your money back faster!
Yes, dealing with small business taxes can be daunting, but by proactively managing all aspects of your business, you’ll make the process of filing your taxes so much easier. Fortunately, Stax can help with our all-in-one payment processing platform.
Designed to grow your business, we provide comprehensive payment options, customized invoicing, and more—all for an optimal payment experience. And with in-depth financial reporting and analytics, we make filling out your taxes is that much easier—just what the doctor ordered!
Contact our payment experts to learn how you can ensure your small business thrives.Request a Quote
FAQs about How to File Business Taxes Online
Q: Can you file business taxes online?
Yes, the IRS and most states provide several options for businesses to electronically file their taxes. These include IRS e-File, authorized e-File providers, IRS Free File (for qualifying small businesses) and state electronic filing portals
Q: What are the benefits of filing business taxes online?
The main benefit of filing business taxes online is that the process is faster and more convenient than filing by mail. It’s also more accurate, as the IRS can automatically check your calculations for errors. Plus, filing your taxes online is quite secure as your data is encrypted and transmitted to the IRS electronically.
Q: What are the tax forms businesses need to file?
The specific tax form you need to complete will depend on your business type and structure. The most common tax forms are: Form 1040, Form 1065, and Form 1120S.
Q: Can I file business taxes online on my own?
You certainly can. That said, if you have a complicated tax return or it’s your first year filing as a business owner, it’s best to pay a tax professional for your first tax year. Afterwards, you can consider doing it yourself.
Q: When is the deadline for filing business taxes online?
The deadline for filing business taxes is generally April 15th. However, there are some extensions available. Also remember that you may need to pay estimated taxes after the end of each quarter, based on the income expected to earn that year. This is due on the following dates:
- April 15th: For income earned from January 1st to March 31st.
- June 15th: For income earned from April 1st to May 31st.
- September 15th: For income earned from June 1st to August 31st.
- January 15th of the following year: For income earned from September 1st to December 31st of the current year.