Many small businesses file their business income tax return on Schedule C as part of their personal tax return. Business tax returns, along with any outstanding tax payments, were due on April 15. Personal tax returns and related payments are now due May 17, 2021, thanks to an automatic extension by the Internal Revenue Service.
Learn what you will need to do to complete your Schedule C by the deadline.
If your business is in Texas or another area where FEMA issued a disaster declaration due to winter storms in 2021, you have a little more time to file your 2020 taxes. The IRS has extended the filing and payment deadline for businesses in these affected areas from April 15 to June 15, 2021.
If You Have Not Yet Started Your Business Tax Return
Invest in tax software. To start working on your return on your own, consider downloading tax software for your business type. Check that the software version you are considering purchasing and downloading includes Schedule C.
If you have already purchased software that did not include Schedule C, you could download the document and the instructions for Schedule C from the IRS. Or you may have to upgrade to the version that includes business software.
You must submit both your Schedule C and your 1040 together to the IRS.
Check on the most recent tax laws to make sure you understand—and take advantage of—any tax changes. The Tax Cuts and Jobs Act has several benefits to small businesses that can save on taxes, and it also has some reductions to deductions and credits.
Changes in the new law include:
- Lower business and personal tax rates and a new tax cut of 20% on business income in addition to normal business tax deductions.
- Entertainment expenses as business tax expenses have been eliminated, and some tax credits are no longer available.
Understanding the effects of this tax law change can help you pay the lowest tax rate.
You Won't Be Able to File Schedule C-EZ
Some very small businesses used to be able to use Schedule C-EZ to file business taxes instead of Schedule C. Schedule C-EZ is a simple one-page form that asks a couple of questions about your income and expenses.
However, as of 2019 this form is no longer in use. The affected small businesses will use Schedule C instead.
Working on Your Schedule C
Start working your way through the program. You might go through once with the information you have and take notes on what you still need. Then, go back again and plug in the additional information.
These tax software programs are an excellent way to do a tax return, because they ask you questions about items you might have forgotten.
If You Have Started Your Business Tax Return on Schedule C
Make sure you have taken all allowable deductions and credits.
Check for errors before you file. If you make a computation mistake, the IRS will catch it and make the change, but other common errors, such as forgetting to sign the return, will cause your return to be rejected.
Remember Schedule SE for Self-Employment Taxes
All business owners must also complete Schedule SE to calculate the amount of self-employment taxes (for Social Security and Medicare). Schedule SE must be completed even if your business had no profit for the year.
It is a relatively complicated form, but if you are using tax software that includes Schedule C, it should also include questions that will help you complete Schedule SE.
Add Your Schedule C Information to Your Personal Tax Return, and Send It
Check to make sure you have added the Schedule C and Schedule SE information correctly on your personal tax return. Determine how you will send your return.
As a last resort, you might want to consider filing an application for an extension. You will still have to compute the estimated taxes and pay before April 15, but an extension will give you time to do a thorough job of preparing your return.
Businesses in Texas, Oklahoma, and Louisiana will not need to file for an extension as one has already been automatically granted until June 15, 2021.