How To Prepare Your Small Business Taxes The Easy Way

Key takeaways

• Organize your tax documents throughout the year so filing is faster and audit-ready.
• Know which taxes apply to your business, including income, estimated, and self-employment taxes.
• Pay quarterly estimated taxes if you expect to owe at least $1,000 to avoid penalties.
• Track your deductions and pick the right tools or a tax pro to save time and money.

Step 1: Stay organized all year long

An ounce of prevention is worth a pound of cure, and that couldn’t be more true for your taxes. Staying organized is only hard when you don’t know which documents to track in advance.

To file your return, be sure to save your:

• Income statement
• Balance sheet
• Bank and credit card statements
• Payroll documents
• Business tax return for last year, if you have one
• Partnership agreements
• Accounting documents
• Asset purchase details, for expensive items like computers
• Depreciation schedules for previously purchased assets

Step 2: Know what you owe

Small businesses generally face a few main types of taxes. Which ones apply depends on your business structure, whether you’re an LLC, C corp, S corp, or B corp.

Here are the main categories:

Income taxes

All businesses file an annual income tax return. S corporations are a notable exception, since those earnings pass through to owners and are taxed as personal income.

Estimated taxes

Freelancers, independent contractors, and small business owners who expect to owe at least $1,000 in taxes must pay quarterly. Payments are typically due on the 15th of April, June, September, and January of the following year.

Self-employment and employment taxes

Self-employed people pay self-employment tax, which covers Social Security and Medicare. Employees split this cost with their employers, but self-employed individuals cover the full 15.3% of their income.

Step 3: Use tried-and-true digital tools to prepare your taxes

Paying your small business taxes is required by law. You can either do this yourself or hire a professional to file for you.

The cost of hiring an accountant has risen over the years and varies by business type and complexity. Recent data shows a simple Schedule C for a sole proprietor averages around $600. S corporation returns typically run $1,200 to $1,900, and partnership returns run $900 to $1,400. C corporation returns often cost even more, from $1,500 to $4,000 or higher.

If you cannot afford a bookkeeper, several software options can help you track business expenses. QuickBooks lets you categorize expenses, snap photos of receipts, and keep track of estimated taxes due, and it syncs seamlessly with Melio.

If you already use Melio to make payments, you can categorize your expenses and export a CSV file with the information you need to file your annual 1099 forms. If you have employees, tools like Expensify help your team stay organized with receipts and reimbursements.

As your business grows or you take on more depreciable assets, a knowledgeable tax preparer can make a real difference. Always remember how much your time is worth and which tasks are better delegated.

Taxes are rarely fun, but good habits make them manageable. Melio helps you track expenses and export the details you need at tax time. Sign up for Melio to get started.

Small business taxes FAQs