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 March 24, 2023

How to File Your Own Small Business Taxes

A small business owner stressed while filing his business taxes

Filing taxes as a small business

You are a hard-working business owner. You probably have deadlines to meet, employees to work with, rent to pay, and a hundred other things to think about on a daily basis. Tax season can creep up on even the most detailed business owners. If you don’t have all your paperwork prepared and files organized, tax season could leave you scrambling!

Filing taxes on your own as a business owner can be incredibly stressful. Even as a seasoned taxpayer, you may find yourself wondering what you need to do to be ready. And if you are filing small business taxes for the first time, you probably want a helping hand as you get started. Let’s go over the basics of how you ideally want to prepare yourself before tax season even hits.

Small business owner & his employer reviewing records for the business tax return

1. The first thing to remember is records, records, records.

When filing taxes, it is essential to have all your finances, income, inventory, debts and more accessible in official paperwork. This enables you to double-check information for yourself. It also makes it much simpler to show proof if your tax return is rejected.

2. Make sure you are aware of your business’s financial state.

Knowing your business’s finances from the previous few quarters lets you more accurately predict what your finances will look like in the near future. In turn, this helps you make informed decisions about the amount you owe on that tax paperwork.

3. Stay up to date on your uncollected debts.

Some customers or clients don’t pay off their debts. While this is frustrating and costs your business money, it also means you can deduct those lost amounts when filing your taxes. It is necessary to have records of these debts.

4. If you have inventory, keep track of how much gets sold or how much stays.

Inventory that is out of date or simply hasn’t sold for a while can be deducted as a business expense. You are legally allowed to get rid of the items that can no longer be sold. Though this isn’t ideal for your product or brand, it does mean you can deduct those items from your tax return.

5. Donate to charity for a good cause and a tax deduction.

You can always donate money to your favorite organization or local non-profit. But other things besides money work as well, including clothing, toys, baby items, furniture, etc. Make sure you keep track of each amount or item you donate and get receipts from the organization if possible.

6. Know which tax forms you need to file.

There are several different tax forms to choose from, and each one applies to a separate area of income of which you need to be aware.

  • A Form W-2 reports the wages that you paid to your employees. While this sounds like an issue your employees need to handle themselves, it is still essential for you to file these forms with the Social Security Administration as the business owner.
  • A Form 940 is related to the Federal Unemployment Tax, accounting for taxes business must pay for unemployment compensation.
  • A Form 941 deals with taxes that your business pays to programs like Medicare and Social Security.
  • A Form 1095c is necessary if your small business provides health insurance benefits for employees. This form will make clear which employees received insurance coverage.
  • A Form 1096 is used if your company employed contract workers for any purpose. Unlike a W-3, a Form 1096 can be applied to independent contractors who receive 1099s.


Small business owner on cellphone talking about which tax forms to use

With all these pointers in mind, you can begin the process of paying your taxes. As you dive in, remember that tax season is fraught with various legal obligations. You can navigate the tax-paying process with a bit more peace of mind if you remember the Taxpayer Bill of Rights:

  • You Have the Right to Be Informed.
  • You Have the Right to Quality Service.
  • You Have the Right to Pay No More than the Correct Amount of Tax.
  • You Have the Right to Challenge the IRS’s Position and to be Heard.
  • You Have the Right to Appeal an IRS Decision in an Independent Forum.
  • You Have the Right to Finality.
  • You Have the Right to Privacy.
  • You Have the Right to Confidentiality.
  • You Have the Right to Retain Representation.
  • You Have the Right to a Fair and Just Tax System.

How an affordable lawyer can help your business

It’s easy to remember these crucial protections. But what if you need other legal help as you pay your taxes? We’ve laid out a few of the most common issues an affordable lawyer can help you with during tax season:


  1. Most importantly, a lawyer will help you save time. Imagine sitting down with a cup of coffee and some relaxing music as you prepare to do your taxes. But first you must sift through all the receipts, refunds, income statements and more paperwork and make sense of them all. A lawyer who understands the legal ins and outs can explain things to you firsthand, so you can get ready for tax season with more knowledge under your belt.
  2. If you work with other people – whether they are employees, contractors, or business co-owners – this can make filing taxes a bit more complex. Your lawyer can help you understand what you need to do in each situation, so your taxes accurately reflect your income and payouts.
  3. State and local taxes vary depending on your location. This means you have even more information you must digest before you can know exactly how to file your taxes. A lawyer will already know these details and can explain them to you, freeing up your time and energy to deal with other tax issues.
  4. Failing to report your business taxes accurately could result in the IRS coming after your business! While this sounds like a worst-case scenario, it’s certainly a situation you want to avoid at all costs. Your lawyer can ease your mind by answering questions, making sure you know your obligations, and protecting your rights as you navigate each step of the tax-filing journey.

For small business owners, tax season can be one of the most stressful times of the year. However, it is possible to ease into tax season with more peace of mind when you bring these basic tips with you. Being in the know about the process, what kind of paperwork you need (hint: all of it), and what your rights are as a taxpayer will help you approach tax season with more confidence.

Asking a lawyer for help is one of the last things you may want to do. Doesn’t a lawyer cost money? But you can access the legal help you need at a fraction of the usual cost when you start a LegalShield Membership. LegalShield exists to help people like you with various legal issues by providing affordable access to dedicated law firms in your area. You can speak with a provider lawyer, ask questions, and get assistance with various areas of the tax-filing process. LegalShield offers you the ability to step into tax season boldly, armed with a dedicated law firm on your side.

Small business owner looking at business taxes on tablet computer.

If you’re wondering about filing your taxes as a business owner, read about whether you should use a tax lawyer or a CPA.

For more support as a small business owner, learn how our prepaid legal plan for businesses can help you.

Pre-Paid Legal Services, Inc. (“PPLSI”) provides access to legal services offered by a network of provider law firms to PPLSI members through membership-based participation. Neither PPLSI nor its officers, employees or sales associates directly or indirectly provide legal services, representation, or advice. The information available in this blog is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide any specific recommendations. The blog post is not a substitute for competent legal counsel from a licensed professional lawyer in the state or province where your legal issues exist, and the reader is strongly encouraged to seek legal counsel for your specific legal matter. Information contained in the blog may be provided by authors who could be a third-party paid contributor. All information by authors is accepted in good faith, however, PPLSI makes no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of such information.

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