How to file taxes as a small business in 2025

Filing your small business taxes for the first time doesn’t have to be a stressful affair. These days, there’s smart accounting software for small businesses that can help you keep track of your business records and receipts in real time, monitoring your spend as you go. That way, you’re not buried under a pile of paperwork when tax season rolls around.

Why you need to file taxes as a small business

Whether you’re a self-employed sole proprietor, have a limited liability company (LLC), are an independent contractor, or are a business owner with multiple employees, the government expects you to pay taxes on money you made over the year.

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It might even surprise you to learn that the IRS scrutinizes small businesses more heavily than their larger corporate counterparts, assuming that they are more likely to misreport their business income.

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For small business owners, the penalties associated with misreporting taxes depend on the extent of the mistake. Meeting tax obligations protects your business from the following:

• Missing out on refunds by failing to file within the three-year deadline
• Facing financial penalties or legal consequences for incomplete or late filings
• Spending valuable time and resources responding to audit requests
• Incurring additional costs for emergency tax professional assistance during audits

What taxes do small businesses have to pay?

Depending on your business activities and corporate structure, you may have a different tax rate at the local, state, and federal levels as a small business owner.

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Some of the primary types of taxes small businesses can expect include:

• Federal income taxes for small businesses and corporations
• Self-employment tax on owner’s share
• Excise taxes on use and consumption
• Dividend tax on shareholders
• Sales tax on products and services (certain states)
• Payroll/employment taxes
• Property taxes
• Gross receipts tax
• State income tax

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To determine your precise tax requirements, refer to the IRS and Small Business Administration websites.

How to file small business taxes for the first time 

Filing small business taxes can be broken down into four simple steps:

1. Gathering your financial records
2. Determining your tax deductions
3. Filing the correct forms for your business structure
4. Filing by the right deadline

Step 1: Gather your financial records

The first step is to get your financial records in order. Organization is key. Avoid leaving this step for a few days before the filing deadline. Instead, keep a record of the following in an organized fashion:

• Your taxpayer identification number
• Bank account statements
• Credit card statements
• Your business tax return from the year prior
• Pertinent accounting records (collect these year-round to streamline the process)

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Step 2: Determine your tax deductions

Small business tax deductions can be a welcome relief to the hassle of tax season. With the right organization, awareness, and tax prep software, you can optimize your tax filings to recoup a maximum amount of deductions.

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The first step is to know what you can claim each tax year. Here are a few of the most common tax write-offs to watch out for:

• Rent on office spaces
• Business insurance
• Vehicle expenses
• Business-related meals
• Office supplies and machinery

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The amount you can deduct depends on your business size and industry. If you aren’t hiring a tax professional to assist you during tax season, familiarize yourself with industry-specific deductions and the right tax software to decrease your tax bill.

Step 3: File the correct forms for your business structure

Depending on the business entity you’re registered with, your business tax forms may differ from the individual income tax form. However, some business structures simply attach an extra form with their individual tax form when filing their business income.

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Refer to these basic tax laws when you’re filing your business taxes:

• Sole Proprietorship or Single-Member LLC: You must attach a Schedule C form to your annual income tax return (Form 1040).‍
• Multi-Member LLCs: LLCs offer a lot of flexibility regarding taxation purposes. You can file taxes as a corporation and use Form 1120, file as a partnership using Form 1065, or even file as an S corp using Form 1120-S. ‍
• Partnerships: Partnerships must file taxes with IRS Form 1065, even though the partnership is not taxed. This form is designed to report business-related profits and losses. You must also attach a Schedule K-1 form to your tax return.‍
• C Corporations: C corporations must file taxes using IRS Form 1120. They must also file Form 941 to report quarterly employment taxes, like Medicare, Social Security, and income tax withholdings. ‍
• S Corporations: S corporations file with IRS Form 1120-S. However, LLCs can also file taxes as S corps, depending on their situation.

Step 4: File by the correct deadline

The due date for tax filing differs depending on your business structure. Here’s the breakdown:

• Single-member LLCs and sole proprietorships must only file by the tax day we all know and love: April 15th.
• All other corporate entities, like S corps, C corps, partnerships, and multi-member LLCs, must file a month before March 15th.
• Partnerships and corporations are also required to file quarterly employment taxes. These deadlines are typically in mid-April, June, September, and January.

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Which businesses need to file estimated tax payments?

Not every business entity is expected to make estimated tax payments. But if you’re a sole proprietor, partner, S corporation shareholder, or self-employed, you may be required to so long as both of the following conditions apply:

• After subtracting federal tax withholding and refundable credits, you expect to owe $1,000 or more on taxes ($500 for corporations).
• You expect federal withholding and refundable credits to be less than either 90% of the taxes shown on your current year’s tax return or 100% of the tax shown on the previous year’s federal tax return (covering 12 months).

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Sometimes, you may not have to pay estimated taxes for the current year. To qualify for that exemption, you need to satisfy the following conditions:

• You had no tax liability for the prior year.
• You were a U.S. citizen or resident for the whole year.
• Your prior tax year covered a 12-month period.

Benefits of filing estimated quarterly taxes

As a small business, filing quarterly estimated taxes poses 3 main benefits:

1. Avoiding penalties

Depending on your business’ tax status, you may be legally expected to provide estimated taxes in lieu of withholding. Should you underpay, you could be subject to an estimated tax penalty.

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Those penalties can be pricey, especially if you dramatically underestimate them. Per the IRS, the penalties include:

• Interest on money owed – “Generally, interest accrues on any unpaid tax from the due date of the return until the payment date in full. The interest rate is determined quarterly and is the federal short-term rate plus 3 percent. Interest compounds daily.”‍
• Failure-to-pay penalties – “The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full.”

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As a general rule, it's better to slightly overestimate your quarterly taxes by about 3 to 5%. This extra amount will be returned as a tax return if you do, in fact, end up overpaying.

2. Preventing an end-of-the-year tax bill “bomb”

Paying as you go helps with financial planning and allows you to avoid problems come tax time. 

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For many, making four smaller payments doesn’t hurt your business bank account as much as a single lump sum payment. Plus, it makes it easier to budget and plan your spend.

3. Gauging cash flow

Cash flow management is an important part of running any business. You need cash to pay your employees, cover expenses, and pay taxes. But budgeting for tax season can be tough. By breaking your tax payments into four smaller quarterly payments rather than one lump sum, it can be easier to gauge cash flow throughout the year and plan for seasonality.

How to calculate estimated tax payments

The process for calculating estimated tax payments is relatively straightforward, but for clarity, we’ll run through the process. Here’s how John, a self-employed independent contractor, would calculate his monthly estimated quarterly tax payment.

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Step 1: Estimate the year’s taxable income

To calculate his estimated income tax, John will first need to determine how much money he’s likely to make.

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In this case, John expects to earn $100,000 this year. He also has $20,000 in deductible income. Subtracting his deductions ($20k) from expected income ($100k), John is left with a $80,000 adjusted gross income (AGI).

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Step 2: Calculate the income tax

John then takes his adjusted gross income ($80k) and calculates his tax liability using the "2025 tax rate tables. According to that rate, he would have an estimated income tax of $12,514.

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Note: Tax brackets are subject to change every year. So check to see that you’re using the most recent year’s numbers.

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Step 3: Calculate the self-employment tax

As mentioned, John is self-employed, so he will also have to pay a self-employment tax. To determine this quarterly tax estimate, he must multiply his estimated total income ($100k) by 92.35%. That is $92,350.

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Where does the 92.35% come from? According to the IRS:

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“Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. You calculate net earnings by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business.”

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But that’s not the only tax that needs to be considered. There’s also the Social Security tax (12.4%) and Medicare tax (2.9%). Together, they represent the 15.3% “self-employment” tax number.

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So, John’s $92,350 needs to then be multiplied by 15.3%. That leaves him with a $14,129.55 estimated self-employment tax.

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By adding estimated self-employment tax ($14,129.55) with the income tax ($12,514), you get John’s estimated taxes total of $26,643.

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Step 4: Add it up and divide it into quarters

Take John’s estimated tax total of $26,643 and divide it by 4 (four quarters in a year). That’s his number—a quarterly tax of $6,661.

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Note: Despite some tax quarters being shorter than others, treating each tax payment as a fourth of the total each quarter is still recommended.

Simplify taxes for your small business

Tax prep must occur year-round to make filing small business taxes as painless and accurate as possible. And an automated expense management platform can help.

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Ramp helps with tax prep and expense management by:

• Automatically categorizing and organizing all expenses by department, team, or employee
• Matching receipts to card transactions and sending reminders for missing documentation
• Eliminating manual data entry and errors in expense reporting
• Integrating with accounting and tax software for automated monthly submissions
• Keeping tax documents up-to-date year-round so you're always prepared

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Beyond simplifying tax prep, you get real-time visibility into company spending, customizable card controls, and average savings of 5% when using Ramp. 

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Explore how Ramp can help you elevate your business and take charge of your company finances.

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