Tax and Business Forms You’ll Need to Start a Small Business

Tax and business forms to address when starting a business

Entrepreneurs have several immediate administrative concerns when starting a business. We’ll look at the necessary forms to file and the steps you must take to set up and monitor your venture’s tax obligations properly. 

1. You must file to register your business’s structure.

Your business’s legal structure affects the taxes you’ll pay, the forms you’ll file and the financial and legal benefits you’ll receive. There are many business structures to choose from. However, most small businesses establish themselves as a limited liability company (LLC), a sole proprietorship or a partnership of some kind.

Your business location and structure will dictate how and where you must register your company. You will have to file within the state where your business will operate. The SBA’s business registration website provides ample online resources to help you register your business correctly in your state.

Various legal structures use the following forms when filing their taxes: 

• Partnerships: As a partnership, you’ll likely fill out Form 1065 with the IRS.
• Corporations: Corporations will file Form 1120. 
• S-corps: If you want to file as an S corporation (S-corp), you must file Form 2553 and then annually file an 1120-S. 
• Sole proprietorships: Sole proprietorships and self-employed individuals must file a 1040 Schedule C.

Various business structures file taxes with the IRS at different times, with partnerships and corporations generally filing on March 15 and sole proprietorships and single-member LLCs filing on April 15.

2. You must get state and federal tax IDs.

The federal government and many states require businesses to have tax identification numbers (TINs), often referred to as employer identification numbers (EINs). Businesses need EINs to pay federal and state taxes:

• State EINs: The process of getting a state TIN varies by state. Visit your state’s Department of Taxation or government website to determine how to proceed.
• Federal EINs: To get your federal EIN, you’ll submit Form SS-4. 

3. You must understand and file employee tax forms. 

If you hire employees, you must file several tax forms based on your team members’ employment statuses.

• W-2 forms: Employers must file W-2: Wage and Tax Statement Forms for every employee who receives a salary, wage or other form of compensation. This form reports wages or salaries your business pays to employees for the calendar year and the taxes withheld from them. It also reports Federal Insurance Contributions Act taxes to the Social Security Administration. While you can file W-2 forms with the IRS, you can also submit them via the federal Social Security Administration’s website. W-2 forms must be filed by Jan. 31.
• W-4 forms: Each employee must complete a Form W-4: Employee’s Withholding Allowance Certificate to note deductions they want taken out and how much tax they want withheld from their wages. 

Anthony Mezzasalma, a certified public accountant with Mezzasalma Advisors, advises all businesses to work with a reputable payroll provider to handle quarterly payroll tax filings, W-2 forms and other vital aspects of managing a staff. The best payroll services automate crucial payroll processes and ensure you don’t inadvertently violate payroll tax laws. 

4. You must understand contractors’ tax requirements and forms.

Independent contractors have unique tax requirements. Here are the forms you should know about:

• Form 1099-NEC: Form 1099-NEC is used to report nonemployee compensation. Businesses and individuals use this form to report compensation paid to independent contractors subject to self-employment tax. Form 1099-NEC is also used for payees to whom businesses or individuals issue more than $600 in qualifying payments amid a calendar year. The filing deadline for Form 1099-NEC is January 31, and a copy must be sent to the payee once it’s filed.
• Form 1099-MISC: Form 1099-MISC is most often used to report miscellaneous payments not subject to self-employment tax ― for example, rent, prizes, legal settlements and other qualifying reimbursements. A Form 1099-MISC must be prepared and filed by January 31 for any payee you’ve paid more than $600 in deductible expenses during a calendar year.
• Form W-9: Individuals covered by a 1099 form must also file Form W-9: Request for Taxpayer Identification Number and Certification. Mezzasalma warns that the W-9, due on January 31, is incredibly important to ensure your business complies with federal tax law. “I suggest [new business owners] not pay any vendor until they are in possession of the W-9 form, as these are much harder to get after the fact,” Mezzasalma advised. “This step is important because there are penalties for not issuing 1099 forms when you are supposed to.”

5. Consider health insurance tax implications.

Following the passage of the Affordable Care Act, businesses must be aware of Form 1095-B or Form 1095-C, depending on how many employees they have. These forms are required if your business offers health insurance as part of its employee benefits plan. Failure to file these forms will incur penalties from the government.

Other small business tax items to note

The U.S. tax code is a labyrinth requiring years of study. Any business tax missteps can lead to significant financial problems. Take the following steps to ensure you avoid tax headaches:

• Separate business and personal expenses: It’s crucial to open a business bank account and keep your business books and records separate from your personal finances. Mezzasalma warns that the IRS requires separate records for businesses. It’s also a good practice because it “helps to ensure there are no missed income and expense records.”
• Know your tax deadlines: It’s imperative to keep your business tax deadlines straight. Your tax payments must be made on time to avoid costly penalties. 
• Hire a tax professional: The best way to avoid missing tax forms or deadlines is to leave the tax requirements to the professionals. If you hire an accountant, they can ensure that you never miss a deadline and always remain in compliance with federal and state law.
• Use accounting software: Whether you do your own taxes or work with a professional, the best accounting software can keep your records organized and accurate. “Being able to capture, organize and present your income and expenses will assist in income tax preparation,” Mezzasalma explained. “A box of receipts will not do!”

Prepare now to avoid problems later

As a small business owner, you want to focus on growing your business. However, preparing and submitting the appropriate tax and legal forms is part of that process. Educating yourself and working with qualified professionals to mitigate risks and eliminate problems is crucial.

Casey Conway contributed to this article. Source interviews were conducted for a previous version of this article.