You probably already have April 15 memorized as the date to file personal taxes. But for business owners, there are a few more tax deadlines on the calendar.
Businesses are required to pay income tax on an annual income tax return as well as quarterly estimated taxes:
||Tax payment dates
|Jan 1 – March 31
|April 1 – May 31
|June 1 – Aug 31
|Sept 1 – Dec 31
||Jan 15 of the following year
When you’re juggling so many other overflowing plates and wearing all the hats required of a small business owner, taxes probably aren’t what you look forward to.
But, there are options available if you want to do your own taxes or hire someone else to complete them. Let’s look at how to file taxes for a small business.
Can I file my own business taxes?
You can file business taxes on your own, but you need to make sure you have the proper tax preparation software and relevant tax documents.
There are numerous tax preparation software options, some free and some not, that make the process relatively painless. Some of the best-ranked programs are:
Research each one to find the one that works best for you.
What’s a self-employment tax?
If you own a limited liability company (LLC), partnership or proprietorship, you’ll need to pay a self-employment tax.
A self-employment tax happens because normally an employee’s company would pay for half of the Social Security and Medicare costs that a business would need to pay. As the owner, you’re responsible for that full amount since you’re considered self-employed.
To get a better idea of how much you might need to pay, check out our Business Solutions Self-employment Tax Calculator.
State and local taxes on your business
Just like in your personal life, depending on where your business is located, you might need to pay state and local taxes.
If you sell products, you have to collect sales tax from your customers, then report the amount to your state and pay it.
If your business owns commercial property, you may need to pay a property tax to either the city or county where the property is located.
How much does a small business pay in taxes?
Many new and prospective business owners ask how much a small business pays in taxes in order to get an idea of how much to budget.
While there’s no easy way to guess what your annual taxes will be, it helps to understand which tax bracket your personal income lands in. For instance, the IRS taxes the owner directly if your business is an LLC, proprietorship or partnership. Once you can calculate your total taxable income, you can guess how much you might have to pay for a given year. Of course, always consult a personal tax advisor to get a more accurate picture of what you could pay.
Take a look at your books and see which tax bracket you fall into.
Tax rates by status for 2021
There are different ways to set up your business based on your industry and how you want to run your company. Your tax stats will be decided depending on which one you choose.
Taxes for pass-through entities
According to The Balance SMB, companies that are either LLCs, partnerships, proprietorships or S corporations are taxed at your personal income tax rate.
Taxes for C corporations
A C corporation is taxed on profits from the business at both corporate and personal levels, creating a double taxation situation.
Generally, you’re taxed at a flat 21% at the corporate level with shareholders paying taxes on any dividends that they received on the personal level, according to The Balance SMB.
How to find an accountant for your business
You might feel more comfortable hiring an outside professional to handle your finances. It’s critical for the future of your business to hire a licensed, experienced professional.
- Check out the American Institute of Certified Public Accountants (AICPA), which has a license verification directory of CPAs.
- You can also look at the Accounting & Financial Women's Alliance if you'd prefer to work with a female accountant.
- Look for an accountant who has a good understanding of tax laws, accounting software and business management.
- If you’re looking at a firm, do a background check and ask for client references.
- Make sure that your candidates are certified.
- Seek recommendations from other small business owners, preferably in your industry.
Remember, bigger doesn’t necessarily mean better. Some very successful accountants have their own practices and are able to charge lower rates for their services.
We’re here if you need help.
Managing your taxes can be difficult. But there are plenty of great resources and knowledgeable accountants to help small businesses like yours.
For more information about taxes and other things to think about when running your small business, check out the Nationwide Business Solutions Center.