All businesses except partnerships must file an annual income tax return (partnerships file an information return). The form you use depends on how your business is organized. You must pay taxes as you go — as you earn or receive income during the year. Typically, a business pays estimated taxes quarterly to the federal and state government.
Here are some of the most common federal business and tax forms you'll need when starting a business (scroll down for more information on each form):
More Tax Information from the IRS:
- There are several online legal forms download sites.
- The IRS has real people answer questions at 1-800-TAX-FORM (1-800-829-3676).
- A corny-looking but useful Tax Calendar lets you know when to do certain things.
- There are many, many more federal tax and business forms here.
- Information on filing electronically.
Summary of the Common Tax and Business Forms:
All U.S. employers must complete and retain a Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens. On the form, the employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and relate to the individual and record the document information on the Form I-9. The list of acceptable documents can be found on the last page of the form.
Do not file Form I-9 with U.S. Immigrations and Customs Enforcement (ICE) or USCIS. Form I-9 must be kept by the employer either for three years after the date of hire or for one year after employment is terminated, whichever is later. The form must be available for inspection by authorized U.S. Government officials (Department of Homeland Security, Department of Labor, Department of Justice).
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN. You may apply for an EIN in various ways, and now you may apply online. This is a free service offered by the Internal Revenue Service. You must check with your state to make sure you need a state number or charter.
The W-2, Wage Tax and Statement form is used to report wages or salaries your business pays to employees for the calendar year, along with the taxes withheld from them. Its also reports FICA taxes to the Social Security Administration. You must fill out a W-2 for each employee who receives a salary, wage or other compensation. The W-2 must be delivered to employees by Jan. 31.
*To order W-2 forms, you must visit the IRS web site or 1-800-TAX-FORM (1-800-829-3676).
The W-4 form, filled out by an employee to note deductions, determines how much tax you withhold from employees wages or salaries. Ideally, it's the exact amount due on an employee's 1040 form at the end of the year, though often the amounts don't match up.
Self-employed people must use 1040 Schedule C to report business income or loss, and to calculate self-employment tax. You can use the simpler 1040 Schedule C-EZ if you have a profit and:
- Your expenses are no greater than $5,000.
- You have no employees
- You have no inventory, and
- You are not using depreciation or deducting the cost of your home.
Used to report miscellaneous income, including fees, rents, commissions, royalties, prizes, awards or income earned as a non-employee.
SOURCES: IRS; Small Business Administration; Department of Homeland Security