Small Business Tax Filing: Preparing for U.S. Tax Season

Tax season can feel like a daunting time for small business owners. As a business owner myself, I understand the pressures of managing operations, pursuing growth, and ensuring compliance with tax regulations—all at once. I’m Shahar Plinner, CEO and Co-founder of Formations, a financial management platform designed for self-employed professionals and small business owners.

The good news is that with the right approach, you can make tax preparation less stressful and even turn it into an opportunity to understand your business finances better.

Here are some key tips and considerations to help you confidently prepare for the United States tax season.

Note: This content was created in collaboration with Formations. It offers an educational overview of U.S. tax filing for the U.S. tax season, and should not be treated as financial or legal advice. We recommend speaking with a tax professional for personalized guidance.

Key considerations for small business tax filing

Knowing a few important details about your business and finances will help you understand what’s required of you and when. In addition to knowing your business type and filing requirements, make sure to track important filing deadlines, deductions, and tax law changes in your locale.

1. Know your business type and filing requirements

The first step to smooth tax filing is understanding your business structure and its tax obligations. Whether you’re a sole proprietor, LLC, partnership, or S-Corp, each entity type/filing election has specific filing requirements and deadlines.

Sole proprietors and Single-member LLCs

• Who: Individuals just starting out, operating low-risk businesses, or seeking minimal administrative burden

• Filing requirements: File Schedule C along with your personal income tax return (Form 1040).

• Key considerations: You’ll pay self-employment tax (covering Social Security and Medicare) on all net earnings.

Multi-member LLCs and Partnerships

• Who: Businesses with two or more owners who want to share profits and responsibilities without forming a corporation

• Filing requirements: File Form 1065 (U.S. Return of Partnership Income), with net income passed through to partners via Schedule K-1.

• Key considerations: Each partner reports their share of the partnership’s income, deductions, and credits on their personal return.

S-Corporations (S-Corps)

• Who: Full-time self-employed professionals or small business owners seeking to reduce self-employment taxes, distribute profits strategically, and operate with a formal corporate structure

• Filing requirements: File Form 1120-S (U.S. Income Tax Return for an S Corporation). Distribute income and losses to shareholders via Schedule K-1.

• Key considerations: Owners must pay themselves a “reasonable salary” (subject to payroll taxes) and can take additional income as distributions, which aren’t subject to self-employment tax.

C-Corporations (C-Corps)

• Who: Larger businesses or venture-backed startups seeking to reinvest profits or take advantage of the 21% corporate tax rate

• Filing requirements: File Form 1120 (U.S. Corporation Income Tax Return).

• Key considerations: Unlike S-Corps, C-Corps face double taxation—once at the corporate level and again when profits are distributed to shareholders as dividends or wages.

Being clear about your business type ensures you meet the correct deadlines and use the proper forms.

2. Understand payment timelines

Unlike traditional employees who have taxes withheld from their paychecks, small business owners are often responsible for estimated quarterly tax payments. These payments cover income tax and self-employment tax, which includes Social Security and Medicare contributions.

Quarterly tax payment deadlines

Mark your calendar with these key dates for quarterly payments. If the date falls on a weekend or holiday, you’ll have until the next business day.

• April 15

• June 15

• September 15

• January 15 (of the following year)

Pro Tip: To avoid underpayment penalties, aim to pay at least 90% of your expected tax liability for the year or 110% of the prior year’s tax liability.

Annual tax filing deadlines

In addition to quarterly payments, here are the critical annual tax deadlines for small business owners:

• March 15: Business taxes for pass-through entities like S-Corps (Form 1120-S) and Partnerships (Form 1065).

• April 15: Personal income taxes (Form 1040), Schedule C for sole proprietors and single-member LLCs, and Form 1120 for C-Corps.

Filing extensions deadlines 

Filing an extension can provide extra breathing room to ensure accuracy and gather all necessary documents. It can also ease cash flow and support retirement planning—you can make contributions for the previous year with income from the current year. Funding for these can come from revenue generated in the following year.

• Business tax extension: Extends the deadline to September 15 for S-Corps, Partnerships, and C-Corps (Form 1120).

• Personal tax extension: Extends the deadline to October 15 for individual filers, including sole proprietors and single-member LLCs.

However, regardless of an extension to file your paperwork, your tax payments are still due on their original annual filing deadlines.

3. Leverage deductions

Tax deductions are one of the advantages of running a business. They can reduce your taxable income, which lowers your overall tax liability. Some common deductions include:

• Home office expenses: A portion of rent, utilities, or home maintenance costs if you work from home

• Business meals: Meals with clients or business partners, with some restrictions

• Startup costs: Initial costs to launch your business, up to $5,000 in the first year

• Professional services: Accounting, legal, or consulting fees

• Business miles: The standard mileage rate for business use of your vehicle or actual expenses like gas, insurance, and maintenance

• Bonus depreciation: Accelerated depreciation for qualifying business assets, such as equipment or machinery, allowing you to deduct a larger portion of the cost in the first year of use

Keep detailed records and receipts to substantiate your deductions in case of an audit.

4. Stay aware of tax law changes

Tax laws are constantly evolving, and even small changes—like updates to the standard mileage rate or business meal deductions—can impact your filings. Stay ahead by regularly checking trusted sources like the U.S. Internal Revenue Service website and working with a tax professional to ensure you’re taking advantage of the latest opportunities and staying compliant.

This is where connecting with other small business owners can be helpful too. Your network can support each other with updates or recommended resources.

Best practices for smooth tax preparation

Staying organized throughout the year can reduce the workload required every time you need to file tax paperwork. Block an hour every other week to tackle these tax and accounting tasks. 

1. Organize your records

Create a clear, organized filing system for important records. This can be digital or physical, but make sure your records are complete, whichever storage system you choose.

• Income records: Invoices, sales receipts, contracts, and bank statements

• Expense records: Receipts, canceled checks, credit card statements, and detailed logs for deductible expenses like mileage or travel

• Tax forms: 1099s (for income from clients), W-2s (if you have employees), and K-1s (for partnerships or S-Corps)

• Payroll records: If you have employees or are an S-Corp owner, include payroll reports, W-2s issued to employees, and Form 941 (quarterly payroll tax returns).

Consider using cloud-based accounting software to simplify record management and ensure everything is easily accessible. This saves time during tax prep and ensures you’re ready in the event of an audit.

2. Track and categorize expenses

Not all expenses are created equal; properly categorizing them is essential for claiming deductions. Common categories include advertising, travel, office supplies, and utilities. Keeping your categories consistent throughout the year can save time during tax prep.

Make sure you’re accurately recording expenses throughout the year in addition to keeping your deduction categories consistent.

3. Separate business and personal finances

If you’re using a personal account for business transactions, it’s worthwhile to open a dedicated business bank account. This makes it easier to track expenses and creates a clear distinction that simplifies tax filing and reduces your risk of errors or risk when it comes to potential audits.

Where to seek guidance

Tax filing can feel daunting, but you don’t have to go it alone. In addition to working with a tax professional, there may be resources available through your government or small business groups. The suggestions below are focused on U.S. resources, but similar support may be available outside of the U.S.

1. Professional help

A CPA or tax advisor can do more than just ensure your compliance. They can also uncover savings opportunities you might not know about and help you make strategic decisions for your business.

At Formations, we specialize in working with self-employed professionals to optimize their taxes, streamline financial processes, and maximize savings. Whether it’s structuring your business as an S-Corp or staying on top of quarterly tax payments, our team of financial experts can simplify your tax season and set you up for success.

2. Taxpayer Advocate Service (TAS)

The Taxpayer Advocate Service (TAS) is a free, independent resource within the IRS that helps taxpayers navigate complex tax issues. If you’re facing challenges such as delayed refunds, issues with audits, or trouble resolving payment disputes, TAS can step in to assist.

How to access TAS:

• Visit the Taxpayer Advocate Service website to find more information and locate your local TAS office.

• Call their toll-free number: 1-877-777-4778.

3. Small Business Administration (SBA)

The Small Business Administration (SBA) is a fantastic resource for self-employed professionals and small business owners, offering a wide range of tools and support to help with tax preparation and overall business management.

Key resources from the SBA:

• Free business counseling: Through their network of Small Business Development Centers (SBDCs), SCORE mentors, and Women’s Business Centers, you can access personalized advice, including tax-related guidance.

• Workshops and training: The SBA regularly hosts webinars and local events covering topics like bookkeeping, tax strategies, and financial planning.

• Access to capital: Learn about funding options like small business loans, which can help with cash flow during tax season.

Build confidence for the coming tax season

Tax season doesn’t have to be daunting. For most households, it’s about pulling together on average 10 to 12 key documents: W-2s, 1099s, mortgage statements, and receipts for deductions. Even with more complex needs, like K-1s or FBAR reporting, a clear plan makes the process surprisingly quick.

Start by listing the documents you need, checking them off one by one, and sharing them with your accountant. This isn’t just about meeting a deadline; it’s a chance to gain clarity on your finances and set yourself up for long-term success. Make this tax season one where you feel confident, organized, and ready to grow.