How to File Small Business Taxes

Knowing how to file small business taxes is one of the most important skills every entrepreneur must master. Keeping on top of the different rules for each business structure and year-round responsibilities often seems overwhelming, especially for new business owners who are just getting a handle on daily operations.

However, filing business taxes doesn’t have to be stressful. Approaching tax season with confidence, avoiding costly penalties, and keeping more of what your business earns is possible with the right partner by your side.

1. Know What Your Business Structure Means for Your Taxes

Your business structure plays one of the biggest roles in determining how you file your business taxes. This is because your legal entity impacts everything from which forms you file to how your income is taxed.

Choosing the right structure in the first place is one of the key decisions that will make filing easier. It could even reduce your tax burden. An expert in tax planning services will help determine which structure is most favorable for you and show you how to take advantage of the benefits your chosen structure offers. 

Important note: Your business structure also affects your liability protection, ownership flexibility, and whether your business income is taxed individually or at the corporate level. This makes choosing the right structure one of the most important decisions as you establish and grow your business.

Common Business Types and How They're Taxed

How you file small business taxes depends on the business type you choose. Your accountant will ensure you file your taxes correctly according to your business’s status.

Sole Proprietorship

Sole proprietorships are the most popular business structure across the United States. This is partly thanks to the simplicity of its structure. Your business isn't taxed separately. Rather, you report all income and expenses on Schedule C alongside your personal Form 1040. Sole proprietors are also responsible for self-employment taxes on net earnings.

Single-Member Limited Liability Company (LLC)

Single-member LLCs are treated the same as sole proprietorships for tax purposes by default. This means you'll also file Schedule C unless you've elected to be taxed as a corporation (S corporation or C corporation). This structure offers added liability protection without changing tax reporting.

Multi-Member LLC/Partnership

Multi-member LLCs are most commonly taxed as partnerships. The business must file Form 1065. Each member will also receive a Schedule K-1 that shows their share of the profits or losses. They must report this share on their personal income tax returns.

C Corporations

C corporations file Form 1120. They pay taxes on corporate profits. Any dividends distributed to shareholders are taxed again on their personal returns (known as "double taxation").

S Corporations

S corporations use Form 1120-S and issue Schedule K-1 forms to shareholders. Income, losses, deductions, and credits pass through to their personal returns. This means they sidestep double taxation.

Keeping up with your tax obligations is a huge task. This is especially true for business owners who channel all their energy into growing their business. That’s why most small business owners take advantage of professional tax preparation services to ensure tax filing is stress- and incident-free.

2. Fulfill Federal, State, and Local Tax Obligations

Small businesses are responsible for more than just filing an annual return. Small and medium-size business owners must also handle a combination of federal, state, and local tax obligations throughout the year.

Federal Tax Obligations

Most small businesses must meet several federal tax requirements. What you owe depends on your business structure and whether you have employees:

• Federal Income Tax: Every business must file a federal return. Sole proprietors and single-member LLCs report business income on their personal returns. Individuals in partnerships or corporations file business taxes separately.

• Self-Employment Tax: This tax covers your Social Security and Medicare contributions. Report this using Schedule SE if your self-employment income exceeds $400 in a year. The term “self-employed” includes sole proprietors and single-member LLC owners.

• Payroll and Employment Taxes: Businesses with employees must withhold and remit federal income tax withholding, FICA taxes (Social Security and Medicare taxes), and the Federal Unemployment Tax (FUTA). You must also file quarterly and annual payroll tax forms.

• Nonemployees (Contractors and Freelancers): You must file Form 1099-NEC if you pay independent contractors, freelancers, or other nonemployees for services in your business.

State and Local Tax Obligations

Common state and local tax requirements include:

• State income tax (this applies to the business and/or the owners, depending on the business entity)

• State employment taxes

• State unemployment insurance

• Sales tax collection and remittance for businesses that sell taxable goods or services

• Local business taxes

State and local tax requirements differ vastly by state and municipality. Always work with a tax professional to stay on top of your obligations and ensure compliance with federal and state tax authorities.

Other Business Taxes

Your business may also be subject to the following taxes, depending on its activity:

• Capital gains tax

• Property tax

• Dividend tax

• Excise tax

• Sales tax

Your accountant will be able to advise you on which taxes apply to you and handle the paperwork relevant to each one.

Can You Correct Small Business Tax Mistakes?

Yes, you can and must correct small business tax mistakes. Learn how to file back taxes if you failed to submit a past return. 

File an amended tax return to redress discrepancies in past federal or state taxes that you did file. It's best to correct mistakes as soon as possible. Failure to do so will result in greater penalties down the line.

3. Gather and Organize Financial Records

Meticulous record-keeping is a critical step before completing your tax forms. Gather income and expense records, receipts, invoices, bank and credit card statements, payroll records, and asset purchase documentation. This will determine your net income, support deductions and credits, and keep you covered in case of an audit.

4. Check Which Tax Forms & Schedules You Need

Business Classification	IRS Form(s) to File	What It’s Used For
Sole Proprietorship / Single-Member LLC	Schedule C (attach it to Form 1040)	Business income and expenses are reported on your personal tax return.
Partnership / Multi-Member LLC	Form 1065 and Schedule K-1 for each partner	Reports partnership income. K-1s pass each partner’s share of business income or losses through to their personal return.
S Corporation	Form 1120-S + Schedule K-1 for each shareholder	Reports S corp income. Business income or losses flow through to shareholders.
C Corporation	Form 1120	Reports corporate income. The corporation pays its own taxes. Individuals pay income tax on dividends.
Self-Employed Individuals (where applicable)	Schedule SE	Calculates the self-employment tax owed.
Businesses With Employees	Payroll & employment tax forms, including federal withholding, Social Security/Medicare contributions, and FUTA	Reports payroll taxes withheld and employer contributions.
Businesses Paying Independent Contractors	1099-NEC / 1099-MISC	Reports payments to independent contractors.

5. Take Advantage of Deductions and Credits

Claiming business deductions is one of the top small business tax tips that will reduce your tax burden. Many ordinary and necessary expenses, like office supplies, equipment, rent, and utilities, are tax deductible. These expenses reduce taxable income and support a healthy bottom line for growing businesses.

The best way to ensure you claim all the deductions and credits open to you is to work with experts in small business accounting. They will help you:

• Maintain the correct documentation to support deduction claims: Accurate record-keeping is essential in case of an audit.

• Stay on top of relevant credits or special deductions: Eligibility for many credits or deductions depends on your business activity. Access is also subject to change and requires the most current knowledge.

6. Know When to File Estimated Taxes

Many businesses must make quarterly estimated payments because their income isn't subject to automatic withholding. Businesses expected to owe $1,000 or more for the year must make estimated payments. Learn how to calculate your self-employment quarterly taxes and make payments by the following dates (for income earned in 2026):

Payment Period (When Income Is Earned)	Due Date
January 1 - March 31, 2026	April 15, 2026
April 1 - May 31, 2026	June 15, 2026
June 1 - August 31, 2026	September 15, 2026
September 1, 2026 - December 31, 2026	January 15, 2027

How to File Estimated Taxes

Estimate your annual income, deductions, and credits. Divide this number into four quarterly payments using Form 1040-ES. You'll likely need to do the same with the equivalent form in your state.

Top Tip: Set aside 25-30% of each payment your business receives in a dedicated tax savings account to avoid cash-flow issues come tax season.

Deadlines, Extensions, and Tax-Year Considerations

The filing deadline for your business depends on its business structure:

• Sole proprietors, single-member LLCs, and C corporations must typically file by April 15 

• Partnerships and S corporations must usually file by March 15

You can request an extension if you need more time to file. However, be aware that this extension is only for filing, not paying. Missing payment deadlines will incur a penalty. State and local deadlines may also differ. Always check with the relevant authorities to avoid missing important deadlines.

Common Filing Mistakes and How to Avoid Them

Your accountant will help you avoid these common tax mistakes and the penalties that go with them:

Mistake	Explanation	How to Avoid
Filing under the wrong business classification or using the wrong form	Misclassifying your business will skew your tax obligations, filing deadlines, and available deductions.	Work with a tax professional to avoid rudimentary but costly errors.
Poor record-keeping	Meticulous record-keeping is an everyday task in small businesses. Failure to implement an effective system will lead to lost deductions and a higher audit risk.	Use bookkeeping software, keep digital copies of receipts, and find an effective way to separate personal and business accounts.
Neglecting estimated taxes	Skipping estimated quarterly taxes may lead to large tax bills, penalties, and cash flow issues.	Use software to keep you on track with your obligations.
Handling complex tax situations without professional help	DIY tax filing is risky without extensive knowledge of payroll taxes, depreciation schedules, and deductions.	Outsource your accounting needs to a professional.
Waiting until the last minute	Procrastination only sets you up for greater stress and an increased likelihood of errors.	Plan your tax strategy early and keep your financial records in order throughout the year.

Take Control of Your Small Business Tax Filing

Filing small business taxes is much less overwhelming when you understand your obligations, stay organized, and plan ahead. Knowing how your business structure, tax forms, deadlines, and deductions fit together puts you in control and reduces the risk of costly mistakes.

With the right systems in place, tax compliance will even become a strategic advantage rather than a burden. Working with experienced tax professionals helps ensure accuracy, optimizes your tax bill, and gives you back the mental space to focus on your business.