Small Business Taxes For Beginners? Detailed Guideline

Small business taxes are the federal, state, and sometimes local taxes you must file and pay based on how your business earns money. If you’re a beginner, your main responsibilities usually include income tax, self-employment tax, payroll taxes (if you have employees), and estimated quarterly payments. Once you understand your business structure and keep good records, filing taxes becomes much easier.

What Are Small Business Taxes?

Small business taxes are not one single tax. They are a set of obligations based on how your business is structured and how it earns income. The IRS treats businesses differently depending on whether you’re a sole owner, partner, or corporation.

What Taxes Do Small Businesses Pay?

Most small businesses deal with some or all of the following:

• Income tax – Paid on your business profit

• Self-employment tax – Covers Social Security and Medicare (15.3%)

• Estimated quarterly taxes – Paid throughout the year if no tax is withheld

• Payroll taxes – If you have employees

• State and local taxes – Vary by location

Not every business pays every tax, which is why structure matters.

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How Small Business Taxes Work by Business Type

Filing Taxes as a Sole Proprietor

If you run your business alone and haven’t formed a corporation, you’re a sole proprietor.

You file:

• Form 1040

• Schedule C (reports business profit or loss)

• Schedule SE (calculates self-employment tax)

No separate business return is required.

Filing Taxes as a Partnership

Partnerships file an informational return using Form 1065.

• The business itself doesn’t pay income tax

• Each partner receives a Schedule K-1

• Partners report income on their personal return

Filing Taxes as an LLC

LLCs are flexible:

• Single-member LLC → taxed like a sole proprietor

• Multi-member LLC → taxed like a partnership

• Option to elect S-Corp or C-Corp status

The tax treatment depends on how the LLC is set up.

Filing Taxes as an S Corporation

S Corporations file Form 1120S.

• Profits pass through to owners

• Owners receive Schedule K-1

• Owners must pay themselves a reasonable salary

This structure can save self-employment taxes when done correctly.

Filing Taxes as a C Corporation

C Corporations file Form 1120 and pay corporate tax.

• Business pays tax on profits

• Owners pay tax again on dividends

• Often called double taxation

Due to complexity, most small C Corps use a CPA.

Filing Taxes as a Nonprofit

Nonprofits file Form 990, even if tax-exempt. If the nonprofit earns unrelated business income, additional taxes may apply.

Self-Employment Taxes Explained

If you’re self-employed, you pay 15.3% in self-employment tax on net earnings.

This covers:

• Social Security

• Medicare

You calculate it using Schedule SE and usually pay it quarterly.

Do Small Businesses Pay Taxes If They Lose Money?

Yes, you still must file, even if you don’t owe taxes.

Business losses can:

• Offset other income

• Reduce future tax bills

• Help establish legitimacy with the IRS

Not filing can trigger penalties.

When Are Small Business Taxes Due?

Most beginners must pay quarterly estimated taxes:

• April 15

• June 15

• September 15

• January 15 (following year)

Missing deadlines can result in penalties and interest.

How to Prepare Your Records for Tax Season

Before filing, gather:

• Invoices and income reports

• Expense receipts

• Bank and credit card statements

• Mileage logs

• Payroll records (if applicable)

Clean records save time and prevent errors.

How to Track Business Expenses Properly

Separate business and personal finances by:

• Opening a business bank account

• Using a business credit card

• Recording expenses monthly

Bookkeeping software like QuickBooks or Wave simplifies this process.

How to Claim Small Business Tax Deductions

Tax deductions reduce taxable income when expenses are:

• Ordinary (common in your industry)

• Necessary (help run the business)

Common deductions include:

• Office expenses

• Software and tools

• Marketing and advertising

• Business mileage

• Travel and meals (business-related)

Always keep proof.

How to Pay Your Small Business Taxes

You can pay taxes through:

• IRS Direct Pay

• EFTPS

• Check or payment plan

Many business owners keep a tax savings account to avoid surprises.

How SK Financial CPA Helps Small Business Owners

We help beginners stay compliant and confident.

• Professional bookkeeping

• Tax preparation for all business types

• Tax planning to reduce liabilities

• IRS notice and audit support

With 24+ years of experience, 22,000+ returns filed, and 17,000+ clients served, we’re built for long-term support.

Conclusion

Small business taxes for beginners don’t have to be overwhelming. Once you understand your structure, track expenses properly, and pay on time, taxes become part of your routine not a source of stress. If you’re starting out or filing for the first time, having expert guidance can save money, time, and frustration.

FAQs

1. Do I need to file taxes if my small business didn’t make any money?

Yes, in most cases you still need to file. Even if your business had no income or made a loss, the IRS usually requires a tax return to be filed. Reporting a loss can actually help you reduce taxes in future years or offset other income.

2. How much should I set aside for small business taxes?

Most beginners should set aside 25% to 30% of their profit. This usually covers income tax and self-employment tax. Keeping this money in a separate savings account helps avoid surprises when payments are due.

3. When do small business owners have to pay quarterly taxes?

Quarterly estimated taxes are usually due four times a year. The typical due dates are:

• April 15

• June 15

• September 15

• January 15 (of the following year)

Missing these deadlines can result in penalties and interest.

4. What records should I keep for small business taxes?

You should keep all documents that show income and expenses. This includes receipts, invoices, bank statements, mileage logs, payroll records, and tax forms like 1099s. Keeping digital copies makes record-keeping easier and safer.

5. Do I have to pay taxes if my business is just a side hustle?

Yes, side income is still taxable. If you earn money from freelancing, gig work, or online sales, the IRS considers it self-employment income. Once your net earnings reach $400 or more, you’re generally required to file and pay self-employment tax.

6. Can I deduct home office expenses as a beginner?

Yes, if you use part of your home regularly and exclusively for business. You can deduct a portion of rent, utilities, and internet costs based on the space used for work. Accurate measurements and records are important to avoid IRS issues.

7. Do small businesses need a CPA to file taxes?

Not legally, but it often saves money and mistakes. Many beginners file on their own at first, but as income grows or business structures become more complex, working with a CPA can help reduce taxes, avoid penalties, and stay compliant.

8. What happens if I file my small business taxes late?

Late filing can result in penalties and interest. Even if you can’t pay the full amount, filing on time reduces penalties. The IRS also offers payment plans if you can’t pay everything at once.

9. What’s the difference between self-employment tax and income tax?

They are two separate taxes. Income tax is based on your tax bracket, while self-employment tax covers Social Security and Medicare at a combined rate of 15.3%. Most self-employed beginners owe both.

10. Can I pay small business taxes monthly instead of quarterly?

No, the IRS requires quarterly estimated payments. However, you can set aside money monthly to make quarterly payments easier. Some business owners also adjust withholding from a spouse’s W-2 job to cover business taxes.

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