There are aspects of small business taxes that prompt many questions. One of the biggest is, “When are small business taxes due?”
Depending on how your company is structured, business tax deadlines are typically either March 15 or April 15.
Other variables you should be aware of when filing your business tax forms, include:
- How business structure impacts small business tax deadlines
- What you should know about estimated taxes
- How to file a business tax extension
- Federal business tax extension deadlines
- What happens if you miss a tax deadline
Tax Deadlines by Business Structure
When business taxes are due varies according to how your business organization is structured. While April 15 is a date the majority of Americans need to remember, the due date for small business taxes may be different. Let’s see how your business structure will impact the deadline to file small business taxes.
According to IRS Publication 509, the following dates are when business organizations are required to file. Keep in mind, these dates apply to most businesses, which typically follow a general tax year calendar. If your business operates on a fiscal year schedule, refer to publication 509 for guidelines on certain changes that can impact filing deadlines.
Sole Proprietorships and Single-Member LLCs
The business tax filing deadline for business owners who function as sole proprietors or single-member LLCs is April 15. Documents needed for filing include Form 1040, including Schedule C.
Partnerships and Multimember LLCs
What is the due date for business taxes if your company is a partnership or multi-member LLC? The IRS notes that businesses structured as one of these two organizations are required to file Form 1065 by March 15. A Schedule K-1 tax form is also required from each owner as part of their personal tax returns.
Similarly, the due date for business tax filings for S corporations that follow a calendar year schedule is March 15. To file, S corporations will need to submit Form 1120S and provide each shareholder with a Schedule K-1.
The general tax calendar deadline for business taxes to be filed by companies structured as C corporations is April 15. Form 1120 is among the documents that need to be submitted to the IRS by the filing deadline.
Estimated Tax Payments
As defined by the IRS, “estimated tax is the method used to pay tax on income that is not subject to withholding.” This income includes self-employment, dividends, rental, interest and capital gains. Estimated taxes are paid through quarterly installments during the year.
Who Needs to Pay Estimated Tax
Sole proprietors, as well as partners and S corporation shareholders who expect to owe taxes of $1,000 or more at the time of their return, are required to pay estimated taxes. The requirements for corporations are slightly different as they need to make estimated tax payments if they believe they’ll owe $500 or more in taxes.
In addition, if your tax was more than zero in the prior year, you might have to pay estimated tax for the current year. For more details on who must pay estimated tax, consult the worksheet found in Form 1040-ES, Estimated Tax for Individuals (PDF), or Form 1120-W, Estimated Tax for Corporations (PDF).
How To Calculate Your Estimated Business Tax
To figure out how much you should pay in estimated tax, you need to first determine your expected adjusted gross income, taxable income, taxes, deductions and credits for the year.
Using those elements from the previous year’s income as a guide, use the worksheet found in Form 1040-ES to project your estimated tax. Your goal using this worksheet is to get an idea of the amount of income you expect to earn for the year.
Each quarter will present another opportunity to more accurately assess your income, meaning you will continue to use Form 1040-ES throughout the year. While it might be challenging, estimating your income as precisely as possible will allow you to avoid penalties and overpayment.
Corporations differ from other business organizations here as well, as they use Form 1120-W to figure estimated tax.
Estimated Business Tax Due Dates
Estimated business tax due dates vary depending if your business is a sole proprietorship or a corporation. It’s important to note that partnerships don’t pay estimated taxes because they don’t withhold taxes when paying out distributions to their partners. However, partners as individuals might need to pay estimated taxes.
The 2021 estimated business tax due dates for individuals, sole proprietors, partnerships and single-member LLCs is as follows:
- April 15, 2021
- June 15, 2021
- Sept. 15, 2021
- Jan. 15, 2022
In contrast, the estimated business tax due dates for corporations is as follows:
- April 15, 2021
- June 15, 2021
- Sept. 15, 2021
- Dec. 15, 2021
Paying Your Estimated Business Taxes
The IRS allows payments to be remitted online, by phone or by mail. For more details, see the section of Form 1040-ES titled “How to Pay Estimated Tax,” as well as Publication 505, Tax Withholding and Estimated Tax.
The Electronic Federal Tax Payment System (EFTPS) is arguably the easiest and most convenient way for businesses to pay federal taxes, allowing organizations to pay federal tax deposits (FTDs), installment agreement and estimated tax payments.
Installments can be made in weekly, bi-weekly or monthly increments, as long as the total tax bill is satisfied at the end of the quarter. Much like a digital bank statement, the EFTPS also allows you to view historical payments to review what you’ve already paid and how much remains.
If your business is structured as a corporation, you are required to use the Electronic Federal Tax Payment System. To learn more about this requirement, see IRS Publication 542, Corporations.
Filing a Business Tax Extension
Running your own business is quite involved, and sometimes tasks get put on the backburner even when they’re important. If, for whatever reason, you’re unable to meet the deadlines set out for your specific business organization, you can file for an extension by the regular tax filing deadline for your entity type. Corporations and partnerships will need to file Form 7004 to request an extension, while sole proprietors will need to file Form 4868.
A business tax extension allows you to file your tax returns 6 months later. Though if you expect to owe taxes, you’re still required to pay this amount by the regular business tax filing deadline. Penalties for late payments are calculated at 0.5% of the unpaid tax balance per month, with 25% being the maximum.
Federal Business Tax Extension Deadlines
Federal business tax extension deadlines also vary by company structure. Let’s take a look at the business tax filing deadline for extensions by entity type.
Sole Proprietorships and Single-Member LLCs
Sole proprietorships and single-member LLC tax extension filings give business owners until Oct. 15 to submit their taxes.
Partnerships and Multi-Member LLCs
The federal business tax extension deadline for partnerships and multiple-member LLCs is Sept. 15.
S corporation tax extension filings give business owners until Sept. 15 to submit their taxes.
In contrast, the federal business tax extension deadline for C corporations is Oct. 15.
What Happens If You Miss a Business Tax Deadline?
While it’s not the end of the world, missing a tax deadline can add additional financial burden to your business. If you do miss a deadline, the IRS recommends that you file and pay as soon as possible. Often, a moderate financial penalty is assessed to your tax account.
Payments can be made to the IRS by mail as well as online through IRS Direct Pay, which is the fastest method to settle your tax balance.
Payroll Tax Deferrals
The Coronavirus Aid, Relief and Economic Security Act (the CARES Act), allowed businesses to postpone their Social Security contributions for workers (6.2% of wages up to $137,700 in 2020) due between March 27, 2020, and Dec. 31, 2020. Self-employed individuals could also defer half of their 2020 Social Security taxes for estimated tax purposes.
According to IRS Publication 509, regarding payment of the deferred employer share of 2020 Social Security tax, half of the deferred amount must be paid by January 3, 2022. The remaining half must be paid by January 3, 2023.
In addition to the deferral of the employer share of Social Security tax, qualifying employers could also elect to defer the employee Social Security tax from September 1, 2020, and December 31, 2020. For employers who chose to do so, they must pay those taxes no later than January 3, 2022.
While initially not eligible, employers with forgiven Paycheck Protection loans can also defer payment of their 2020 employer Social Security taxes, according to the Paycheck Protection Program Flexibility Act of June 2020.
For more information, see the IRS guidance of deferral of employment tax deposits and payments.
Final Considerations When Small Business Taxes Are Due
Small business taxes require careful review and attention to detail. While the tax code is full of cumbersome language, the basics of business taxes are generally straightforward — especially when it comes to business tax deadlines. The best way for you to stay in the good graces of the IRS is to submit your required tax forms and payments by your business tax filing deadline.
If you’re concerned that you may miss a deadline or you’re not sure your business will have everything needed to file, you can file for a federal business tax extension. Talk with your CPA to find out your small business tax rates and start securing all of the documents, details and payment specifics you’ll need to file on time.