Tax Forms – The Ones Every Small Business Owner Should Know

Income Tax

Schedule C (Form 1040) is most often used to report income for a small business (i.e., sole proprietors and single-member LLCs) and to calculate its total tax liability for the year. Schedule C is used for reporting your business’s profit or loss. On this form, you’ll carefully detail your business’s income, ranging from sales and fees to service revenues. You’ll also itemize deductible expenses, which can include anything from office supplies to rent payments.

The net result shows your business’s financial health and is the figure that factors into your overall tax liability. Therefore, maintaining precise records and understanding the implications of Schedule C is important for any small business owner.

Estimated Taxes

Estimated taxes are periodic tax payments made throughout the year, often quarterly, to account for income that isn’t subject to withholding. Form 1040-ES is used to calculate and submit these payments.

Properly estimating and paying these taxes help you to avoid penalties and maintain compliance with the IRS. Plus, paying estimated taxes keeps you from receiving one large tax bill for the year, which can be devastating to your cash flow if you’re unprepared. But a warning, be precise when calculating estimated taxes because inaccuracies can lead to unnecessary expenses.

Self-Employment Tax

Self-employment tax is required for anyone working for themselves. It covers the contributions towards Social Security and Medicare that traditional employees have withheld from their paychecks. To report and calculate self-employment tax, small business owners use Schedule SE. This form records your net earnings from self-employment activities and determines the applicable tax.

Employment Taxes

If you have employees, you must manage employment taxes. Form 941, also known as the Employer’s Quarterly Federal Tax Return, is for reporting and remitting various taxes withheld from your employees’ pay. This includes federal income tax withholding, along with Social Security and Medicare taxes. Filing Form 941 accurately and on time is imperative, as errors or delays can result in penalties for your business and disrupt the finances of your employees.

Morgan & Associates Know Tax Forms

The tax forms discussed above help to keep you compliant with state and federal tax requirements and to give you insight into the financial health of your company. With the many roles you play in your business, it’s hard to take the time necessary to learn the intricacies of each form, but we encourage you to know their purposes.

We understand that the forms themselves may seem complicated, or you lack the time to complete them yourself. If so, reach out to us. We’ll be happy to help.

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