Finding the right tax forms for your tax filing is foundational to your business tax preparation success. Whether you are doing your own taxes or leaning on a preparer, knowing what forms you’ll be required to file can inform your information gathering and timeline.
This year, due to pandemic-related support and potential changes in your staffing, new forms may be required.
Review some of the common essential forms for small and midsized businesses (SMBs) below. Most states have parallel reporting requirements as the federal government, frequently with their own sets of forms. If some deadlines have passed to file forms listed here, don’t panic. Work with your tax advisor to make a plan to complete them as soon as possible. You may be eligible for the First Time Penalty Abatement Waiver.
“2020 was a dynamic year and this change may impact many businesses at tax time,” says Bruce McVittie, CPA, President of McVittie Financial Advisors in Newton, Massachusetts.
After the passage of the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) in December 2020, Congress verified that a forgivable Paycheck Protection Program (PPP) loan is tax-exempt and is not taxable income. According to the IRS, this means:
- Money received from your forgivable PPP loan will not be included in your gross income at the federal level.
- You will need to check with your state to determine if the forgivable loan is taxable on your state tax return.
- You can deduct qualifying expenses paid with the proceeds of a forgiven PPP loan or emergency Economy Injury Disaster Loan (EIDL) grant.
- Recipients of less than $150,000 in PPP loans who use Form 3508S to request loan forgiveness should review the questions and instructions on Form 3509, which is used to evaluate loan necessity. This can help you understand the documentation you need to retain in the event of an audit.
Many businesses may also be eligible for the Employee Retention Tax Credit (ERTC) related to COVID-19 relief. And, if you had to close a business last year, you likely need to file a final tax return for the year you closed and report employment taxes for any employees as well. Ask your tax preparer what related forms you may need.
Forms specific to startups.
These include applications for employer identification numbers, entity classification and S-corp elections, registrations with the state for various taxes, employment tax forms, general business expense forms, and forms regarding employee benefits such as health insurance or retirement accounts.
W2 and W3.
The general deadline for employers to file W-2 and W-3 wage and tax statement forms with the Social Security Administration in 2021 was February 1. This is also the date employers needed to get W-2 forms to their workers. Automatic extensions to file these forms are not available, but extensions may be granted in certain circumstances.
New for tax year 2020, the 1099-NEC (non-employee compensation) form must be distributed by businesses to contractors, similar vendors and the IRS (with a Form 1096). To help avoid penalties, it’s important that your workers are classified correctly as employees (who you pay Social Security, Medicare and unemployment taxes for) or contractors (who are responsible for these taxes themselves). If you’re unsure about anyone’s status, see the IRS classification rules for more information.
Previously used to report non-employee compensation, the 1099-MISC is now used to report miscellaneous payments of over $600, such as rent, prizes or awards, and certain insurance costs. This form should also typically be used to report direct sales of at least $5,000 in consumer products to a buyer for resale anywhere other than a permanent retail establishment.
According to the IRS, Form 940 must be filed by January 31 to report the Federal Unemployment Tax Act (FUTA) tax you owe for the previous year and the amount you have already paid. You must also submit the balance you owe at this time. These taxes provide funds for paying unemployment compensation to workers who have lost their jobs.
Forms based on business structure.
The IRS requires businesses to report their revenue, expenses, income, gains, losses, credits and deductions. Businesses that operate as sole proprietorships, including single member LLCs, can file a Schedule C as part of the business owner’s personal return. Partnerships file a Form 1065; S-corporations file Form 1120-S; and C-corporations, an 1120.
To file this year and get ready for next season, make sure you have enough copies of any forms you need to distribute to employees. If you plan to print forms yourself, check your printer’s ink level and replace the cartridge, if necessary, to ensure forms print legibly.
Each company has its own tax obligations so check with the IRS to make sure you have all the forms specific to your business needs.
This information is only provided for general informational purposes, and should not be considered as offering individualized tax advice. Please consult your tax advisor on specific issues related to your tax situation.