It’s no surprise that running a business is no easy task. You have to worry about compliance, human resources and of course, that pesky accounting piece too. Another factor that adds to the confusion of running a business is tax filings. Common struggles with tax filings include knowing how to file them, when to file and what forms to use. Fear not: we are here to save the day!
Whether you’re an S-Corp, C-Corp, Partnership or Sole Proprietorship, we’ve got you covered. Not sure which you are? Look here. We’re breaking down what type of forms you need and what they cover.
If you’re an S-Corp…
As an S-Corp, there are five forms you need to focus on.
- Form 2553 — Election by a Small Business Corporation – This is the required form to elect to be treated as an S-corporation for income tax purposes. Without filing this form, your business will be considered a C-corporation, partnership, or sole proprietorship for income tax purposes. Generally, it must be filed within 2 1/2 months after the effective date of the S-election or anytime during the preceding year leading up to the effective date. There are provisions for late S-corp election in certain instances.
- Form 1120S — US Income Tax Return for an S Corporation – This form includes information on the corporation’s profits and losses, deductions and credits. This is the S-corp’s annual income tax return. It is due on the 15th day of the third month.
- Form 7004 — Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns – If you need more time to file income tax, information and other returns, you can file this form for a six-month extension. The due date varies depending on the last day of the corporation’s tax year.
- Form 1120W — Estimated Tax for Corporations – Although this form will not apply in most cases, quarterly estimated tax payments must be paid in order to avoid penalties if the total of the taxes on built-in gains, excess net passive income tax and the investment credit recapture tax are more than $500.
- Schedule K1– Shareholder’s Share of Income, Deductions, Credits, Etc. – This form is part of the annual income tax filing (Forms 1120s) and will tell each individual shareholder what their portion of the S-corp’s income, deductions and credits of the tax payment is. This activity will be reported on the shareholder’s personal income tax return.
If you’re a C-Corp…
There are four important forms you need to be aware of.
- Form 1120 — US Corporation Income Tax Return – This is the annual income tax return filed with the IRS. The corporation’s taxable income will be subjected to the appropriate corporate rates. Any dividends paid to shareholders will also be taxed at the individual level.
- Form 7004 — Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns – This form allows for a six-month extension if more time is needed to file income tax. The due date will vary based on the last day of the corporation’s tax year.
- Form 1120W — Estimated Tax for Corporations – A C-Corp must make quarterly estimated tax payments if it expects tax for the year to be estimated at $500 or more. If payments are not made by their due date, the C-Corp can face an underpayment penalty.
- Form 1099 – DIV-Dividends and Distributions — This form is required to be issued to shareholders for dividends and other distributions on stock of $10 or more.
If you’re a Partnership…
If you are a partnership, the following three forms require your attention.
- Form 1065 — US Return of Partnership Income – This form reports income, gains, losses, deductions and credits from the partnership’s operations.
- Form 7004 — Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns – Form 7004 will give your business a five month extension to get your returns and paperwork in order. To qualify, this form must be filed by the original due date of Form 1065.
- Schedule K1 — Partner’s Share of Income, Deductions, Credits, Etc. – This form serves to tell each partner what their individual portion of the taxable income or loss is. It also states any credits and any other pass-through income and deductions.
If you’re a Sole Proprietorship…
More than likely, you can easily recognize if this is your business. A Sole Proprietorship is owned by a sole proprietor (hence the name) alone.
A Sole Proprietorship utilizes the following four forms.
- Form 1040 — US Individual Income Tax Return– One of the most common forms, it is used to report an individuals’ income, gains/losses, deductions and credits. It must be filed by the 15th day of the fourth month.
- Schedule C — Profit or Loss from Business (Sole Proprietorship) – This form is to be filed alongside the 1040. It reports the taxable income/loss from the sole proprietorship.
- Form 1040ES — Estimated Tax for Individuals – If you expect to owe at least $1000 in tax for the year, after subtracting your withholding and refundable credits, quarterly payments are required in order to avoid underpayment penalties. For more information on estimating tax amounts, check out this blog.
- Form 8832 — Entity Classification Election –This form is required to change the entity status of your business. For example, LLCs are not considered corporations by default. (They are classified as partnerships or sole proprietorships for income tax purposes by default.). However, by filing this form, LLCs can choose to be taxed as corporations.
If you have employees…
Having employees working for you is great, but you need to acknowledge these five forms to stay compliant.
- Form 940 — Employer’s Annual Federal Unemployment (FUTA) Tax – This is your annual payroll report which will also detail your business’s unemployment taxes. This form is due January 31st.
- Form 941– Employer’s Federal Quarterly Tax Return — This form is due quarterly, and reports info on employee withholding and wages.
- Form W3 — Transmittal of Wage and Tax Statements — Filed with the Social Security Administration, this form is the transmittal of wage and tax statements. It is due by February 28th.
- Form 943 — Employer’s Annual Federal Tax Return for Agricultural Employees – Due quarterly, this form must be filed if there are any agricultural employees within a company.
- W2 — Wage and Tax Statement – A form you are probably familiar with, this form must be given to employees at the end of the tax year to report their wages and tax payments made on their behalf. More information can be found here.
1099s – There is a series of information returns, referred to as 1099s, that all business are required to file to report various types of activity. Examples are 1099-INT to report interest, 1099-DIV to report dividends, 1099-MISC to report rent, non-employee compensation, and various other types of income. The list is goes on and on!
Various state filings — In addition to the common federal forms previously referenced, most states (and some cities) have their own reporting requirements. Common examples are state unemployment, workers’ compensation, sales & use tax, personal property tax, state payroll filings, and state income or franchise tax filings.
Tax season won’t be upon us for a while, but it is never too early to start thinking of what you may need to do to make sure your business is up to date. Sound like a lot to keep track of? We can help!