TL;DR: This FAQ will give you quick, straightforward answers to the questions small business owners ask the most about taxes, with details on planning, deductions, quarterly payments, filing, recordkeeping, handling extensions, and more. 

Doing your own small business taxes can feel like you’re trying to solve a puzzle with half the pieces missing. You know there's a finished picture somewhere, but you're stuck staring at a pile of receipts and confusing forms. 

You’ve got questions. A lot of them. What to track, what to save, what to file, and “what do I need to do?” are all common questions. We’re here to give you straightforward answers to all those most common tax questions small business owners ask.

This small business tax advice page is your starting point if you’re looking for tax tips for small business owners. In fact, why don’t you think of it as your friendly tax help desk? We’ll cover the basics to get you oriented and then point you toward more detailed guides for the topics you need to dive into.

Where Should I Start with My Business Taxes?

This is the big one, isn't it, since the sheer volume of information can be overwhelming. In general, the best way to begin is by understanding your business's legal structure, because that dictates everything else.

Here are some questions to ask to help you figure things out: 

Figuring out your structure is step one, since it tells you which forms to use and what rules apply to you. Once you know that, you can start building your tax strategy and take advantage of any tax incentives that might exist.

What Records Do I Actually Need to Keep?

Recordkeeping feels like a chore, but come tax time, it’s your best friend, since detailed records are your proof for all the deductions you claim. In fact, good recordkeeping is probably the most important of all tax tips for business owners, full stop. That’s because if the IRS ever has questions, your records are your backup. 

So, what should you keep?

• Proof of Income: This includes invoices, bank deposit slips, and payment processor statements (like from Stripe or PayPal). Basically, anything that shows money coming into your business.
• Records of Expenses: This is huge for deductions. Keep all your receipts, bills, and credit card statements for any business-related purchase. This means everything from your new laptop to the coffee you bought a client. Digital copies are fine (even encouraged!), so feel free to use a receipt-scanning app.
• Asset Information: If you buy bigger-ticket items like equipment, furniture, or a vehicle for your business, you need to track their cost and the date you started using them. These are assets you can depreciate over time.
• Employment Tax Records: If you have employees, you need to keep adequate records of their wages (payroll taxes), taxes withheld, and payments for at least four years.

You don’t need a fancy, complicated system to comply with small business tax rules, either. A dedicated spreadsheet or accounting software can do the job perfectly. You just need to be consistent.

Not sure when you can toss those old files? Be sure to read our guide on how long to keep tax records.

How Do I Know What to Deduct on My Small Business Taxes?

Business deductions are your easy way of lowering your taxable income. The IRS rule is pretty simple in theory: you can deduct any expense that is both "ordinary and necessary" for your trade or business. An ordinary expense is one that's common and accepted in your industry, while a necessary expense is one that's helpful and appropriate for your business.

Some common deduction categories include:

• Home Office Deduction: If you use part of your home exclusively for business, you can deduct a portion of your rent or mortgage, utilities, and insurance.
• Vehicle Use: If you drive your car for business (like meeting clients or making deliveries), you can deduct the actual expenses or take the standard mileage rate.
• Supplies: This includes everything from office supplies like paper and ink to materials you use to create your product.
• Software and Subscriptions: Any software, apps, or online subscriptions you use for your business are deductible.
• Professional Development: Courses, workshops, and conference tickets that improve your skills in your field are also deductible.

The goal, again, is to accurately track all these expenses so you don't leave any money on the table and effectively reduce your tax burden. And remember: you can deduct only business expenses, so make sure you keep a separate bank account for your business finances and talk to a certified public accountant prior to tax season if you aren’t sure what might qualify as a reasonable expense for your business. 

This is just the tip of the iceberg. For a deeper exploration of every possible write-off, explore our complete guide to small business tax deductions.

What Are Quarterly Taxes and Do I Need to Pay Them?

If you expect to owe at least $1,000 in tax for the year, you'll likely need to pay estimated taxes every quarter. As a small business owner, you don’t have an employer withholding taxes from your paycheck. So, you're responsible for sending the IRS a portion of your earnings throughout the year.

Think of estimated tax payments as paying your tax bill in installments. It prevents you from getting hit with a massive bill (and potential penalties) when you file your annual return. The payment deadlines are typically:

• April 15
• June 15
• September 15
• January 15 of the next year

To calculate your estimated tax payments, you need to estimate your total expected income for the year and figure out your expected tax liability. Then you divide that total by four. Yes, it can be tricky, especially when your income fluctuates. A common strategy is to base your estimate on last tax year’s gross income, or to re-evaluate your earnings each quarter.

How Do I File My Business Taxes?

When it’s time to file, the forms you use will depend, once more, on your business structure.

• Sole Proprietors and Single-Member LLCs: You'll report your business income and expenses on a form called Schedule C, "Profit or Loss from Business." This form is filed along with your personal tax return, the Form 1040. You’ll also need to file Schedule SE to calculate and pay self-employment tax (Social Security and Medicare).
• Partnerships and Multi-Member LLCs: Due by March 15 each year, you'll file Form 1065, "U.S. Return of Partnership Income." This is an informational return. The business itself doesn't pay income tax. Instead, the profits or losses are "passed through" to the partners by way of a K-1 Schedule. Each partner then reports their share of the income on their personal tax return.
• Corporations (S Corporations and C Corporations): S Corporations file Form 1120-S and C Corporations file Form 1120. These corporations have their own distinct rules and are generally more complex, with Form 1120-S due by March 15 each year for S-Corps and Form 1120 due April 15. Shareholders of an S-Corp receive a K-1 Schedule for profits or losses that are then passed through to their 1040 personal return.

No matter your structure, you can file your taxes yourself using tax software, or you can hire a professional. For many small business owners, DIY tax software is a powerful and cost-effective solution if you’d like to attempt to do your taxes yourself. These platforms are designed to walk you through the process, asking you questions about your income and expenses to fill out the right forms.

Still confused about which forms you need to file to meet your tax obligations? Be sure to check out our guide.

What Happens If I Can't Pay or File on Time?

Life happens. Maybe you had a tough cash flow month, or you just couldn't get your documents organized in time. The IRS understands this, and you have options.

If you can't file by the deadline (usually April 15), you can get an automatic six-month filing extension by submitting Form 4868. This is an extension to file, not an extension to pay. You still need to estimate what you owe and pay it by the original deadline to avoid penalties and interest.

If you can't pay the full amount you owe, don't just ignore the bill. The worst thing you can do is nothing. The IRS offers several payment options, including short-term payment plans and longer-term installment agreements. Be proactive and contact them to work out a solution. The penalties for not filing at all are typically much higher than the penalties for not paying on time.

If you’re worried about filing late or managing your tax bill, our guide to common small business tax mistakes can help you avoid costly errors.

Take Control of Your Taxes

Tackling your business taxes doesn’t have to be a source of stress. By taking the time to understand these core concepts (your business structure, recordkeeping, deductible expenses, and filing requirements), you're already well on your way.

But each of these topics has more depth to it. Use this page as your home base and branch out to the more detailed guides as you need them. Our small business taxes guide has everything you might want to know about planning and filing your small business taxes, but if you’re still not sure, contact a tax advisor for small business tax advice.

And remember: a little bit of planning and organization throughout the year makes all the difference when it’s time to file taxes. 

💡 File your taxes with confidence. Start your taxes the easy way with our DIY filing platform.