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Small Business Owner Taxes

Small Business Owner Taxes
Ines Zemelman, EA
20 September 2021

Who doesn't want to be their own boss? Running your own business has numerous benefits. However, it can provide a lot of difficulties, particularly if you live abroad.

Every move you make as an American expat entrepreneur has tax repercussions, from how you establish your company to how you pay yourself and your staff. Small business owner taxes will be affected by where your firm is located, if there is a Tax Treaty and/or Social Security Agreement between your host country and the United States (US), and where your employees are based.

You must also examine the likelihood of paying US payroll taxes and Social Security in addition to federal tax filing requirements. Even if your company works entirely outside of the US, you may be needed to file IRS tax forms for small business owners, such as Form 5471, which is needed for anyone owning 10% or more of a foreign firm.

Us here at Taxes for Expats are here to guide you when it comes to dealing with taxes for business owners. To make sure you don’t miss anything—which can lead to hefty fines from the IRS—we’ve compiled this nifty guide. Let’s start with determining what tax form for small business owner you should must know about:

1. Small Business Owner Tax Forms

You must file different business owner tax forms that you would not file as an individual. These documents are useful for calculating and paying taxes on your business income, and reporting company costs, among other things.

You can take a close look at each small company tax form below to gain a good grasp of your tax duties, file an accurate tax return, and receive the most beneficial tax outcome possible, whether you are a new small business or a seasoned entrepreneur.

Form 1065, U.S. Return of Partnership Income

You and your partner(s) will be using this form to record partnership income, profits, losses, deductions, and credits if you have a partnership. A partnership is a pass-through entity, which means that any profit or loss is distributed to the partners via Schedule K-1 (Form 1065). On their individual income tax returns, partners must include partnership items.

Form 1120-S, U.S. Income Tax Return for an S Corporation

An S corporation's income, profits, losses, deductions, and credits are reported on this form. An S company is a pass-through organization, which means that any profit or loss is distributed to its shareholders through Schedule K-1. S corporation items must be included on individual income tax returns by shareholders.

Form 1120, U.S. Corporation Income Tax Return

Use this form to report a “regular” or C corporation's income, profits, losses, deductions, and credits.

Form 1040-ES

This small company tax return form will be submitted to the IRS on a quarterly basis. It assists you in calculating and paying estimated taxes, such as self-employment tax and tax on net profits from your firm.

Form 1040 (Schedule C)

This form details the profit or loss from a business or profession that you ran as a sole proprietor. It's filed alongside your Form 1040 - Individual Income Tax Return.

Form 1120-W Estimated Tax for Corporations

Form 1120-W is used by corporations to assess their tax liabilities and calculate their expected tax payments.

2. Tax Deadlines for Small Business Owners

What is the deadline for business owners to file taxes? The tax deadline for business owners is something that you must be aware of.

If you're using a Schedule C, that becomes part of your Form 1040, so you don't have to worry about submitting deadlines. The same April 15 deadline applies in most cases.

If you are taxed as a C-Corp, you must file Form 1120 by the 15th day of the fourth month following the end of the tax year, which is April 15 for most taxpayers. If you are taxed as an S-Corp, you must file Form 1120S by the 15th day of the third month following the end of the tax year, which is March 15 for most taxpayers. This form cannot be submitted with your personal income tax return to the IRS.

3. Tax Deductions for Small Business Owners

Effective for tax years after 12/31/2017, a small business taxpayer has been classified as a taxpayer that (a) has an average annual gross receipts of $25 million or less for the 3 prior tax years and (b) is not a tax shelter.

If you're a small business taxpayer, you can adopt or adjust your accounting method to account for inventories in the same way as non-incidental materials and supplies, or in accordance with your treatment of inventories in an applicable financial statement, or if you don't have an applicable financial statement, the method of accounting you use. 

Figuring out what your tax obligations are as a small business owner can be tedious and frustrating if you don’t have any knowledge about these. It can even take your focus away from what matters most— your business. The good thing is TFX can handle all of that in a jiffy. 

Ines Zemelman, EA
Founder of TFX