Full Instructions for Filing Taxes for Your Company

Profit or loss from a small business is reported on the individual tax return of the business owner. This manual will assist you in deciding which forms to use and where to obtain the necessary data.

Small businesses that include a Schedule C with their individual tax returns will benefit from this manual (Form 1040). Owners of sole proprietorships or single-member LLCs fall into this category. Check out the Comprehensive Guide for Corporations and S Corporations if your company is incorporated, or the Business Taxes for Partnerships if you have multiple partners in your business.

Qualified Business Income is a deduction for small business owners that can reduce taxable income by up to 20%.

The deduction is available starting in 2018 and continuing through 2025. Consult your tax preparer if you think you meet the criteria. This sort of deduction calculation is typically included in small business tax preparation software.

Dates Due
As a result of the fact that most small businesses are owned and operated by sole proprietors or partners, the tax filing deadline for these businesses is the same as that for individuals: April 15. When the annual deadline falls on a weekend or holiday, the next business day becomes the new deadline. 2

Due to the severe winter storms in 2021, the filing deadline for tax returns from the states of Texas, Louisiana, and Oklahoma has been pushed back from April 15, 2021, to June 15, 2021. The first quarter 2021 estimated tax payment deadline has been extended to June 15 for these residents, from the regular April 15 deadline. In response to the ongoing COVID-19 pandemic, taxpayers in all other states have until May 17, 2021 to file their taxes. 5

Income Tax Returns, Schedule C
These are the tax documents required for sole proprietors and single-member limited liability companies, including those used to figure self-employment tax.

  • Instructions for Filing Form C, Profit or Loss From a Business, in Year 2020
  • Instructions for Self-Employment Tax Form SE in 2020
  • Information Required for Tax Form Schedule C

Schedule C information you may need:

For businesses that keep an inventory of products or components, the data needed to determine their cost of goods sold
Documentation showing all business expenses, such as those incurred while traveling for work, driving for work, or eating out for work purposes, can be deducted from taxable income. No longer are costs incurred for amusement non-deductible.
Depreciation deductions require information on the purchase price of capital assets, such as machinery and vehicles.
Considerations for Deducting the Cost of Using Your Home as a Business Location
Six Tax Considerations for Independent Contractors
Self-employment taxes, also known as Social Security and Medicare taxes, are levied against the net income (profit) of small business owners. You are exempt from paying self-employment tax if you have no business income or if your business income is $400 or less for the year.

Breaking down the components of self-employment tax:

Input your company’s net profit here.
Increase this sum by 92.35 percent to get the total amount needed to retire (0.9235)
Your self-employment tax liability can be calculated by multiplying this figure by 15.3 percent (the current self-employment tax rate).
This sum is used to calculate your annual Medicare and Social Security benefit. In other words, you won’t be eligible for these benefits in a year where you don’t make any money.

One half of the self-employment tax is deductible against AGI.

This tax can be calculated by a tax software program or a tax preparer, or it can be calculated manually using Schedule SE.

Instructions for Completing Schedule C of Your Individual Tax Return
Schedule 1, line 3 (Business Income/Loss) should include the sum of lines 31 and 3 (Net Profit or Loss from Business) from your business’s Schedule C. If you have any additional income or adjustments, you can add them up on this schedule and then transfer the totals to your Form 1040 or 1040-SR.

Schedule 2 of Form 1040 is where you will report the total amount of self-employment tax you paid from Schedule SE (Additional Taxes). Schedule 1 is where you’ll report the amount by which you’ve saved on your share of self-employment tax.

Include the 50% self-employment tax deduction and any other business adjustments for which you are eligible on Schedule 1.

Schedule C and Schedule SE Instructions for Filing Your Tax Return
Returns can be submitted electronically or through the mail. The IRS mailing addresses are provided on the final page of the Form 1040 instructions. If you use tax software, the cost of e-filing is already factored in. If you hire an accountant to do your taxes, this fee will also be included.

Applying for a Tax Exemption Extension
When filing your taxes, whether personal or for a small business, you can request an automatic filing extension. Due to the six-month extension, the new deadline for individual tax returns is October 15th (unless October 15 is a weekend or holiday, in which case that date is the next business day). 8

There will be no grace period for making payments as a result of your filing extension. If you live in Texas, Louisiana, or Oklahoma, you have until June 15 to pay your taxes or face penalties and interest.

Submission of a Revised Tax Return
In the event of an error on your tax return, whether it be for personal or business purposes, you are required to submit an amended return. Which form you need to file an amended tax return with will be determined by the nature of your company. Use Form 1040X Amended Return to make adjustments to your tax return, including to Schedule C.

Installment Tax Payments
If you don’t pay enough in taxes throughout the year, you must make estimated tax payments. Since self-employed individuals do not have taxes withheld from their income, many owners of small businesses find themselves in the precarious position of having to make quarterly estimated tax payments.

You must pay quarterly estimated taxes beginning on April 15 or June 15 if you live in Texas, Louisiana, or Oklahoma.

January 15, the 15th of the following year, as well as June 15th and September 15th of the current year.

1011 Estimated tax payments are unaffected by the shift in the federal tax filing deadline to May 17, 2021. Except for those who live in Texas, Louisiana, or Oklahoma, they are still due on April 15. 12

Should I Get a Tax Preparer?
In some cases, a small business may be able to use tax software if it is very simple and has no inventory costs or depreciable assets. but a tax preparer is essential for most small businesses. Some Schedule Cs are more complicated than they appear on the surface.

Use the information in this guide to get ready for business taxes before you seek the assistance of a certified public accountant (CPA), enrolled agent (EA), or other qualified tax preparer.