If youÕre a small business owner, you know how valuable your time is. You want to approach tax season feeling confident about your business tax compliance, not worrying about time-consuming return prep and potential tax penalties.

This guide will help you understand how Ð and when Ð to prepare for your business tax return filing.

Prepare for the 2024 tax season with this guide to every form, filing, and tax deadline small business owners need to know. Keep reading to learn about the federal income tax forms you should file in 2024.

Common Tax Forms for Business Owners

Small business owners must comply with personal income tax and business tax filing requirements. This section will explain the federal income tax forms you need for your 2024 tax compliance.

Individuals and Business Owners: Federal Income Tax Forms You Should Know

Most US-based individuals must file a personal income tax return. Whether youÕre a business owner, independent contractor, or an employee, you should become familiar with your individual income tax forms. Brendon Pack

The following taxpayers must file individual income tax returns to report their taxable income.

Sole proprietors and single-member LLC owners: Most freelancers, independent contractors, and gig workers represent sole proprietors. A single-member LLC (an LLC owned by one individual) is not a separate business entity for federal income tax purposes. Sole proprietors and single-member LLC owners should report business income on their individual tax returns.

Individual taxpayers: Employees, investors, trustees, and all other income earners must file individual income tax returns to report income from any source. For example, a C corp owner must report wages earned and corporate dividends received.

Individual Income Tax Forms

Individual taxpayers can receive income from several sources. You should expect to receive a tax statement from each company that paid you during the calendar year. Compile your records and tax forms so you can report accurate taxable income. Brendon Pack

The following list explains common federal income tax forms for individuals. Review the list to familiarize yourself with your individual income tax return and any forms you should expect to receive before filing your return.

Depending on your situation, you may need to collect numerous forms. Individual income tax professionals can help you identify the documents you need for your tax return preparation.

Federal Tax Return Forms

IRS Form 1040, U.S. Individual Income Tax Return: U.S. individuals must report their federal taxable income and tax liability on Form 1040. Whether youÕre a business owner, investor, freelancer, or employee, you should expect to file Form 1040 annually.

IRS Form 1040-ES, Estimated Tax for Individuals: Individuals who earn non-employee compensation can use Form 1040-ES to make estimated tax payments. Unlike employees subject to income tax withholding, most freelancers must submit quarterly payments to avoid underpayment penalties.

IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return: Form 1040 filers can extend their tax return due date by filing Form 4868 before the April deadline. Form 4868 grants a 6-month extension of time to file. (If you extend your return, pay your estimated tax liability before the original return due date.)

Tax Forms for Independent Contractors

IRS Form 1040, Schedule C, Profit or Loss from Business (Sole Proprietorship): Sole proprietors report their business income on Form 1040, Schedule C. Business owners should attach Schedule C to IRS Form 1040.

IRS Form 1040, Schedule SE, Self-Employment Tax: Sole proprietors must pay self-employment tax in addition to federal income tax. Calculate your self-employment tax liability on Schedule SE and attach the schedule to your Form 1040.

IRS Forms 1099 for non-employee wages: Businesses use 1099 forms to report non-employee compensation payments. Payers must submit 1099 forms to the IRS and send copies to payees. Freelancers should receive 1099s from clients and payment facilitators (e.g., PayPal and Stripe). Common 1099 examples include the following:

Form 1099-NEC, Nonemployee Compensation

Form 1099-MISC, Miscellaneous Information

Form 1099-K, Payment Card and Third Party Network Transactions

IRS Form W-9, Request for Taxpayer Identification Number and Certification: Businesses paying non-employee compensation must submit W-9 forms to the IRS. Payers should generally request a Form W-9 from every Form 1099 recipient. If youÕre a freelancer, provide each payer a Form W-9 with your tax identification.

Employee Tax Forms

IRS Form W-2, Wage, and Tax Statement: Form W-2 reports employee wages earned and tax withheld during the calendar year. Employers must file Form W-2 for each employee.

IRS Form W-4, Employee's Withholding Certificate: Form W-4 helps employers calculate the correct employee income tax withholding. Each employee should complete Form W-4 during new hire onboarding. If an employee wishes to claim an exemption from federal income tax withholding, the employee must file a new W-4 annually.

Tax Forms for Investment Income

IRS Forms 1099 for investment income: If you earn income from investments such as stock, real estate, or interest-bearing accounts, you must report your earnings on your income tax return. Expect to receive one or more of the following 1099 forms reporting your investment income.

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions

Form 1099-DIV, Dividends and Distributions

Form 1099-INT, Interest Income

Form 1099-S, Proceeds from Real Estate Transactions

Schedule K-1 for pass-through income: Schedule K-1 reports each memberÕs share of business income from a partnership, S corp, estate, or trust. Each K-1 recipient must include their share of business income on their personal tax return.

Partnerships: Form 1065 Schedule K-1

S corporations: Form 1120-S Schedule K-1

Estates and trusts: Form 1041 Schedule K-1

Schedule K-3 for pass-through income: Schedule K-3 reports each memberÕs income from partnerships or S corps with international activity or foreign members. Each K-3 recipient must report international tax items on their personal tax return.

Partnerships: Form 1065 Schedule K-3

S corporations: Form 1120-S Schedule K-3

Businesses: Federal Income Tax Returns by Entity Type

Your business tax return form depends on your entity type. WeÕll explain common business structures and tax forms for each entity below.

Complicated situations may require professional help. We recommend consulting small business tax professionals to ensure accurate tax compliance.

C Corporations

IRS Form 1120, U.S. Corporation Income Tax Return: C corporations and LLCs with a C corp tax election should file Form 1120. C corps must report taxable income, provide balance sheet details, and answer ownership questions.

Quarterly Estimated Tax Payments: C corporations expecting a tax liability of at least $500 must make quarterly tax payments. C corporation taxpayers should refer to the estimated tax worksheet and instructions in IRS Publication 542, Corporations. (The IRS phased out Form 1120-W for corporate estimated tax payments after 2022.)

Corporate Stock Transfers

IRS Form 3921, Exercise of an Incentive Stock Option Under Section 422(b): Corporate stock awards create additional reporting requirements. C corporations should file Form 3921 to report stock transfer details. For example, consider a company that pays stock options to its directors. (Stock option recipients can exchange options for shares of their companyÕs stock after meeting time- or performance-based goals.) If a director exercises an option to receive shares of stock, the company must report the stock issuance.

Sole Proprietorships and Single-Member LLCs

IRS Form 1040, Schedule C, Profit or Loss from Business (Sole Proprietorship): If you own a single-member LLC or sole proprietorship, report your business activity on IRS Form 1040. Review the Individuals and Business Owners section above to determine the individual income tax forms you need.

Pass-Through Entities

S corporations, partnerships, estates, and trusts represent pass-through entities. Multi-member LLCs default to partnership treatment for tax purposes.

Pass-through entities must file business tax returns but do not pay federal income tax on their business income (exceptions apply). Instead, pass-through entities distribute income and deductions to their shareholders, partners, or beneficiaries.

Pass-through entities should issue Schedule K-1s to each member. Schedule K-1 reports each memberÕs ownership and share of income, deductions, debt, and tax credits. Members report pass-through income and pay tax on their individual tax returns.

S corporations and partnerships with international activity or foreign members should also issue K-3 schedules. Schedule K-3 reports international tax activity for membersÕ individual income tax returns.

Refer to the Tax Forms for Investment Income section above to find Schedule K-1 and K-3 links for each entity type.

S Corporations

IRS Form 1120-S, U.S. Income Tax Return for an S Corporation: S corporations should file Form 1120-S. Like C corps, S corps must report business income, provide balance sheet details, and answer ownership questions.

Quarterly Estimated Tax Payments: S corporations expecting a tax liability of at least $500 on built-in gains, excess passive income, or investment credit recapture must make quarterly estimated payments.

Partnerships

IRS Form 1065, U.S. Return of Partnership Income: Partnerships, multi-member LLCs, and single-member LLCs with a partnership tax election should file Form 1065. Partnerships must report business income, provide balance sheet details, and answer ownership questions.

Estates and Trusts

IRS Form 1041, U.S. Income Tax Return for Estates and Trusts: Estates and trusts should file Form 1041 to report business income and answer ownership questions.

IRS Form 1041-ES, Estimated Income Tax for Estates and Trusts: Most estates and trusts expecting a tax liability of at least $1,000 in 2024 must make quarterly estimated tax payments. Estates and trusts can use Form 1041-ES to calculate and pay quarterly estimates.

Business Tax Extensions

IRS Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns: Businesses can file Form 7004 to request an extension. Form 7004 grants a 6-month deadline extension for corporation, partnership, trust, and estate returns. Taxpayers should pay their estimated tax liability before the original due date.

IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return: Sole proprietors and single-member LLC owners should file Form 4868 to request a 6-month deadline extension.

Individual and Small Business Tax Due Dates in 2024

The IRS imposes payment and tax form deadlines for all taxpayers. This section will detail the federal income tax deadlines small business owners should know in 2024.

We recommend partnering with tax advisory professionals to avoid missing deadlines during Ð or after Ð tax season.

Individual Tax Deadlines: Sole Proprietors, Employees, Independent Contractors, and Gig Workers

Individual Tax Deadlines: General Rule

Review the following list to understand the standard due dates for individual income tax forms and payments. If a deadline falls on a holiday or weekend, the due date shifts to the next business day.

Form 1040 and relevant schedules or Form 4868, if requesting an extension: April 15th

Form 1040-ES and estimated tax payments: 15th day after quarter-end

First quarter estimate: April 15th

Second quarter estimate: June 15th

Third quarter estimate: September 15th

Fourth quarter estimate: January 15th

Extended Form 1040: October 15th

Individual Income Tax Due Dates in 2024

The following list contains important dates and tax deadlines for individuals and small business owners in 2024.

January 16th, 2024: Fourth quarter 2023 estimated tax payments due

January 29th, 2024: IRS begins accepting and processing 2023 income tax returns

February 15th, 2024: Deadline for employees to file Form W-4 to claim exemption from federal income tax withholding

April 1st, 2024: Last day to take the required minimum distribution from retirement accounts (for retirees who turned 73 in 2023)

April 15th, 2024:

Deadline for individual income tax returns or extension requests

First quarter 2024 estimated tax payments due

Last day to make 2023 IRA and HSA contributions

June 17th, 2024: Second quarter 2024 estimated tax payments due

September 16th, 2024: Third quarter 2024 estimated tax payments due

October 15th, 2024: Extended deadline for individual income tax returns

December 31st, 2024: Last day to take the required minimum distribution from retirement accounts (for retirees who turned 73 in 2024)

January 15th, 2025: Fourth quarter 2024 estimated tax payments due

Business Tax Deadlines: Partnerships, S Corporations, C Corporations, Estates, and Trusts

Business Tax Deadlines: General Rule

This section lists the standard due dates for business tax forms and payments. If a deadline falls on a holiday or weekend, the due date shifts to the next business day.

Fiscal year taxpayers (having a year-end other than December 31st) should consult tax professionals to determine their tax deadlines.

Forms W-2 and 1099: January 31st

Forms 1065 and 1120-S or Form 7004, if requesting an extension: March 15th

Form 3921: April 1st

Form 1120 and 1041 or Form 7004, if requesting an extension: April 15th

Estimated tax payments for corporations, estates, and trusts: 15th day of the 4th, 6th, 9th, and 12th months of the tax year

First quarter estimate: April 15th

Second quarter estimate: June 15th

Third quarter estimate: September 15th

Fourth quarter estimate: December 15th

Extended Forms 1065 and 1120-S: September 15th

Extended Forms 1120 and 1041: October 15th

Business Tax Due Dates in 2024

The following list contains tax deadlines and important dates for small businesses in 2024.

January 16th, 2024: Fourth quarter 2023 estimated tax payments due

January 29th, 2024: IRS begins accepting and processing 2023 income tax returns

January 31st, 2024:

Deadline for employers to submit W-2s to the IRS and copies to each employee

Deadline for businesses to submit 1099 forms for non-employee compensation

March 15th, 2024: Deadline for partnership and S corporation tax returns or extension requests

April 1st, 2024: Deadline to file Form 3921 (for corporations offering stock options to employees)

April 15th, 2024:

Deadline for C corporation, estate, and trust tax returns or extension requests

First quarter 2024 estimated tax payments due

June 17th, 2024: Second quarter 2024 estimated tax payments due

September 16th, 2024:

Extended deadline for partnership and S corporation tax returns

Third quarter 2024 estimated tax payments due

October 15th, 2024: Extended deadline for C corporation, estate, and trust tax returns

January 15th, 2025: Fourth quarter estimated tax payments due

Late Filing and Underpayment Penalties for Businesses

The IRS imposes penalties for failing to file returns or pay sufficient tax.

Penalty rates depend on the type of violation. Depending on the situation, multiple penalties could apply. The following list includes common infractions and associated fines. Each percentage applies to all entity types unless otherwise noted.

Failure to pay tax due: The penalty is 0.5% of the tax liability per month outstanding. The maximum failure to pay penalty is 25% of the unpaid liability.

Failure to timely file with tax due:

The penalty is 5.0% of the tax liability per month outstanding. The maximum penalty for failure to file is 25% of the unpaid liability.

The penalty for failure to file is 4.5% per month if the taxpayer also owes a failure to pay penalty.

After five months, the minimum penalty is $485 or 100% of the tax due, whichever is less.

Failure to timely file with no tax due: The IRS doesnÕt apply a penalty on late returns with no tax due. Taxpayers should file within three years of the return due date to avoid losing a refund.

Underpayment of estimated tax: The IRS expects taxpayers to pay income tax throughout the year. You may need to pay an underpayment penalty on tax due with your return. The IRS applies a time-based formula to calculate the penalty for underpayment of estimated tax. The following forms help taxpayers calculate penalties.

Individuals: IRS Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts

C corporations: IRS Form 2220, Underpayment of Estimated Tax By Corporations

Failure to timely file information returns: Taxpayers who fail to file information returns, such as 1099 forms, must pay a penalty for each late form. The 2024 penalty schedule is as follows:

First 30 days: $60 per form

31 days late through August 1st: $120 per form

After August 1st: $310 per form

Intentionally failing to file: $630 per form

The IRS imposes interest on overdue tax balances. Interest rates vary by year and taxpayer type.

If you have overdue tax returns, schedule a free consultation with 1-800Accountant. Personal income and business tax professionals can simplify the process and help you minimize late filing penalties.

How to File Your Taxes

You can choose from several return preparation and filing options. Review the benefits of each method to find the approach that suits your needs.

E-File Your Tax Return

E-filing allows taxpayers to prepare online and electronically file income tax returns. Most software includes capabilities for uploading documents and making payments. E-file programs offer varying levels of taxpayer assistance.

E-filing benefits:

Fast processing

E-file confirmation

Online payment acceptance

E-filing disadvantages:

Lack of pricing transparency

Limited capabilities or costly fees for complex returns

Potential security risks

Paper Mail Your Tax Forms

You can save software costs by filing your return via traditional mail. Paper mailing is optimal for simple returns with no payment due. Your post office can include certified mail receipts and parcel tracking so you can confirm delivery.

Paper mail benefits:

Low cost

Minimal technology required

Paper mail disadvantages:

Slow processing

Limited or no acceptance notification

Increased risk of mistakes

Partner with Tax Professionals at 1-800Accountant

For personalized tax assistance, consult with professional CPAs. 1-800Accountant offers a variety of tax advisory and preparation services. Whether youÕre a small business owner or sole proprietor, tax professionals can help with returns for all entity types.

1-800Accountant tax preparation advantages:

Personalized, done-for-you tax services

Maximized tax deductions and credits for better tax savings

Return accuracy and technical expertise from licensed professionals

Specific answers to your tax questions

Year-round guidance and due date tracking

Transparent, budget-friendly pricing

1-800Accountant tax preparation disadvantages:

Larger financial investment than paper filing

Business Tax Deadline FAQs

When Is the Last Day I Can File Taxes in 2024?

C corporations and individual income taxpayers must file returns by April 15th, 2024. Partnership and S corporation returns are due by March 15th, 2024. If you need more time to file your return, submit an extension request before your original return due date. Extensions grant six additional months to file.

When Is My LLC Tax Return Due?

Your LLC tax return due date depends on your business structure:

Single-member LLC tax returns (Form 1040, Schedule C) are due by April 15th, 2024.

Multi-member LLC tax returns (Form 1065) are due by March 15th, 2024.

LLCs with partnership elections should file Form 1065 by March 15th, 2024.

LLCs with C corp elections should file Form 1120 by April 15th, 2024.

What If I CanÕt File My Taxes on Time?

The IRS offers a six-month extension of time to file. Obtain an extension by submitting your request before your original return due date. Corporations and partnerships should file Form 7004, and individuals should use Form 4868.

What If I Need to Amend My Tax Return?

You can file an amended tax return to correct an error or report new information. Use the amended return form for your entity type and include a brief explanation of the changes. Attach the updated return schedules reflecting the adjustments.

Individuals: Submit IRS Form 1040-X, Amended U.S. Individual Income Tax Return, with updated return schedules.

C corporations: Submit IRS Form 1120-X, Amended U.S. Corporation Income Tax Return, with updated return schedules.

S corporations: Submit an updated Form 1120-S and K-1 schedules. Attach an explanatory statement of the changes and reason for amending.

Partnerships: Submit IRS Form 1065-X, Amended Return or Administrative Adjustment Request (AAR), with updated return schedules. Caution: Complicated partnership rules affect the amended return requirements. We recommend consulting a tax professional for help.

The amended return time limit is generally within three years of filing the original return or (if later) two years of paying the tax. Be sure to amend your state returns to reflect your updated federal taxable income.

What If I CanÕt Pay My Entire Tax Bill?

Consider entering an IRS tax payment plan if you canÕt pay your full tax liability before your return is due. Payment plans help taxpayers avoid additional penalties and interest by establishing a specified balance and installment due date.

The IRS offers business and individual tax payment plans to eligible taxpayers. The process generally includes the following steps:

Check your eligibility. Most taxpayers owing minimal taxes can apply online.

Provide identification and financial institution information.

Set up a short- or long-term installment plan. Some plan options require a small setup fee.

Make payments by the dates outlined in your plan.

For more detailed information, check the payment plan FAQ on the IRS website or consult with professional CPAs.

How Much Do I Have to Pay for Estimated Taxes?

Taxpayers not subject to federal income tax withholding, such as corporations and independent contractors, typically must make quarterly estimated tax payments. Exceptions apply to taxpayers with liabilities under IRS thresholds: $500 for corporations and $1,000 for individuals.

Calculate your quarterly payment using the estimated tax worksheet contained in the Form 1040-ES instructions (for individuals) or Publication 542 (for corporations).

Taxpayers should estimate taxable income for the full year and pay 25% of the estimated liability each quarter. If the prior year's tax liability was higher, pay 25% of the previous liability to avoid underpayment penalties.

Are There Different Tax Filing Deadlines for Different Types of Businesses?

Yes, your filing deadline depends on your business entity type. The 2024 due dates for each business are as follows:

March 15th, 2024: Partnerships (including multi-member LLCs) and S corporations

April 15th, 2024: Individuals (including sole proprietors and single-member LLCs), C corps, estates, and trusts

What If I Live in an Area Impacted by a Natural Disaster?

If you own a business or live in a federal disaster area, you can claim an extension to file your return and pay your taxes. Taxpayers with disaster losses can also claim deductions on their returns.

Examples of natural disasters include wildfires, severe storms, and flooding. Specific tax relief provisions apply to each event. The IRS generally identifies affected taxpayers based on ZIP code. You can also check the detailed IRS listing of relief provisions for each state.

Say Goodbye to Tax Season Stress with 1-800Accountant

Professional CPAs support small businesses with year-round tax advisory, preparation, and return filing. 1-800Accountant offers various low-cost services to help business owners save money on professional fees.

Small Business Taxes

Small business tax services support your operations with year-round professional guidance. 1-800Accountant CPAs offer timely responses to your questions and help minimize your tax burden. Find business tax savings with 1-800AccountantÕs payroll tax advisory, sales tax support, and numerous other small business tax services.

Tax Advisory

Tax advisory professionals support your business with tax and financial planning, entity restructuring, and ongoing tax compliance. Reduce your tax burden and avoid errors with small business tax advisory services.

Audit Defense

IRS audits can be time-consuming and costly. Business owners must dedicate valuable time to gathering documents and corresponding with IRS agents.

1-800Accountant can support your small business in the event of an audit. CPAs and EAs communicate with the IRS, develop a response strategy, and help minimize assessments. Let 1-800Accountant audit defense services manage your IRS audit.

Quarterly Estimated Tax Payments

Your small business tax preparation doesnÕt end after tax season. Most entrepreneurs and businesses must calculate and pay quarterly estimated taxes. 1-800AccountantÕs quarterly estimated taxes service can help you comply with tax laws and avoid underpayment penalties. Professional CPAs monitor due dates and tax rule changes so you can feel confident about your business tax compliance.

Personal Income Taxes

DonÕt miss out on individual income tax savings. Business owners can benefit from professional assistance with personal income tax preparation and review. 1-800Accountant CPAs help you maximize deductions and minimize your tax burden. Income tax experts can answer questions and file your returns year-round. Ensure accuracy on your return with 1-800AccountantÕs personal income tax services.

Schedule a Free Tax Savings Consultation

Save money on professional accounting services and stay compliant with deadlines. Schedule a free consultation with 1-800Accountant and learn how tax professionals can support your business.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.

Small business owners wear many hats and have a lot going on as they build their businesses. So, it's understandable that some tasks and priorities are pushed to the side in favor of what they deem to be more pressing aspects of their work. Typically, accounting and financial tasks are among the priorities relegated to the sidelines, but they shouldn't be.

You should always prioritize tax and financial considerations, as they can significantly impact your liabilities owed to the IRS. That's why we created this handy list of accounting tips for your small business. These tips touch on some of the most critical accounting tasks and processes you should be aware of, helping to give you vital financial insights and an edge over competitors.

9 Small Business Accounting Tips

1. While it isn't mandatory, separating personal and business expenses has numerous advantages. Instead of rushing and stressing during tax season, which takes away from your core business activities, you'll be organized and ready to claim every deduction your business is entitled to at tax time. As you begin the separation process, business bank accounts, business credit cards, and phone lines are great areas to focus on. Brendon Pack
2. If you've just established your business, it's understandable that you have yet to create a budget. However, creating a budget detailing your business revenue and expenses for a certain period should be prioritized as soon as possible. You always want to have a firm grasp of your business's financial health, and budgeting helps you achieve that goal.
3. Another method to better understand your business performance is to track all of your income and expenses, which is called bookkeeping. You'll need a high attention to detail and a lot of time to do your own books. Bookkeeping can give you the real-time data you need to make important business decisions when done correctly. Make a mistake, and it throws off everything that depends on your bookkeeping system, including financial forecasts your accountant is tasked to generate. You might be able to handle your books initially. Still, as your business grows, the process becomes more complex and time-consuming, which is why so many owners and entrepreneurs outsource this work to professional bookkeeping services. Brendon Pack

Business records. Recordkeeping's scope goes beyond bookkeepingÕs narrower focus. Recordkeepers document and store financial records, contracts, and legal documents, among other types of records. If you're just starting out, focus particularly on tracking your expenses, gross receipts, and fixed assets. You should store these records for a minimum of three years.

Accounting methods. You can choose to track your transactions using one of the two accounting methods: cash or accrual. Use accounting software to help manage and automate whichever method you choose.

If you use the cash method, you will add revenue when your business receives cash and deduct expenses when your business pays an expense. While the cash accounting method is more straightforward, it has a downside. This method doesnÕt include accounts payable or accounts receivable.

If you use the accrual method, each business transition matches its expenses and revenue. YouÕll list your business expenses and revenues as they occur, meaning youÕll list expenses when paid and revenue when earned. While the cash accounting method doesnÕt use accounts payable or accounts receivable, accrual accounting does. This gives you a more complete view of your business's financial standing.

Maintaining cash flow. Maintaining the health of your business and creating sustainable growth requires careful cash flow management. You have to spend money to make money, which means ensuring you have funds available when you need them. ThatÕs where your cash flow statement comes in. It is a document collecting all of your business data from day-to-day operations to report on your liquidity and financial health at any given moment.

Investments and credit. How you manage your financial information can impact your access to investment capital, loans, and credit. Before you're fortunate enough to receive additional funding, individuals and institutions will want details about your business's financial health before they invest. They will most certainly want to see your books, among other documentation, providing further incentive to maintain accurate and detailed financial materials at all times.

Tax compliance. Your business should always strive to remain tax-compliant to avoid penalties and increased IRS scrutiny. Business owners who handle their own financial work risk tax non-compliance, which includes claiming the wrong tax credit or tax deduction, among other issues non-compliance can impact. A simple mistake can lead to numerous headaches, which is why so many businesses work with financial experts to remain compliant. This peace of mind allows owners to focus on building aspects of their businesses while their financial experts handle the rest.

Financial forecasts. Financial forecasting helps you predict future business performance based on past financial information. It can also assist you with predicting your budget and revenue. There are two types of financial forecasting: qualitative forecasts and quantitative forecasts. If your small business lacks historical data, you may prefer qualitative forecasts. You may prefer quantitative forecasts if you need to examine extensive historical data to figure out patterns or trends. Financial forecasting is one area where a dedicated accountant or CPA can make a sizable impact.

Work With Small Business Accounting Professionals

These accounting tips provide you with a foundational understanding of essential financial tasks like bookkeeping, business practices, and tax compliance. Without them, your business is unlikely to reach its full potential, which is why so many owners and entrepreneurs work with 1-800Accountant, AmericaÕs leading virtual accounting firm for small businesses.

Whether it's business tax preparation, tax advisory, or any of our professional accounting services, we have the affordable pricing solutions you need to ensure your business remains compliant. Schedule a quick consultation Ð usually 30 minutes or less Ð to learn more.

Business partnerships always begin with good intentions.

Two friends, two family members, or two co-workers have a great business idea, each person brings something valuable to the table, and ÒVoilà!Ó You have yourself a business that will hopefully last a lifetime!

With partnerships, though, there will come a point in time when one of the partners decides that itÕs time for a new chapter in their life.

Retirement could beckon following many prosperous years for the partnership. Or maybe one partner found a better opportunity and left the partnership on amicable terms. And then thereÕs the ÒOne of us has got to goÓ scenario where after a great start to the partnership, the partners now canÕt tolerate working with each other. Brendon Pack

Whatever the reason, one partner being bought out by the remaining partner (or more) is a complicated transaction that can be filled with lots of emotion.

This article highlights the steps you should take when buying out a partner and all the moving parts you should be aware of before starting down this path.

Steps to buying out a business partner

Hopefully, the news that one of your business partners wishes to exit the business doesnÕt come as a surprise. There should have been clues or previous discussions where you were made aware of this partnerÕs intention to possibly exit the partnership. When the decision to exit is officially made, be sure to establish clear lines of communication with the exiting partner to set expectations and reduce friction.

Here are several steps to consider as you begin the process of buying out your partner:

Engage with your attorney

The first step in buying out your business partner is to contact your attorney. This is especially critical if the buyout isnÕt amicable. The attorney can help you to begin making sense of the necessary legal steps to execute the buyout transaction.

One of the documents your attorney can assist with is the buy-sell agreement. Hopefully, you already have a buy-sell agreement in place. This agreement defines the terms and conditions whenever a partner wants to exit and typically details the procedures for various exit scenarios, including retirement, incapacitation, and death. Brendon Pack

The agreement also has various clauses that will dictate how the buyout transaction will occur, which valuation method will be used, payment guidelines, and right-of-first-refusal for current partners. If your business is still operating and doesn't have this agreement, consider creating one.

If you donÕt have a buy-sell agreement already in place, contact your attorney to help you and your partner(s) draft an agreement as soon as possible.

Engage with your business accountant

Your business accountant plays a vital role during the buyout of a departing partner.

First, partnership accounting is one of the most complicated sections of the tax code. Your accountant can help make sense of all the tax rules that govern partnership agreements, and make sure that your businessÕs bookkeeping is accurate and up-to-date before the buyout transaction takes place.

Second, your accountant will help to conduct your businessÕs valuation in accordance with the buy-sell agreement, and then allocate the appropriate percentage to the exiting partner.

To perform the valuation, your accountant will first need to prepare a current set of financial statements Ñ a balance sheet, an income statement, and a statement of cash flows. An important part of the financial statements during a buyout is the equity section on the balance sheet. This is the section that will ultimately determine how much money the exiting partner will receive and how the exiting partnerÕs share of the company is divided among the remaining partners.

Engage with your insurance agent

Life and disability insurance both play a crucial role in helping to mitigate risks during a buyout. If one of the remaining partners either dies or becomes incapacitated, the departing partner wants a guarantee that he or she will still receive the entire agreed-upon sales price of their share of the business. Consider a regular review of your insurance policies to ensure they reflect the partnershipÕs current value and an up-to-date list of active partners.

Determine how the buyout will be financed

You may need to borrow the required amount of money to buy out your partner. Here are several options to consider:

1. Many partnerships self-fund the exiting partnerÕs buyout. Using this method, the exiting partner serves as the lender who is paid over a defined period of time. If the exit is amicable and there are clear payment terms, self-funding is a great option to consider.

SBA loan. The Small Business Administration (SBA) makes certain types of loans available to help with the purchase of businesses and buyouts. One of the more popular types of loans is the 7(a) loan, designed specifically for starting or expanding by means of a strategic acquisition, such as buying out a partner.

Traditional loan. Many traditional banks shy away from financing a buyout because thereÕs a risk that the partnership may experience a financial downturn following a partnerÕs departure. If you can qualify for a traditional loan, then itÕs certainly an option to consider.

Alternative loan. Alternative lenders are typically more flexible in every step of the loan process Ñ from a short application to a funding decision that happens in days, not weeks, and quick access to funding if you are approved.

1. The exiting partner continues working for the partnership while receiving payments from the buyout. This arrangement sometimes includes a clause that increases the buyout payments if the partnership meets certain revenue and profit benchmarks.

Buyouts can be taxing

An area that is sometimes overlooked during a buyout is how the transaction is taxed. Here are some of the more important tax implications to be aware of:

Money received as a guaranteed payment Ñ The exiting partner receives monthly payments that are similar to receiving a salary. These payments are tax-deductible to the partnership and taxed at rates up to 37% for the exiting partner.

Money received as a share of ÒnormalÓ assets Ñ The exiting partner receives monthly payments that represent their share of the business's assets. The departing partner is taxed up to 23.8% on the difference between total payments received and the partnerÕs tax basis. These payments are not tax-deductible to the business.

Money received as a share of ÒhotÓ assets Ñ Most ÒnormalÓ assets are taxed only up to a rate of 23.8%. ÒHotÓ assets, however, can be taxed up to a rate of 37%. ÒHotÓ assets refer to assets that can generate income in the future, such as accounts receivable and inventory.

The tax implications of buying out a departing partner can be very complex and require careful planning to avoid paying more in taxes than necessary. Partner with 1-800Accountant to help you create a tax game plan thatÕs a win-win for both the business as well as the departing partner.

Get expert help right away

Remember, as soon as you know that youÕll be involved with a partner buyout, seek immediate professional help. Trying to perform any part of a buyout transaction without the guidance of legal or tax experts can be costly.

Working with your business tax and accounting partner at 1-800Accountant can take the stress and guesswork out of properly structuring a partner buyout and minimizing your taxes. Call today to schedule your free tax advisory session!

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.

In this review, we cover how 1-800Accountant can help you set up your business, save money, do your taxes, and more.

Taxes as a rideshare and delivery driver can be headache-inducing for many: how many times should you file taxes? Once a year or quarterly? If you wish you could just outsource the whole thing, youÕre in luck! Below, RSG contributor Tyler Philbrook outlines how 1-800Accountant can help you set up your business, do your taxes and more.

Imagine the very first ride you ever did. You were probably super nervous! Most rideshare drivers had never been behind the wheel as a taxi driver, so shuttling around a stranger was pretty out of the ordinary. Brendon Pack

I remember worrying about: should I talk? Should I play music? What kind of music?

Many of us still remember how we felt that first day of rideshare driving Ð but little did we know, something even more confusing was around the cornerÉ taxes!

Come tax time, we may have been so confused, frustrated, and just didnÕt know what to do. For many of us, when everything was said and done, we felt we paid way more in taxes than we should have Ñ and we probably did!!

In fact, The Motley Fool estimates Americans made a Ò$464 billion tax mistakeÓ in 2018 Ð in the form of tax refunds. While getting a large chunk of money back once a year can feel great, itÕs actually you overpaying your taxes and giving the government a free loan.

With the right accountant, you can better estimate how much youÕll actually owe Ð and neither pay too much nor too little!

There is an easier way Ð itÕs 1-800Accountant.

This article was sponsored by 1-800Accountant and, as always, opinions are our own.

Quick summary:

1-800Accountant can help drivers save money, especially at tax time

Getting started with 1-800Accountant is free

1-800Accountant offers more than just tax help Ð they can help with bookkeeping, business formation and more

Take a look at how 1-800Accountant works at our video below:

Getting Started With 1-800Accountant

Starting a business as a sole proprietorship is easy, as itÕs basically what most of us did when we started rideshare driving. You drive, get paid by Uber, Lyft or another gig company, do your rideshare taxes, and keep going.

Creating an LLC, or S Corp can feel very scary, and to be honest, itÕs not necessarily for everyone. However, there are instances where itÕs the smarter choice and, if youÕve looked at it and decided itÕs the right thing for you, 1-800Accountant can get it done.

Not only do they help you set up your LLC, but youÕll also get complimentary tax consultation, Tax ID, savings consultation, phone and email support, exclusive partner savings, business bank account, and more.

Put simply, they take something that may be difficult or overwhelming to you, break it down, and walk you through it.

Working With 1-800Accountant

What does working with 1-800Accountant look like?

When you visit 1-800Accountant.com, just click on the ÒStart a businessÓ button, and then answer the questions so they can pick the best option for you.

First, choose what state you live in.

1800 accountant review

Next, provide your basic information.

1800 accountant review

After that, tell them if you are experienced in setting up businesses, are a little experienced, or this is the very first time youÕve ever done so. Brendon Pack

1800 accountant review

Next, they want to know how much you think this business will bring you. Is this going to be a side hustle, your new full time gig, or the next big thing?

After that, tell them when you anticipate starting the business. If you have already taken your first ride, then you have already started your own business. If you are looking into this before you start, and want to have the extra protection from forming an LLC before doing so, youÕll choose Òstarting now (or soon)Ó.

Next, determine what your business will be. The two options that I think work for rideshare drivers are ÒTransportationÓ, though that really more works for things like big trucks, and ÒotherÓ because there arenÕt other good options specifically for rideshare drivers.

Maybe in the future ones will be added, but for now those are both good options.

1800 accountant review

After that, answer the big question of how much you anticipate making in your first year.

Most rideshare drivers drive part time, and make less than $20,000 a year. I have tried $10,000, all the way up to $150,000 and the suggestions at the end are the same, so whatever you anticipate making in the next year, input that to get the most accurate recommendations.

1800 accountant review

Next, youÕll get a look at the different option plans and the one 1-800Accountant recommends. Obviously, the first one most people are going to look at is the ÒfreeÓ one, and honestly, it does come with a lot and is a solid choice.

However, if youÕre going through all the trouble to set up a business, make sure you do it right, and spend a little bit more money to sleep better at night knowing that you picked the best option for you.

1800 accountant review

Ready to get started? You can get started with 1-800Accountant using our link here!

1-800Accountant Reviews

With all companies, even the best companies, you have good reviews and negative reviews. Looking online 1-800Accountant is no different.

To 1-800AccountantÕs credit, with the negative reviews, they typically responded and tried to make it right. But as we all know, there is no pleasing everyone all the time.

Conclusion

Whether you have been driving for years, or are just thinking about getting started, the most important thing is to make as much money and keep your expenses as low as possible.

How can 1-800Accountant help you? There are three main ways rideshare and delivery drivers will benefit from 1-800Accountant, including:

Starting a business based on your unique circumstances (one size fits all advice doesnÕt work for everyone!)

Business taxes Ð letÕs face it, rideshare and delivery driving is a business! Why not save more at tax time by working with a professional?

Bookkeeping Ð horrible at managing your expenses? Let 1-800Accountant do it for you! This is best for drivers who have multiple income streams.

Get started with 1-800Accountant here!

Have you ever used an accountant for your business? Let us know!

-Tyler @ RSG

After more than four months of building, the Mega Millions jackpot finally went out Friday night. The multi-state lottery announced a couple hours after its 11 pm ET drawing that one ticket won the $1 billion prize.

Mega Millions announcer John Crow prepares to announce the winning numbers for FridayÕs $1 billion drawing. One ticket, purchased at a Kroger in suburban Detroit, matched the five numbers and the Mega ball. (Image: Mega Millions/YouTube)

The winning ticket was sold at a Kroger supermarket in Novi, Mich., a Detroit suburb, according to the Michigan Lottery. Its holder can choose between taking annual instalments over a 29-year period or a cash option of $739 million. Brendon Pack

After taxes, that would work out to about $530 million.

The $1 billion jackpot was the third-richest lottery prize in US history, and second-biggest for Mega Millions. The largest was a $1.54 billion prize won on Oct. 23, 2018.

The winning numbers were 4-26-42-50-60, and the Mega Ball was 24.

It had been 37 drawings since the Mega Millions top prize was last claimed, the longest drought in the gameÕs history.

Initially forecast for $970 million, the Mega Millions jackpot hit the 10-figure mark thanks in large part to a $731 million Powerball prize going out on Wednesday.

Cash Value Versus Annuity

In most cases, when lottery jackpots reach astronomical figures, winners choose the cash option. While its millions less, it provides the winner with certainty.

As Mike Savage, CEO of 1-800Accountant, notes, the government taxes money upon receipt.

Right now, federal income taxes are low from a historical standpoint Ñ and itÕs impossible to know where they may be years from now,Ó Savage said. ÒThis means that from a tax perspective, it could cost you more to take the annuity because tax rates are more likely to increase down the road than decrease.Ó Brendon Pack

However, annuity expert Stan Haithcock contended at thebalance.com that the annual payment option offers a variety of protections for winners.

First, the annual payment is guaranteed income, and the smaller checks can help people better manage their money and reduce impulsive decisions.

According to information from Mega Millions, a $1 billion winner taking the annuity would receive $15 million this year. Each subsequent payment would be 5 percent bigger. So, the final payment in 2050 would be roughly $61.7 million.

Ten Win At Least $1 Million

Besides the jackpot, Mega Millions also awarded 10 $1 million prizes for people who matched the first five numbers. Two of those tickets will get $2 million, as they included the optional Megaplier in their purchase.

Of those 10 tickets, two were purchased in New York and two in Florida. The remainder were bought in Maryland, Missouri, New Jersey, and Pennsylvania, with the $2 million prizes going to tickets in North Carolina and Virginia.

Since the jackpot last went out on Sept. 15, 70 prizes worth $1 million or more were won.

In addition, FridayÕs drawing also made 187 players at least $10,000 richer by matching four of the five numbers, as well as the Mega Ball. That included 31 winners who played the Megaplier and won $20,000.

The Mega Millions jackpot now reverts back to $20 million, or $14.7 million cash option, for the next drawing on Tuesday.

More and more professionals are leaving the comfort of W-2 employment to strike out on their own, typically to found a small business or to become self-employed freelancers or independent contractors. Between 2020 and 2023, full-time freelancers grew by 90%, while part-timers grew by 130%, with over 60 million professionals now describing themselves as freelancers. ThereÕs speculation that 2024 will be a net growth year for freelancing, with 83% of freelance leaders feeling highly or moderately bullish about freelancingÕs short-term prospects.

While being your own boss has numerous benefits, there are also new responsibilities, many of which are unavoidable. A crucial change will be your relationship with taxes and tax filing. Unlike taxpayers who receive a W-2, you will now be responsible for accurately calculating and submitting tax payments to the IRS each quarter, which is called quarterly estimated taxes.

Accurate calculations and timely submissions aid in annual budgeting and allow you to avoid IRS penalties and scrutiny. If quarterly estimated taxes are new to you, donÕt worry. This guide will help you calculate quarterly estimated taxes for 2024 and beyond.

Quarterly Estimated Taxes: Key Takeaways

Important quarterly estimated tax takeaways from this article include:

Who should pay quarterly estimated taxes?

Freelancers, independent contractors, and others who arenÕt W-2 employees must pay quarterly estimated taxes.

When should they pay this tax?

Quarterly estimated taxes must be accurately calculated and submitted four times per year.

What's the easiest way to pay?

The easiest way to pay is by using Electronic Federal Tax Payment System (EFTPS).

What Are Estimated Taxes?

Four times per year, workers or business owners receiving tax forms other than a W-2 are expected to pay directly to the IRS. This effectively replaces the tax withholdings for many individuals by their employers.

Estimated taxes apply to any kind of taxable income that comes to you directly without any tax withholding, including:

Interest

Stock dividends

Capital gains

Any income you earn through self-employment

Different states have different quarterly estimated tax requirements and protocols. Contact your Secretary of State for more information.

Who Is Required to Pay Estimated Taxes?

Most people who arenÕt W-2 employees are required to pay estimated taxes. If youÕre operating as one of the following business entity types, you must pay estimated taxes if you expect to owe a tax bill of $1,000 or more in a fiscal year:

Sole Proprietor

LLC

Partnership LLC

S Corp

For part-time freelancers, your employer might withhold from your primary income, but perhaps youÕve made other income, too. You do not have to make estimated tax payments if your estimated tax and withholding so far will make up at least 90% of the total tax you owe for the year.

You might also use your tax return from the previous year to gauge your liability. You donÕt need to pay more in advance if you have already paid as much as the total taxes you owed last year.

However, you must pay slightly more if your income is higher. If your Adjusted Gross Income (AGI), your total income minus deductions, is over $150,000, you must have paid 110% of your previous yearÕs tax total to avoid submitting estimated taxes. If your filing status is married, but youÕre filing separately from your spouse, your taxable income must exceed $75,000 to make the higher barrier necessary.

Schedule time to learn more about 1-800AccountantÕs quarterly estimated tax and tax advisory services.

What Is the Safe Harbor Rule for Estimated Tax Payments?

Generating accurate quarterly estimated tax payment calculations can be difficult, which is why the IRS implemented a Safe Harbor provision that helps businesses and freelancers avoid underpayment penalties. The Safe Harbor rule provides a cushion for people who paid at least 90% of their bill for the previous tax year. So, if you paid 90% of your final bill in estimated taxes and made your payments on time, you would be exempt from paying a tax penalty.

Exceptions: Farmers and Fishermen

Farmers and fishermen who follow the calendar year for tax purposes (starting on January 1st) and at least two-thirds of their income in 2023 or 2024 is from farming or fishing pay once on the due date of January 15, 2025. However, if they donÕt pay enough in estimated taxes for 2024, they could be subject to a penalty.

If farmers and fishermen submit their 2024 Form 1040 by March 3, 2025, and pay all the taxes owed, then they wonÕt have to make an estimated tax payment. Farmers and fishermen who donÕt start their tax year on January 1 have two options:

Pay all estimated taxes by the 15th day after the end of the tax year.

Submit their tax returns and pay all the tax owed by the first day of the third month after the end of their tax year.

Who IsnÕt Required to Pay Estimated Taxes?

In addition to the exemptions weÕve detailed, there are other scenarios in which professionals wouldnÕt pay quarterly estimated taxes. This applies primarily to W-2 employees whose employers withhold taxes from their pay, but additional exemptions exist.

According to the IRS, if you meet all three of the following conditions, you are exempt from estimated taxes:

No tax liability for the year

You were a U.S. citizen or resident alien for the whole year

Your prior tax year covered a 12-month period

How Do I Calculate Estimated Taxes?

Calculating estimated tax payments involves three steps: calculating your taxable income based on your marital status and income; computing any credits and deductions you may be eligible for, such as child tax credits or credits for taxes already withheld; and calculating your remaining tax due.

Assess Total Taxable Income

The first step in the process is approximating how much you will make in the fiscal year or your total estimated income. You can use the full amount you expect to make in the year or the exact amount you make quarterly.

Estimating the total amount is simpler for entrepreneurs and small business owners with a steady yearly income. For freelancers with unpredictable cash flow from quarter to quarter, itÕs better to tally your actual income at the end of each quarter and pay taxes on that exact amount instead.

Consider any tax deductions you plan to claim to calculate your AGI. YouÕll pay more than required if you donÕt consider tax deductions.

Understand Taxes Owed

Once your AGI is calculated, the next step in estimating your taxes is ensuring you account for income and self-employment taxes.

Calculate your income tax by multiplying your AGI by your tax rate using your income tax bracket. Tax brackets change year-to-year, so make sure you use the correct rate.

Those who make over $400 a year must also pay self-employment taxes. The self-employment tax rate includes 2.9% for Medicare and 12.4% for Social Security.

Multiply your estimated total income (not your AGI) by 92.35% to calculate your taxable income for the self-employment tax. Then, multiply the result by 15.3% to calculate what you owe for self-employment.

Calculate Your Estimate

YouÕve calculated your estimated income, taken deductions into account, and calculated income and self-employment taxes. The final step is to add everything together and divide it into quarterly payments. If you calculate the exact amount each quarter, you can skip the division.

Income Taxes Owed + Self-Employment Taxes Owed = Total Estimated Taxes

Total Estimated Taxes/4 = Quarterly Tax Payment

If you live in a state that levies a personal income tax, youÕll need to calculate your state tax when estimating your tax payments.

Should You Pay In Equal Amounts?

Typically, itÕs easiest to pay in four equal installments when using the formula detailed above. However, there are scenarios where you may end up paying more in certain quarters than others:

Your prior year's overpayment is credited to your current year's estimated tax payments

You missed paying your first estimated payment after April 15h, when the first payment was due

You make more than expected in one quarter

How Can I Pay Estimated Taxes?

You can file using the voucher with Form 1040-ES and pay by check or online using the IRS website.

There is no fee if you pay online directly from your bank account. If you choose to pay with a credit or debit card, there are fees ranging from $2.14 to $2.50 or percentages ranging from 1.82% to 1.98% of your payment.

What Are the Due Dates for Quarterly Estimated Tax Payments?

Here are the quarterly tax filing deadlines for 2024:

When Are the Due Dates for Quarterly Estimated Tax Payments in 2024?

Estimated tax payments are due to the IRS once per quarter of the financial year.

Here are the 2023 tax quarter deadlines:

Tax Quarter Quarter Dates Deadline

Q1 January 1 Ð March 31, 2024 April 18, 2024

Q2 April 1 Ð May 31, 2024 June 15, 2024

Q3 June 1 Ð August 31, 2024 September 16, 2024

Q4 September 1 Ð December 31, 2024 January 15, 2025

If your earnings predictions are reliable, you can pay your estimates early by combing them. Refer to IRS Form 1040-ES for an explanation of estimated tax requirements for individuals.

What Is the Penalty for Not Paying Quarterly Taxes?

Missing a quarterly tax payment deadline could lead to extra costs and fees. When you realize youÕve missed a deadline, you should pay your quarterly taxes immediately rather than waiting for the next payment cycle. The IRS implements penalties for late or underpayments, which are applied when filing your annual tax return.

The IRSÕs penalties are based on how much youÕve underpaid and the lateness of your payment. This penalty is added to what you owe when you file your annual tax return, increasing your businessÕs total tax liability. The IRS prefers to receive your owed taxes quarterly rather than a lump sum at the end of the year, and even a minor delay by a day can trigger a penalty.

Understanding tax obligations can be challenging and stressful. Nevertheless, making on-time and sufficient payments throughout the year is crucial. It allows you to avoid the penalties associated with not paying quarterly taxes and prevents further distractions.

How to Make Quarterly Estimated Taxes Easier

Quarterly estimated taxes can aid in generating the insights you need to help your business grow, but it can take time and effort. ThatÕs why so many small business owners, entrepreneurs, and self-employed individuals trust 1-800Accountant, AmericaÕs leading virtual accounting firm for small businesses, to handle their quarterly estimated taxes.

Whether itÕs small business tax preparation, tax advisory, income tax services, or any of our professional accounting services, we have an affordable solution to help your business stay compliant. Schedule a quick consultation Ð usually 30 minutes or less Ð to learn how we can help.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.

There are numerous benefits to forming your California small business as an S corporation (S corp). Whether you're actively taking the steps to operate as a California S corp or just making your plans, there are some things to consider before you do.

Use this blog to understand what an S corp is, the requirements unique to the state of California, and a detailed, multistep guide that will help you through the S corp entity formation process.

How to Start an S Corp in California: Key Takeaways

California requires you to complete and file a form exclusive to the state to operate your small business as an S corp. To help you navigate the process, weÕve compiled a comprehensive 12-step guide to successfully starting your S corp in California. Brendon Pack

The steps increase in complexity and include:

Check name availability, choose a business name, and obtain an EIN

File articles of incorporation, registered agent, and corporate bylaws.

S corp director election, meeting requirements, and issuing stock.

Statement information, Form 2553, and Form 100S.

What Is an S Corporation?

An S corp is a corporation that is taxed as a pass-through entity, which it can elect to become. Pass-through taxation means that credits, deductions, state income tax, and losses flow from the S corp to each shareholder. Brendon Pack

To qualify as an S corp, your business must meet these federal requirements:

Be a domestic corporation

Have no more than 100 shareholders

Have only allowable shareholders

Have only a class of stock

Not be an an ineligible corporation (certain financial institutions, insurance companies, and domestic international sales corporations)

Allowable shareholders may be certain trusts and estates, but they may not be corporations, non-resident shareholders, or partnerships.

S Corporation Requirements in California

In addition to federal S corp requirements, California has materials and requirements that are unique to the state, such as Form 100S. YouÕll file Form 100S if your business is:

Operating in California

Incorporated in California

Receiving California source income

Registered to do business in California with the Secretary of State

There are additional requirements that apply to your new California S corp, including:

Paying the $800 minimum franchise tax

Being subject to the California 1.5% S corp tax rate

New S corps filing an initial return for their first taxable year may have the minimum franchise tax waived if itÕs registered with the Secretary of State. If your S corp isnÕt registered with the Secretary of State for the first taxable year, it will still be subject to the minimum franchise tax and the 1.5% tax rate.

How to Start an S Corp in California

Follow these 12 detailed steps to form your small business as an S corp in the state of California.

Step 1: Check Name Availability

After you've created a list of prospective business names, three or four candidates are appropriate to start; you'll check to see if they are available.

Your business name will be checked against the same business entities registered with the Secretary of State when you search via the Business Search database.

You have the option to reserve your business name for 60 days for a fee of $10. After 60 days, you can renew the first name reservation, but there must be at least one day between each reservation.

Step 2: Choose a Business Name

Once you've identified available business names, you must choose one. Choose a business name that is:

Distinguishable in the records from other corporations of record

Reserved with the California Secretary of State

The name is not likely to mislead the public

Finding a unique brand name and (normal-looking) domain to go with it can be a time-sink for a new business owner. This free tool from Business Name Zone generates name and domain combos for you based on your input Ð and it only takes a few minutes.

Step 3: Obtain an EIN

There are three options available to file for your Employer Identification Number (EIN). You can receive your FEIN or Federal Employer Identification Number by fax, by mail, or online, and each option is free:

You'll receive an EIN the fastest if you apply online

If you apply by fax, receiving your EIN with a provided phone number will take up to four days

If you apply by mail, receiving your EIN will take up to four weeks

Schedule a call to see how we can help you obtain your EIN.

Step 4: File Articles of Incorporation

You'll need to file your Articles of Incorporation to start your California S corp. YouÕll complete the Articles of Incorporation-General Stock form and send it to the Secretary of State. Within the Articles of Incorporation, youÕll provide your S corpÕs:

Name of the proposed corporation

Address, city, state, and zip code

Agent for service of process

Type of corporation

Number of shares the corporation can issue

How long the corporation will last if the goal is not to exist perpetually

Purpose statement

Signatures of each incorporator

The fee to file Articles of Incorporation is $100, and you can complete the form online.

Step 5: Registered Agent

Registered agents are also known as an agent for service of process in California, and you'll need to select one for your S corp. The agent for service of process will accept legal documentation on your business's behalf, such as court papers, if your S corp is sued.

Consider these three points for registered agents for service of process in California:

An agent for the service of process can be a corporation or an individual

If the agent for service of process is a corporation, it must have previously completed Form 1505, Registered Corporate Agent for Service of Process Certificate.

If the agent for the service of process is an individual, the individual must live in California

A business entity wonÕt be able to act as its own agent for the service of process in the state of California.

Step 6: Corporate Bylaws

Corporate bylaws establish how your corporation will operate and prove its legitimacy.

The main difference between corporate bylaws and Articles of Incorporation is that the Articles of Incorporation should be filed externally, while bylaws are mainly used for internal operations.

Your corporate bylaws should contain basic information about your S corp, such as:

Address

Designation of the corporation (public or private)

The fiscal year of the corporation

Name

Principal place of business

Your bylaws should also contain information about important functions of your S corp. This may include:

Board of directors

Director functions

Meeting procedures

Shareholder meetings

Step 7: S Corp Director Election

Shareholders elect directors who will serve on a board of directors, acting on behalf of your S corp. Duties and responsibilities they will have include:

Directors will annoucne corporation-related developments at the annual meeting.

Directors will create the mission of the S corp, often as a mission statement.

Directors will ensure the S corp meets its financial and legal obligations.

Directors will review the actions of corporate executive and set policies.

Step 8: Meeting Requirements

Before starting an S corp in California, you should become familiar with and keep track of a few meeting requirements.

First, the board of directors will keep meeting minutes. Second, there are no rules regarding what to include in meeting minutes or outlining how to track these minutes.

It may be helpful for your meetings to contain an outline that can resemble:

Agenda for approval (the board can approve additions)

Minutes of the last meeting for approval

Reports from committees and executives

Old business (carried over from a previous meeting)

New business

Comments and announcements

Adjournment (with time)

The next meeting date set

Step 9: Issue Stock

To start an S corp in California, you must issue stock. An S corp can issue only one class of stock to its shareholders.

Step 10: Statement of Information

An S corpÕs Statement of Information requirements differs from other business entities in the state:

You must file a complete Statement of Information within the first 90 days of filing the Articles of Incorporation.

After filing the Articles of Incorporation, a Statement of Information is due every year.

You can file subsequent Statements of Information online.

ThereÕs a fee of $25.00 to complete the Statement of Information.

Step 11: Form 2553

You must file Form 2553 to convert your California corporation to an S corp at the federal level. YouÕll need information about your S corp to complete this step, including:

¥ Address, name, and signature of each shareholder

¥ Business address and name

¥ Company EIN

¥ Company officer signature and title

¥ CompanyÕs state of incorporation

¥ The address and name business address

¥ The date of incorporation

After completing Form 2553, you can fax or mail it to the IRS.

Step 12: Form 100S

Filing Form 100S will allow you to operate your S corp within California.

In this step, youÕll need to submit several pages of information about your S corp, so make sure you've completed the previous steps in advance of completing and filing this form.

Other Requirements: California Franchise Tax

All S corps owners in California will pay a franchise tax. The minimum franchise tax for S corp status is $800, due in the first quarter of each accounting period.

YouÕll pay this tax whether your corporation is active, inactive, operates at a loss, or files a return for a short period (under 12 months).

California waives the minimum tax on newly formed or qualified S corps filing an initial return for their first taxable year if theyÕre registered with the Secretary of State.

Every S corp will pay an additional 1.5% tax from their California source income, even if itÕs the first year in operation.

Conclusion: Let Us Help You Start Your California S Corp

Converting your California small business entity to an S corp is a great decision that provides numerous advantages. However, the process can be complex and time-consuming for busy owners, which is why they trust 1-800Accountant, AmericaÕs leading virtual accounting firm for small businesses, for their California S corp needs.

Whether it's entity formation for an S corp, C corporation (c corp), or limited liability company (LLC), or any of our professional accounting services, we have the affordable solutions you need to ensure your business remains compliant. Schedule a quick consultationÐusually 30 minutes or less to learn more.

As your business grows, so does your tax bill. While your small business may require minimal tax planning in its early stages, every company can benefit from periodic tax strategy assessments.

Filing an IRS Form 8832, Entity Classification Election, can be a simple strategy to lower your companyÕs tax burden. Form 8832 is a tax election for newly formed entities and existing businesses.

This article contains step-by-step instructions for filling out IRS Form 8832. YouÕll learn the benefits and timing considerations to discuss in your next tax advisory planning session. Brendon Pack

What Is IRS Form 8832?

IRS Form 8832 allows a business to elect a federal tax classification other than its default treatment. In other words, a company can choose a different entity type for its federal tax return.

For example, a single-member LLC defaults to a sole proprietorship for federal tax purposes. However, the LLC can file Form 8832 to elect corporate tax treatment. After filing Form 8832, the LLC will file corporation tax returns and pay corporate income tax.

Form 8832 elections can benefit growing companies. Smaller businesses often benefit from pass-through entity taxation because the business owners pay tax at their personal income tax rates. However, companies with high taxable income could pay lower taxes with a corporate tax election. Individual income tax rates range up to 37%, but C corps pay 21% federal income tax.

Your tax advisor can help you determine the most tax-efficient structure for your business.

When youÕre ready to file an election, let professional CPAs handle the paperwork for your business. 1-800Accountant offers budget-friendly entity formation services so you can confidently choose the best business entity type. Brendon Pack

Who Should File Form 8832?

An eligible company can use Form 8832 to file an entity classification election. An eligible business includes one of the following:

Limited liability companies (LLCs)

Partnerships

Sole Proprietorship or Single-Member LLC

If a business has one owner, the company defaults to a disregarded entity for federal income tax purposes. An individual business owner is a sole proprietor. Disregarded entities do not file separate entity income tax returns. Instead, the owner must report the entityÕs business income on its federal tax return.

You can register a single-member limited liability company with your Secretary of State.

A sole proprietorship or single-member LLC can file IRS Form 8832 to elect corporate tax treatment. The entity should elect classification as Òan association taxable as a corporation.Ó After filing Form 8832, the entity should file a C corp tax return to report taxable income and calculate its income tax liability.

Business owners must report corporate dividend income on their personal tax returns. Corporation owners do not use Form 1040 Schedule C to report business income.

Let tax professionals help you comply with your new tax filing requirements. 1-800Accountant supports your tax form preparation and filing.

Partnership or Multi-Member LLC

A business with more than one owner defaults to pass-through entity tax treatment.

A partnership or multi-member LLC must file partnership returns to report business income and ownership information. The company must issue a Schedule K-1 to each owner, reporting income and expense distributions.

The pass-through entity can file IRS Form 8832 to elect corporate tax treatment. The business should elect classification as Òa partnership or an association taxable as a corporation.Ó

After filing Form 8832, the entity must file a C corp tax return to report taxable income and calculate its income tax liability. Business owners report corporate dividend income on their personal tax returns. Owners will no longer receive K-1s.

We recommend partnering with tax professionals for help with your new tax forms and due dates.

C Corporation

Corporations cannot use Form 8832 to elect a different tax classification.

However, an LLC or partnership that previously elected corporate tax treatment can file a new Form 8832 to change its election:

A company with one owner can elect sole proprietorship tax treatment.

An entity with multiple owners can elect partnership tax treatment.

Always consult your tax advisors about tax planning strategies for your business.

When Should You File Form 8832?

Your company can file IRS Form 8832 at its formation or at a later time, depending on the most beneficial date for your business.

Form 8832 allows taxpayers to choose an effective date of the election. However, note the following due date requirements for your desired election date. To start your election on a specific date, you must file Form 8832 within the following periods:

No later than 75 days after your desired effective date

Less than 12 months before your desired effective date

For example, if you want your corporate tax election effective as of 1/1/2025, you must file Form 8832 after 1/1/2024 and before 3/17/2025.

Additionally, your business cannot file two 8832 elections within five years. (The five-year rule does not apply to Form 8832 filed by a newly-formed business.)

1-800Accountant can help your business file Form 8832 on time Ð and weÕll monitor your tax due dates year-round.

Instructions for Filling out IRS Form 8832

Information Required for Form 8832

Have the following business information handy before filling out your Form 8832:

Business name

Employer identification number (EIN)

Address

Businesses with a single owner or corporate parent must also report the ownerÕs name and taxpayer identification number (TIN).

How to Fill out Form 8832

Part I: Election Information

IRS Form 8832, Part I includes questions about your entity election.

IRS Form 8832, Part I, Page 1

Line 1, type of election: Indicate whether your business is changing its tax classification or filing the election as a newly formed entity.

Lines 2a and 2b, previous elections: Do not complete these questions if your business hasnÕt filed an entity classification election. Indicate whether the previous election was within the last five years (if applicable).

Line 3, number of owners: Indicate whether your business has one or multiple owners. Your response will determine which election(s) you can make with Form 8832.

Line 4, sole owner information: If your business has only one owner, list the ownerÕs name and identifying number.

Line 5, corporate owner information: If a corporation owns your business, list the parent corporationÕs name and EIN.

IRS Form 8832, Part I, Page 2

Line 6, type of entity: Indicate your businessÕs current entity classification and the type of election you want to make with this Form 8832.

Line 7, foreign entity information: If applicable, list the country where the business was organized.

Line 8, effective date: List the effective date of the entity election.

Line 9, contact information: Provide the contact personÕs name, title, and phone number.

Each owner or member must sign Form 8832. If the business authorized an officer to file the election on its behalf, the authorized officer(s) can sign.

Part II: Late Election Relief

Part II applies to taxpayers who failed to file Form 8832 on time.

Your business can request late election relief if you missed the Form 8832 filing deadline for your desired effective date. The IRS requires taxpayers to meet the reasonable cause requirements explained in the Form 8832 instructions.

If you missed the Form 8832 due date, include an explanation in Part II. Each owner or member must sign the late election relief section.

You can leave Part II blank if you filed your entity election within the required timeframe.

How to File IRS Form 8832

The IRS requires taxpayers to file Form 8832 via paper mail.

Use the Form 8832 instructions or refer to the following list to determine where to file your election. Use the mailing address applicable to your business location.

Mailing Address Business Location

Department of the Treasury

Internal Revenue Service

Kansas City, MO 64999 Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, Wisconsin

Department of the Treasury

Internal Revenue Service

Ogden, UT 84201 Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah, Washington, Wyoming, foreign countries or U.S. possessions

Form 8832 Frequently Asked Questions

What Is an Entity Classification Election?

An entity classification election allows a business to change its tax entity type for federal income tax purposes. The election affects the companyÕs federal income tax return filing.

What Is the Default Classification for My Small Business?

If your business has a single owner, the company defaults to a disregarded entity for federal income tax purposes. A business with more than one owner defaults to partnership tax treatment.

How Do I Get an EIN?

Your business can request an EIN by filing IRS Form SS-4 Application for Employer Identification Number (EIN) or using 1-800AccountantÕs budget-friendly EIN filing service.

What Form Should I File to Become an S Corporation?

If your business meets the S corp requirements, file IRS Form 2553, Election by a Small Business Corporation, to elect S corporation tax status.

Partner with 1-800Accountant for Confidence in Your Taxes

Always work with professional CPAs to determine your most tax-efficient business structure. 1-800Accountant can help you understand the effects of an entity classification election. WeÕll also determine the best time to file.

Tax advisory professionals help you with filing requirements and deadlines so you can focus on growing your business.