The Most Common U.S. Business Tax Forms
The complex world of income taxes can be confusing, daunting, and even frustrating for a new business owner to figure out on their own.
Considering the Internal Revenue Code manual is over 80,000 pages long, there is not a single person on earth who can memorize and comprehend every single page…not even America’s best CPAs!
This page summarizes the various tax forms that business owners should know about to ensure they can stay on top of their federal and state taxes as they grow.
Any questions? Book a free consultation with our Tax Partner to assess your tax situation.
Form 1040: Individual Income Tax Return
Most U.S. adults are required to file a Form 1040, otherwise known as the U.S. Individual Income Tax Return (Link). If you earn an income, it’s 99.99% likely that you need to file this form each and every year. Most minors, full-time students, and low-income adults don’t need to file a form 1040 (if their income is below a certain threshold).
Schedule C: Profit or Loss from Business
Individuals who earn income from a sole proprietorship or single member LLC are required to file a Schedule C: Profit or Loss from Business (Link) form each year with their Form 1040. This is a simple profit and loss statement that calculates a net income (or loss) from their business venture(s). This income / loss flows into their Form 1040 and is added to any other income the taxpayer and their spouse earns each year.
Form 1065: U.S. Return of Partnership Income
LLCs with multiple members, Partnerships of all types, and certain other business relationships are required to file a Form 1065: U.S. return of Partnership Income (Link). Since partnerships are “pass through entities” they typically don’t pay federal taxes themselves, rather, they pass through income (and loss) to their members / partners, to calculate taxes on their final tax returns. Partnership returns are separately filed business tax returns filed under the partnership’s EIN, have their own profit and loss statements, balance sheets, and capital accounts, and have a much different set of rules and complexities than Schedule C filers. Partners each receive a Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.(Link). Each partner includes their K-1 on their tax return, which can be a Corporate tax return, another Form 1065, a trust, or their individual tax return. Many states now require partnerships to pay state income taxes, and some states give their members special deductions or credits on their tax returns for taxes that the partnership pays each state, adding further complexity.
Form 1120s: U.S. Income Tax Return for an S Corporation
S Corporations are required to file a Form 1120S: U.S. Income Tax Return for an S Corporation (Link) each year. S Corporations are either LLCs or Corporations that have made a special election with the IRS and most states to be taxed as S Corporations for income tax purposes. Similarly to partnerships, S Corporations file their own business tax returns, pass through income and loss to their shareholders, and have a set of rules that are more complex than Schedule C filers, but are typically less complex than partnership returns. S Corporation owners are known as shareholders and also receive a Schedule K-1 to include in their (typically individual) income tax returns each year. Just like partnerships, many states require S Corps to pay state income taxes too.
Form 1120: U.S. Corporation Income Tax Return
C Corporations are required to file a form 1120:U.S. Corporation Income Tax Return (Link) each year. C Corporations can be LLCs that have elected to be taxed as C Corporations, or, are standard Corporations that default as C Corporations that make no special tax election. Just like partnerships and S Corporations, C Corporations file a separate income tax return each year. But unlike Partnerships and S Corporations, C Corporations are NOT pass-through entities and actually pay corporate and state income taxes themselves.
Within each business tax return above there are a number of other forms include a profit and loss, balance sheet, equity schedules, basis, and a number of other forms that you must include in your tax returns.
Summary
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