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Starting or Ending a Business

Question: I just started a small business and want to know if I have to file my income taxes quarterly or at the end of the year?

Answer:

You file a federal income tax return annually, but the federal income tax system is a pay-as-you-go system.

If your business is a sole proprietorship or an unincorporated single member LLC with you as the sole owner, the income is attributable to you personally. If your business is a partnership, an unincorporated multi-member LLC, or an S corporation, the ordinary business income passes through to members and is attributable to them on their personal returns.

If you expect to owe more than the amount allowed by law at the end of the year after deducting any withholding and refundable credits:

  • You should make quarterly estimated tax payments or increase the withholding on other income subject to withholding.
  • Form 1040-ES (.pdf), Estimated Tax for Individuals, will assist you in determining if you need to make estimated tax payments, their due dates and how to pay them.

When you file your income tax return at the end of the year:

  • Include the income from the business on your Form 1040 (.pdf), U.S. Individual Income Tax Return, Schedule C (Form 1040) (.pdf), Profit or Loss from Business, Schedule E (Form 1040) (PDF) (.pdf), Supplemental Income and Loss, and Schedule SE (Form 1040) (.pdf), Self-Employment Tax.
  • If you made estimated tax payments during the year, claim them on your individual income tax return as a payment.

Generally, all other corporations must make installment payments if they expect their estimated tax for the year to be $500 or more. All corporations, except for most S corporations, will use Form 1120-W (.pdf), Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax.

Additional Information:


Category: Small Business, Self-Employed, Other Business
Subcategory: Starting or Ending a Business

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224