Declaring quarterly taxes and annual taxes for a small business is not as complicated as you might imagine. The key is to understand how your company is structured.
In this article, we will explain who needs to file their taxes annually, and who needs to file them every three months. In addition, we specify which forms each business must submit and what are the deadlines to declare.
What are annual taxes?
The structure of your company determines how often you must file your tax return. All small businesses must file their taxes annually, however, the terms and requirements vary depending on their type.
Let’s see which companies, according to their structure, must file annual taxes, as well as the forms they need to complete, and the deadlines they have to do so.
Corporations must file their taxes annually using Form 1120. A C corporation, as these entities are also known, must submit this form regardless of whether it has received income or not.
According to the IRS, a corporation must file its return on April 15. If you request an extension, the maximum date to file them is October 15.
Type S corporations, companies that do not pay taxes on their income but on the personal gains of their shareholders, must file Form 1120S on March 15. If they request an additional term, the deadline to declare is September 15.
Sole proprietorships and partnerships
A sole proprietorship company must report annually all of its income or losses in the personal tax return of its owner. The deadline for these companies to submit Form 1040 is April 15.
In a company, its partners inform the IRS of their profit and loss using Form 1065, and the deadline is March 15.
For the members of a Limited Liability Company, the same requirements apply. But, an LLC that belongs to a single owner is appraised as a sole proprietorship and must submit Annex C no later than April 15.
What are quarterly taxes?
If you are a business owner, no one withholds taxes on your income, nor deducts your own income tax, since you are not an employee. This is also the case of contractors, investors, and lessors.
The IRS requires them, and anyone whose salary is not subject to withholdings, to declare and pay their taxes quarterly. These estimated quarterly taxes, as they are also called, have certain advantages that translate primarily into deductions for independent workers.
Preparing a tax return quarterly involves calculating how much you owe, completing Form 1040-ES, and choosing a payment method, among other requirements. In addition to doing the appropriate paperwork, you have to meet the deadlines set by the IRS:
- First quarter. The deadline is April 15.
- Second quarter. The deadline is June 17.
- Third trimester. The deadline is September 16.
- Fourth trimester. The deadline is January 15 of the following year.
Filing annual taxes and quarterly taxes can be confusing, and it requires a lot of work. Do not hesitate to ask for the help of a tax advisor or use tax software if you need them.
Quarterly taxes vs annual taxes: don’t confuse them!
So that there is more clarity on how to declare the taxes of your small business, we’re using a table to compare quarterly taxes and annual taxes.
|Quarterly taxes||Annual taxes|
|Who has to pay them?||Form||Deadline||Who has to pay them?||Form||Deadline|
|Sole proprietorships |
|Form 1040-EN||1. April 15 |
2. June 17
3. September 16
4. January 15 of the following year
|Corporations||Form 1120||April 15|
|S Corporations||Form 1120S||March 15|
|Sole proprietorships||Form 1040||April 15|
|Corporations and LLCs||Form 1065||March 15|
|Single Owner LLCs||Annex C||April 15|
How can you pay your taxes?
The Internal Revenue Service has several means of payment available to taxpayers:
- Electronic Federal Tax Payment System (EFTPS). You can pay your federal taxes online or by phone with this system. The United States Department of the Treasury offers the EFTPS at no cost.
This is the most suitable option for large businesses to be large sums.
- DirectPay. Taxpayers can use this platform at no cost to pay their taxes using a checking or savings account. After completing the payment, the system sends a confirmation.
It is possible to schedule payments up to 30 days in advance.
- Credit and debit cards. Quarterly taxes and annual taxes can be paid with credit and debit cards. The operation can be done online, by phone or through a mobile device.
There is a possibility that your card issuer will charge additional fees for the transaction.
- Cash. Those who prefer to pay in cash can make the transaction through the IRS retail partners.
This type of payment usually takes five to seven business days to be processed.
Quarterly taxes vs annual taxes: how different are they?
The following diagram distinguishes quarterly taxes more clearly from annual taxes.
Remember, sole proprietorships must report annually to the IRS of their income and earnings on their owner’s personal tax return. But because they are not subject to any withholding tax, they must also pay quarterly taxes.
Don’t forget to file your taxes
Depending on how your business is structured you’ll have to declare quarterly taxes or annual taxes.
Corporations, partnerships, sole proprietorships and LLCs must file taxes annually.
Contractors and sole proprietorships, whose incomes are not subject to any withholding tax, must declare and pay their taxes quarterly.
The good news is that the IRS has different payment channels, such as virtual platforms; and that you can pay your obligations with credit and debit cards, through bank deposits or in cash.