NerdWallet Small-Business Advisory Board
This article has been informed by a member of our NerdWallet Small-Business Advisory Board, a select group of small-business owners who help shape our content.
Whether you are just starting your business or have been running it for a few years, this guide will walk you through each step of the tax filing process. You’ll learn how to:
If that list feels daunting to you, you’re not alone. But filing business taxes doesn’t have to be complicated. In fact, if you treat your business taxes as a year-round process rather than a once-a-year chore, you’ll find it much easier to keep on top of deadlines and paperwork. Plus, you’re more likely to save some big bucks.
Expert on the ground
Tish Heiss Founder & CEO, PKH Advisors, PLLC
Tish Heiss, enrolled agent, and founder and CEO of PKH Advisors, PLLC, a Pittsburgh-based tax, accounting and advisory firm serving small businesses, makes the case for hiring a tax professional to ensure you plan for and manage your taxes throughout the year. And she’s not wrong to do so. But you can absolutely educate yourself on the business tax filing process and get a jumpstart yourself. That’s exactly what this article is designed to help you do.
Editor’s Note: This guide covers federal taxes only; state requirements vary.
Step 1: Determine your business structure
Your business structure drives everything. It determines which forms you file, when they're due and how your income is taxed. But many business owners don’t fully understand the tax implications for the entity type they’ve chosen.
Heiss told NerdWallet about a conversation she commonly has with business owners after they tell her that they’re an LLC. "I say to them, 'How are you being taxed? How is your entity being taxed?' Usually radio silence."
So, here are the key things to know about business taxes for each of the entity types.
Sole proprietorship
A sole proprietorship is the simplest business structure and therefore has a simpler tax filing process. As a sole proprietor, there is no legal separation between you and your business. So you carry personal liability for the business.
For tax purposes, a sole proprietorship is considered a pass-through entity. That means you file your business taxes on your personal tax return using Schedule C attached to Form 1040.
You are also responsible, as a sole proprietor, for paying self-employment tax, which covers Social Security and Medicare taxes. The self-employment tax rate is 15.3%.
» MORE: Self-employment tax calculator
Single-member LLC
Here’s the important distinction Heiss makes about an LLC as it relates to taxes: The LLC designation exists at the state level, not the IRS level. “This is a big misconception,” she says.
A single-member LLC is taxed at the federal level as a sole proprietorship. So you’d file the same Schedule C attached to Form 1040 (personal tax return) as mentioned above. However, unlike a sole proprietor, you have the option as an LLC to elect to be taxed as a C corporation (using Form 8832) or an S corporation (using Form 2553). There could be benefits to making the corporate election, depending on the specific circumstances of your business.
Multi-member LLC or partnership
A partnership, like a sole proprietorship, is a pass-through entity. So each partner reports their share of income and losses on their personal tax return (Form 1040) based on information they receive from the partnership on the Schedule K-1. Additionally, the business files an information return (Form 1065).
By default, a multi-member LLC is taxed as a partnership. But again, as an LLC, you can elect corporate tax status instead.
S corporation
An S corporation is another type of pass-through entity. Owners report their share of business income on their personal tax returns (Form 1040), based on information provided on Schedule K-1. The S corporation itself files Form 1120-S as an information return. You can choose to be an S corp at the state entity level and therefore also for federal tax purposes. Or, as mentioned above, you can be an LLC at the state level but elect to be taxed as an S corp.
While the benefits of S corp formation and taxation are certainly worth consideration and will make good sense for some businesses, it’s also extremely important to understand the full scope of what it means to be taxed as an S corp.
S corp elections are often made prematurely, sometimes based solely on advice found on social media, Heiss noted in her conversation with NerdWallet. Revenue and preparedness should drive the decision to elect S corp status, Heiss told us, not a TikTok video. Business owners don’t often understand the compliance requirements: board minutes, a separate tax return and mandatory payroll if the owner works in the business.
That mandatory payroll piece — referred to by the IRS as a “reasonable salary” — is not to be overlooked, as noted to NerdWallet in two separate conversations with tax professionals. It can be a costly audit trigger.
The IRS will reclassify your distributions if you’re not taking a high enough salary based on your cash flow, Heiss explained. And if the agency has to reclassify, you’re looking at rerunning payroll across four quarters, with penalties and interest. The total liability can be four to five times the actual tax due, according to Heiss.
Paul Miller, CPA and founder of Miller & Company, LLP, an accounting firm with locations in New York, Florida and Washington, D.C., described to us a recent call he’d had with an S corp owner who had never taken a payroll. “You’re gonna get in trouble,” he warned her, “because the IRS is gonna say to you, ‘Who’s working here? Who’re your employees that are generating this revenue?’” The IRS “may not come today, but they’re gonna ring your doorbell” if you don’t start taking a payroll, he advised.
» MORE: S corp vs. C corp
C corporation
A C corporation is the only business type taxed at the entity level, meaning the business pays taxes at the corporate level (using Form 1120). C corps are, however, subject to something called double taxation. This means that if dividends are distributed to shareholders, then the shareholders pay taxes on those dividends in addition to the corporate-level taxes.
This is when finding a business tax advisor can be especially beneficial. As Miller explained to NerdWallet: It’s the job of a tax professional to understand the ins and outs of your business and to advise you accordingly on choosing the proper structure. He described entity choice as something he revisits with every client annually, asking about five-year plans, exit strategy, plans to raise capital and operating state: "Does the entity you're operating in still make sense?"
» MORE: LLC vs. corporation
Step 2: Know your deadlines
NerdWallet has a page entirely dedicated to the nitty gritty details of business tax deadlines. So head there to get your personalized calendar of all the deadlines and forms you need to know for your business.
But here are the highlights.
2026 and 2027 annual return filing deadlines
| Deadline | Entity types | Form(s) |
|---|---|---|
| Sept. 15, 2026 (March 16 extension) | S corporation, partnership | Form 1120-S (S corps); Form 1065 (partnerships) |
| Oct. 15, 2026 (April extension) | Sole proprietorship, C corporation, single-member LLC | |
| March 15, 2027 | S corporation, partnership | Form 1120-S (S corps); Form 1065 (partnerships); Form 7004 (to file for extension) |
| April 15, 2027 | Sole proprietorship, C corporation, single-member LLC |
Quarterly estimated tax deadlines
Expert on the ground
Tish Heiss Founder & CEO, PKH Advisors, PLLC
If you expect to owe $1,000 or more in taxes in a given tax year, then you need to pay quarterly estimated taxes (for C corporations, the threshold is more than $500 in taxes).
If you follow a calendar year for your taxes (and most businesses do), then your upcoming quarterly deadlines are as follows:
- Sept. 15, 2026 (Q3)
- Dec. 15, 2026 (Q4 payment for C corps)
- Jan. 15, 2027 (Q4 payment for individuals/pass-throughs)
- April 15, 2027 (Q1)
- June 15, 2027 (Q2)
- Sept. 15, 2027 (Q3)
Sole proprietors, partners and S corp shareholders file Form 1040-ES with their quarterly estimated tax payments. C corporations file Form 1120 and make payments through the Electronic Federal Tax Payment System® (EFTPS).
Be aware that missing these quarterly payments can result in you paying a penalty plus interest.
Employer tax deadlines
If you have employees, you’re responsible for meeting additional tax deadlines. Your deadlines and payments revolve around the following:
- Federal Unemployment Tax Act (FUTA) taxes, using Form 940.
- Federal income tax withholding and FICA (Social Security and Medicare) taxes, using Form 941.
- FICA tax deposits, using electronic funds transfer (EFT).
- W-2s and 1099s.
Again, see your complete calendar of deadlines on our business tax deadlines page.
Deadline extensions
You can file for extensions on your annual returns using Form 7004 (most business entities) or Form 4868 (sole proprietorships and single-member LLCs taxed as disregarded entities). In most cases, this extends your tax filing deadline by six months.
One critical caveat to understand with extensions: An extension applies to the filing date only. You are still responsible for paying any taxes you owe by the original deadline.
Step 3: Gather your financial records
This step is one of the most time-consuming. But actually, keeping organized records upfront will save you much time and energy on the back-end when it comes time to file your business taxes, especially if you’re enlisting the help of a tax pro.
“A lot of business owners are not business-minded,” Heiss says. By that she means they don’t have a good handle on their books and financial records. As a result, they usually come to her with an accounting mess that needs major reconciliation. Miscategorizing things like loan payments and fixed assets and not properly balancing bank accounts and credit cards mean you may be missing deductible expenses you never tracked.
To make tax filing easier and help you maximize your savings, keep these key financial documents organized and easy to find.
Income records
- Gross receipts, sales records, invoices.
- Bank and payment processor statements.
- Form 1099-K (reports payments received through payment processors for card and online sales).
- Form 1099-NEC (if you received payments as a contractor).
Expense records
- Business expense receipts and invoices.
- Credit card and bank statements.
- Mileage logs (if deducting vehicle use).
- Home office documentation (if applicable).
Payroll and contractor records
- W-2s issued to employees.
- Form 1099-NEC issued to contractors paid $2,000+ (or $600+ in the 2025 tax year).
- Payroll tax payment records (Form 941 filings).
Other documents to have ready
- Last year's tax return (useful reference).
- Prior-year depreciation schedules (if deducting equipment costs).
- Retirement plan contribution records.
Step 4: Choose how you'll file
Option 1: Hire an enrolled agent (EA) or a certified public accountant (CPA)
The distinction between these two professional titles is important to understand.
An enrolled agent (EA) is licensed by the federal government to advise on taxes. An EA can represent taxpayers before the IRS in all 50 states.
A certified public accountant (CPA), however, is a licensed accounting professional. CPAs complete education and exams in taxation, but it’s not a given that a CPA will be well-versed and highly experienced in complex tax preparation or seeing clients through the audit process.
If you hire a CPA, you’ll want to be sure that they’re specialized in small-business taxes as well as accounting.
- Best for: Corporations, S corps, multi-state businesses, businesses with employees, anyone with complex deductions or a significant change in the business that year.
- Look for: Enrolled agent (EA) or CPA credential. If CPA, verify their specific tax experience.
- Ask: How they handle audits, their availability during tax season, if they’ve worked with businesses similar to yours, whether they'll review your books or just your return.
- Cost range: $300 to $2,500+ for CPA tax prep.
- When to hire: The earlier in the year the better — don't wait until March.
Option 2: Bookkeeper + EA or CPA
Bookkeepers and accountants serve distinct roles. A bookkeeper, whether human or in the form of software, reconciles your accounts and transactions, prepares monthly financial statements and handles other day-to-day financial aspects of your business. An accountant largely focuses on filing your tax returns and serving in more of an advisory role for your business finances.
Having the two working in tandem can have great benefits for your business. A bookkeeper maintains clean, reconciled records for you year-round. Then a CPA or EA uses those clean records to prepare your tax return. Less cleanup time on the part of the CPA or EA ultimately means lower professional fees for you to pay.
- Best for: Businesses with ongoing transaction volume, anyone whose books are routinely behind, owners who want to minimize their CPA bill by arriving organized.
- Bookkeeping tools: Software such as QuickBooks and Xero, or a full-service bookkeeping firm.
- Cost range: ~$300 per month for bookkeeping + cost of CPA tax prep (which should be reduced with good bookkeeping practices).
- When it makes sense: You're spending meaningful time on your own books or your CPA keeps telling you your records need work before they can file.
Miller, a CPA himself, says that a good bookkeeper is arguably as important as a good accountant for a small business. He adds that skimping on professional help early often means paying more in taxes than necessary.
Option 3: Business tax software
- Best for: Sole proprietors and single-member LLCs with straightforward financials, single-state operations, owners comfortable navigating software with prompts.
- Look for: Software that supports your specific entity type and all required forms.
- Ask yourself: Whether your situation has changed significantly (hired employees, new state, major asset purchase). If so, a professional may be worth the cost this year.
- Cost range: $180 to $640 for paid software, depending on your business structure. (State filings are extra.) You also have several free tax filing options.
- When to reconsider: Any year with significant complexity.
Both Heiss and Miller echo similar cautions around relying solely on tax software, though. Too many times they’ve seen business owners pay more in the end coming to them as the professionals to clean up what was done incorrectly. The owners, they say, would have saved money by working with a professional from the start.
Step 5: Calculate your taxable income and deductions
We’ve compiled a list of two dozen small-business tax deductions, so use that as your complete guide to potential write-offs.
Here’s a brief summary of the kinds of costs you can deduct from your taxable income. Note that what you’re able to deduct depends on your entity type and other qualifying factors.
Common deductible business expenses
- Home office.
- Vehicle expenses or mileage.
- Equipment and technology.
- Business insurance, professional fees, marketing costs.
- Health insurance premiums (for self-employed).
- Retirement contributions (SEP IRA, SIMPLE IRA, solo 401(k)).
- Self-employment taxes (employer portion) and other taxes.
The qualified business income (QBI) deduction
This deduction was made permanent under the One Big Beautiful Bill Act, passed in July 2025. It entitles pass-through entities to a deduction of up to 20% of their qualified business income.
Income thresholds and limitations apply. Read our guide to the qualified business income deduction to learn more.
Startup costs
New small-business owners commonly get this one wrong. In the first year, you can deduct up to $5,000 in startup costs (this phases out if total costs exceed $50,000). Then, you get the remaining deduction back in equal installments over 180 months (15 years).
Check whether you qualify for tax credits
Unlike deductions, which reduce your taxable income, credits reduce your actual tax bill dollar-for-dollar. There aren't many federal credits available to small businesses, but the ones that exist can be significant. See our guide for details on 10+ credits you may be eligible to claim for your business.
» MORE: Small-business tax credits
Step 6: Complete and submit your return
Fill out the correct forms
If you’re filing your own taxes, with or without the assistance of software, the first step in completing your tax return is to ensure you’re using the correct form for your entity type. Refer back to the annual return deadline table above, which includes links to the IRS forms for each entity.
Review before you file
Once you’ve finished filling in your form(s), review all your entries carefully. Check them and check them again. Then have a trusted fellow business owner, mentor, family member or friend check them as well.
Ensure you’ve entered the correct EIN. Double-check income figures and deduction amounts. Confirm that you’ve made all your estimated payments during the year and that they’re all properly accounted for in the paperwork. Also be sure that you’ve distributed K-1s to any partners or shareholders, if applicable.
Submit your return
Filing your return electronically is the faster and more secure way to go. It’s also the method the IRS prefers. In fact, nearly 94% of individual tax returns were submitted electronically in 2025. Plus, the IRS’ Zero Paper Initiative has hit some snags and won’t be rolling out for the 2026 tax season as originally anticipated. So to avoid the backlog in manual processing, e-file your return.
Pay any balance owed
Your payment options vary depending on how you file. If you use software or a tax professional, you can use electronic funds withdrawal (EFW) to both file and pay your taxes. Otherwise, IRS Direct Pay is open to all tax filers. That lets you securely pay your tax bill directly from your bank account. Additionally, you can pay with a card or digital wallet, though processing fees apply.
❗Remember, you must pay your tax bill by the original filing deadline, even if you file an extension.
Frequently Asked Questions
Do I file business taxes separately from my personal taxes?
That depends on your business entity type. If you’re a sole proprietor, an LLC that hasn’t elected corporate tax status, partnership or S corporation, then you declare your taxable business income on your personal tax return. C corporations and LLCs that have elected to be taxed as corporations file business taxes separately.
How do I file taxes for an LLC?
By default, LLCs are treated as pass-through entities, meaning you file your business taxes with your personal tax return. The form you attach to your personal return (Form 1040) depends on whether you're a single-member or multi-member LLC. Single-member LLCs attach Schedule C, while multi-member LLCs receive a Schedule K-1 from the LLC (which files Form 1065 separately) and use that to report their share of income on their personal return. You also have the option, as an LLC, to elect to be taxed as a corporation. If you go that route, then you file your business taxes separately from your personal taxes.
What happens if I miss a business tax deadline?
Don’t miss a business tax deadline! But if you do, pay as soon as possible and be prepared to pay a penalty fee and interest on top of what you owe.
Can I file business taxes myself, or do I need a CPA?
A CPA or other tax professional is not required to file your business taxes, though it is recommended. You also have the option to use tax filing software, which often comes with AI or human-assisted guidance.
What is the difference between a tax extension and a payment extension?
There is only one type of tax extension and that is to extend the filing deadline. You must always pay any tax you owe by the original filing deadline. You can, however, file to extend the deadline for submitting all of your paperwork, usually by six months.
What is an enrolled agent, and should I use one instead of a CPA?
An enrolled agent (EA) is licensed by the federal government to advise on taxes. An EA can represent taxpayers before the IRS in all 50 states. A certified public accountant (CPA) completes education and exams in taxation. But it’s not a given that a CPA will be well-versed in tax preparation and advising. If you hire a CPA, be sure they have the tax experience and expertise your business requires.
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- 1. IRS. Returns filed, taxes collected and refunds issued. Accessed Jun 25, 2026.
