There is a lot to know about filing business taxes.
From deadlines to proper forms, it's important to understand the differences between and requirements of federal, state and local taxes. — Kenishirotie/Getty Images

This story was updated 2/17/2021.

As a business owner, understanding your federal, state and local taxes is vital to your overall success. All businesses must pay business taxes, but the type of business entity you own determines which taxes you must pay and how you go about paying them.

Knowing how to file your taxes properly and on time allows you to spend minimal time working on IRS tax forms so you can focus on running your business. In this guide, we break down everything you need to know about business taxes, from your Employer Identification Number to common business tax forms.

What is an Employer Identification Number (EIN)?

An Employer Identification Number (EIN) is your business’s federal tax ID number. Most businesses require an EIN to file business taxes, but not all. According to the IRS, you need to apply for an EIN if any of the following items apply to your business:

  • You have employees.
  • Your business is a corporation or partnership.
  • You have a Keogh (tax-deferred pension) plan.
  • You withhold taxes on income paid to a non-resident alien.
  • You file Employment, Excise, or Alcohol, Tobacco and Firearms tax returns.
  • You are involved with certain trusts, estates, real estate investments, non-profits, farmers’ cooperatives or plan administrators.

If you do require an EIN, you can apply for one on the IRS’s website.

[Read: How to Obtain a Federal Employer Identification Number for Your Business]

Types of business taxes

The taxes you’re required to pay depend largely on two elements: the type of business you own and the state you do business in. According to the IRS, these are the different business taxes you can anticipate:

Income taxes

All business entities — aside from partnerships — must file and pay taxes on received income during the year. Nearly all states impose a business or corporate income tax, but each state has its own tax laws. As you prepare your business taxes for the year, make sure you understand your required income tax at the state and local level.

Estimated taxes

Freelancers, solopreneurs, partners and S corporation shareholders are expected to make estimated tax payments if they anticipate owing $1,000 or more when they file their return. You pay estimated taxes quarterly; and determining just how much you must pay every quarter can be confusing for new business owners. It’s important to get your estimation right as you can receive a penalty for missing or underpaying these taxes. Visit the IRS’s guide on estimated taxes to determine if this tax applies to your business and to help calculate how much you owe.

Self-employment taxes

The self-employment tax (SE tax) is a Social Security and Medicare tax that contributes to your coverage under the social security system. Social Security coverage provides you with retirement, disability, survivor and Medicare benefits.

Employment taxes

If you have W-2 employees, you must file and pay certain federal taxes that include social security and Medicare taxes, federal income tax withholdings and federal unemployment tax. Furthermore, each state requires specific state employment taxes, such as unemployment insurance and workers’ compensation insurance, so make sure you get all the information you need at your state’s department of taxation.

[Read: How to File Payroll Taxes: Everything You Need to Know]

Excise taxes

These taxes are paid when purchases are made on certain goods, such as gasoline, and are often included in the price of the good. There are many different types of businesses that are required to pay excise taxes, but fuel is usually a major component. Excise taxes are collected mostly from sales of motor fuel, airline tickets, tobacco, alcohol and health-related goods and services. For a more complete list, visit the IRS’s page on excise taxes.

Filing tax forms

With an understanding of which taxes your business may be required to pay, you can familiarize yourself with the right forms. While most tax preparation companies and software packages provide the correct forms for you, it’s best to get acquainted with them so you can fill them out accurately and quickly when the time comes.

The IRS provides a thorough list of business tax forms and instructions, though if you’re not sure you have everything you need, you should consult a Certified Public Accountant (CPA), professional tax preparer or tax accountant.

If you run a sole proprietorship or operate your business as a single-member limited liability company (LLC), you will likely need to fill out a Schedule C (Form 1040) to report your business’s income and losses. In many cases, if you fill out a Schedule C form, you will also need to submit a Schedule SE (or self-employment tax) form. Schedule C is a simple business tax form at only two pages long. To complete this form, you simply list all the expenses you claim, then subtract your expenses from your earnings to find your net profit or loss. Finally, you transfer this number to your personal income tax form.

[Read: Running a Home-Based Business? Important Tax Information You Need to Know]

Knowing how to file your taxes properly and on time allows you to spend minimal time working on IRS tax forms.

If your business is a corporation, or if you opt to treat your LLC as one, then you must prepare a separate corporate tax return on Form 1120 (or Form 1120S for S corps), which is the estimated tax form for corporations. Form 1120 is similar to Schedule C, as you calculate your business income the same way. However, this form is often more complicated because it requires more details than Schedule C, and you must file it separately from your personal income tax return.

Here is a list of the common tax forms your business may be required to file depending on the type of business you own:

Annual return of income (partnerships)

Income tax

Self-employment tax

Estimated tax

Employment tax

Social Security, Medicare taxes and income tax withholding

Federal unemployment (FUTA) tax

For a more complete list of tax forms, consult a business tax professional or visit the IRS’s tax forms and instructions page.

Deadlines, extensions and past due

If you don’t file your business taxes on time and become delinquent, you may face fines, penalties and back taxes, so it’s important to know when they are due. Here are some of the most important business tax due dates for the upcoming year:

January 15, 2021

  • Sole proprietors:
    • File and pay quarterly estimated tax for last quarter of 2020 using Form 1040-ES.

February 1, 2021

  • All businesses:
    • Deadline to provide information statements (for example, Forms 1099 and 1099-NEC) to recipients of certain payments during 2020. See IRS General Instructions for Certain Information Returns.

    • Deadline to provide employees with W-2 for 2020.

    • Deadline to file Form W-3, Transmittal of Wage and Tax Statements, including copy A of all W-2s issued.

    • File and pay Federal Unemployment Tax for 2020 using Form 940.

    • File and pay any Withheld Income, Social Security and Medicare Taxes for the fourth quarter of 2020 using either Form 941 or Form 944. (If you made all 2020 payments on time and in full, this deadline is February 10).

  • Sole proprietors, in addition to the above may choose to:
    • File and pay 2020 income tax if you did not make a final quarterly payment of estimated income tax for 2020 by the due date of January 15. Filing and paying any amount due by this date will avoid a penalty for late payment. Use Form 1040 or 1040-SR. File a separate Schedule C for each business or a separate Schedule F for each farm business.

February 16, 2021

  • All businesses:
    • Provide information statements to recipients of certain payments during 2020 using Forms 1099-B or 1099-S.

    • Begin withholding income tax from any employee who did not give you a W-4 for 2021.

March 1, 2021

March 15, 2021

  • Partnerships:
    • File 2020 income tax return using Form 1065.

    • Provide each partner with Schedule K-1 (Form 1065).

    • File Form 7004 to request an automatic six-month extension.

  • S corporations:
    • File 2020 income tax return using Form 1120-S and pay any tax due.

    • Provide each shareholder with Schedule K-1 (Form 1120-S).

    • File Form 7004 to request automatic six-month extension and pay estimated tax owed.

March 31

  • All businesses:

April 15, 2021

  • Sole proprietors:
    • File and pay your personal income tax using Forms 1040 or 1040SR. File a separate Schedule C for each business or a separate Schedule F for each farm business.

    • For an automatic six-month extension, file Form 4868 and pay estimated amount owed.

    • If income was more than $400, pay self-employment tax. Use Forms 1040 or 1040SR, Schedule SE.

    • File and pay first quarter 2021 estimated income tax using Form 1040-ES.

  • Corporations:
    • File income tax return for 2020 using Form 1120. Pay any tax due.

    • File for automatic extension using Form 7004. Deposit estimated taxes.

    • Deposit first quarter estimated income tax for 2021. Use worksheet 1120-W.

April 30, 2021

  • All businesses:
    • File and pay withheld Social Security, Medicare and Income tax for first quarter of 2021 using Form 941 (If you made payments on time and in full, the deadline is May 10).

    • Deposit Federal Unemployment tax if amount owed through March is more than $500.

June 15, 2021

  • Sole proprietors:
    • File and pay second quarter 2021 estimated income tax using Form 1040-ES.

  • Corporations:
    • Deposit second estimated income tax payment for 2021.

August 2, 2021

  • All businesses:
    • File and pay withheld Social Security, Medicare and Income tax for second quarter of 2021 Form 941 (If you made payments on time and in full deadline is August 10).

    • Deposit Federal Unemployment tax if amount owed through June is more than $500.

    • If you have an employee pension, profit-sharing or stock bonus plan, file Form 5500 or 5500-EZ for 2020. Consult IRS.gov for information on this form.

September 15, 2021

  • Sole proprietors:
    • File and pay third quarter 2021 estimated income tax using Form 1040-ES.

  • Partnerships:
    • File 2020 income tax return using Form 1065 if you requested a six-month extension.

  • S-Corporations
    • File 2020 income tax return using Form 1120-S if you requested a six-month extension.

    • Provide each shareholder a copy of Schedule K-1 Form 1120-S.

  • Corporations:
    • Deposit third installment of estimated Income tax using Worksheet 1120-W to estimate.

October 15, 2021

  • Sole proprietors:
    • If you filed for a six-month extension of income tax, file and pay using Forms 1040 or 1040SR. File a separate Schedule C for each business or a separate Schedule F for each farm business.

  • Corporations:
    • If you filed for a six-month extension of income tax, file and pay using Form 1120.

November 1, 2021

  • All businesses:
    • File and pay withheld Social Security, Medicare and Income tax for third quarter of 2021 using Form 941. (If you made payments on time and in full deadline is November 10).

    • Deposit Federal Unemployment Tax if amount owed through September is over $500.

December 15, 2021

  • Corporations:
    • Deposit fourth installment of estimated Income tax using Worksheet 1120-W.

Determining which of these dates apply to your business, adding in your state and local deadlines, and setting reminders will help your business avoid costly penalties and help you avoid unnecessary worry.

While preparing your business taxes can be overwhelming and time-consuming, investing the time to prepare, calculate and plan your taxes can help you make smart business decisions and avoid hefty penalties and fees. If you’re not comfortable working on your business taxes alone, consult a CPA or other business tax professional.

[Read: Still Not Clear on the New Tax Laws? Here's How They'll Affect Your Business]

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Published February 17, 2020