When Are Small Business Taxes Due? Your Easy Guide to Tax Navigation

Taxes - one of our least favorite things to acknowledge as business owners.

I’m sure that you, like so many others, often find yourself a bit discouraged when Uncle Sam runs off with all the money you’ve worked so hard to earn. Begrudgingly, we pay because we know without taxes, our country couldn’t run. 

If you’ve ever found yourself asking questions such as “when are taxes due?” or “what should I expect to owe in taxes?” this article will help you understand everything you need to know about taxes as a small business owner.

We’ll cover the types of taxes required, how much you should expect to pay, when to pay your taxes, and why a mid-year financial check-up is key to successfully closing out the year (without a headache).

Small Business Taxes 

Let’s start with what taxes need to be paid. When you’re a W2 employee, taxes are withheld before you see your paycheck. Then when you file your taxes, the Internal Revenue Service (IRS) has information from you and your employer to make sure that the information matches.

But when you own your own business, you are in charge of the bookkeeping. You have to keep clear and accurate records. Then when tax time comes, you don’t have to scramble to assemble the necessary documents. 

The taxes you need to keep in mind are as follows:

• Estimated tax - If you do not have taxes being withheld every paycheck, you have to report your estimated tax to the IRS weekly, monthly, or quarterly. Estimated tax is used to pay income tax, self-employment tax, and alternative tax minimums. 

  • You have to pay estimated tax if you expect to owe more than $1,000 or more in taxes.

  • Per the IRS, “You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

    • You had no tax liability for the prior year

    • You were a U.S. citizen or resident for the whole year

    • Your prior tax year covered a 12-month period”

• Self-employment tax - Covers medicare and social security, currently at 15.3%.

• Payroll taxes - 7.25% of an employee's gross income. Unemployment and workers' compensation may be extra.

• Capital gains taxes - This is taxation on investments or the sale of assets. Assets held for more than a year are subject to taxes based on 0%, 15%, or 20% depending on income level. Assets held less than a year are considered business’ income and are taxed according to income brackets.

• Property tax - Any building or property owned by a small business is subject to 0.18% - 1.89%, depending on your state. 

• Dividend tax - Dividends reported from small business investments are taxed according to the owner's tax bracket.  

When you see it all written out, it can feel like a lot and may be overwhelming. I get it. You work hard for your business to succeed and paying taxes can be disheartening. But if you think of taxes like any other sinking fund, you’ll have the cash set aside and ready to go when the due date comes. 

If you’re a single proprietor business owner you’ll pay 13.3% estimated tax on average. If there is more than one owner, you’ll pay 23.6%, on average. And C corporations pay a federal corporate income tax average of 21%. You also have to factor in state income tax, which ranges from 0 to 11.5%.

When it comes down to it, experts recommend setting aside anywhere from 20%-35% of your small business income for taxes. This number varies greatly on your expenses and profitability of your business.

Required Forms for Small Business Taxes

As with anything in business ownership, there is a lot of paperwork involved. Luckily, in this digital age, you can find almost anything with the click of a button. You just have to know where to go. 

The most essential site you’ll need when completing your taxes is the Internal Revenue Services (IRS) page. But to ease the navigation of an overwhelming site, here is the list of forms to keep in mind when filing your small business taxes.

• Schedule C 

  • If you are a sole proprietor or single-owner LLC, you will report your profits and losses via a Schedule C form.

  • This form requires such information as:

    • Business name and address

    • Principal products or services your business performs

    • The accounting method used by your business

    • What year your business was started

    • A detailed report of your income and expenses

    • Any other details specific to your business running and operations

• Form 1120 or 1120 S

  • If your business files as a corporation, you will use Form 1120 or 1120 S. This reports income, gains, losses, deductions, and credits.

  • Applicable information as stated above will be required when filing. 

• Schedule K-1 

  • If your business is a partnership, you’ll use Schedule K-1 to report business expenses, income and losses. This is typically filed along with Form 1065.

• Form 1099 

  • 1099 typically reports money exchanged between a payor and a payee. So if you hire independent contractors, you’ll give and receive Form 1099 to report work and payouts exchanged. 

  • Any time you begin work with a new contractor or freelancer, it is wise to request a form 1099 at the beginning of your work relationship. This way, when tax time comes, you have the paperwork you need and don’t have to chase down the contractor, which can be a challenge if you are no longer working together.

When Are Small Business Taxes Due?

Most of us know that we are required by law to file our personal income tax by mid-April. But as a small business owner, you are required to file taxes more often because taxes are not taken from your paycheck automatically. 

So keep in mind the following dates and mark them on your calendar. 

• Estimated tax - paid quarterly using form 1040-ES

  • For income received Jan. 1 through March 31, estimated tax is due April 18, 2022.

  • For income received April 1 through May 31, estimated tax is due June 15, 2022.

  • For income received June 1 through Aug. 31, estimated tax is due Sept. 15, 2022.

  • For income received Sept. 1 through Dec. 31, estimated tax is due Jan. 17, 2023.

• Employment tax - paid quarterly using form 941 are due April 30th, 2022, July 31st,  2022, October 31, 2022, and January 31st, 2023

  • You pay this only if you have employees.

  • There are other forms in the 940 series, which may apply to your business if you have unemployment taxes or agricultural taxes to consider. You can find that information here.

• Self-Employment tax - paid quarterly through estimated tax payments.

How To Make Your Tax Payments

The first thing you’ll need to acquire is an EIN (electronic filing number). Your EIN is your business tax identification number and is needed on all filing forms. 

A very important thing to remember is that your EIN is free from the IRS. Unfortunately, there are scammers out there that try, and often succeed, at making people pay $250+ for their EIN. This is just absurd. Go directly to the IRS site and file for your EIN there. 

The IRS also gives many electronic filing options to file your taxes. You can either do this by yourself or hire a tax accountant to do it in your name. Quarter 3 is the perfect time to meet with your accountant for a mid-year financial check-up! You can head into the last quarter knowing your finances are in order and close the year out ahead of the game.

Hire Financial Fitness Coaching to Help Navigate the Tax Labyrinth

I’ll be the first to say that tax forms, due dates, and all the requirements that go along with them can not only be frustrating to navigate but quite a drain of your time. Financial Fitness Coaching can help you understand the jargon of tax information and set goals and systems that will set you up for success come tax time. 

Although we’re not accountants at Financial Fitness Coaching, we can help alleviate the pain of complex tax jargon. Email me at kristen@financialfitnesscoaching.com or simply schedule a free 20-minute Discovery Call on my calendar. I’d love to hear from you and see how my services can ease the strain of tax time.