Running a business requires completing many different tax forms, which is why many businesses opt to use payroll software instead of manual processes to manage their payroll system. Calculating relevant federal, state, and local taxes is only the tip of the iceberg; employers must also calculate any relevant deductions on each paycheck, and then this information is used to create the Form W-4s. In addition to these basic requirements, different businesses must also file additional forms as well, which vary depending on the classification of business they run. Fortunately, these tax forms can be easily handled by using payroll software, but if you don’t currently use payroll software (or simply would like to learn something new), read on to learn about some common types of tax forms!
Form 1040 – Form 1040, also known as the Individual Tax Return form, is generally used by employees to file their income taxes. However, this type of form is also used by businesses if the business in question has only one employee (self-employed). These self-employed single-member businesses are treated as sole proprietors by the IRS, which is why they must file a Form 1040 (alongside a Schedule C) instead of a Form 1120-S or a Schedule K-1.
Schedule C – Sole proprietors file a Schedule C alongside their Form 1040 come tax time. This form covers all the information and statistics regarding their business, including (but not limited to): name, product/service, address, sales, and how much it cost to produce/make their product/service. It also includes other overhead costs like advertising, vehicle costs, supplies, utilities, office expenses, and other types of business costs.
Form W-2 – This is a tax form sent to both individual employees and the IRS at the end of the year. It covers all of the employee’s income for that year, including wages, salary, commissions, and bonuses. The form will also show the amount withheld from their wages throughout the year, which is important information to have while filing taxes. Employers are required by law to provide employees (both current and former) with their Form W-2 by January 31st of the following year.
Form W-4 – Also known as an “Employee’s Withholding Allowance Certificate”, the Form W-4 is a form filled out by the worker when they are first employed. The information provided on this form is used by their employer to calculate how much to deduct from each paycheck for federal, state, and local taxes as well as any other necessary deductions. Information provided includes:
- Social Security Number
- Marital Status
- Number of Dependents
- And other relevant information
Form W-9 – This type of form is used by businesses when they hire a contractor, freelancer, or other types of worker that is not considered an employee. Also known as the “Request for Taxpayer Identification Number and Certification Form”, the information gathered on this form is used by the employer to verify an individual’s TIN (taxpayer identification number). Unlike a W-4, a W-9 does not involve withholding any funds from the worker. Instead, the compensation paid during W-9 work is reported to the IRS via Form 1099.
Form 1099 – A Form 1099 is provided to both non-employee workers and the IRS by early February of the following year after the work was performed. The form contains information on the wages that were earned but haven’t been taxed yet. Therefore, it’s needed by taxpayers to accurately file their taxes and the IRS to calculate these taxes/process any necessary tax returns.
Form 1120-S – Unlike sole proprietors, S Corporations can’t file their taxes using a Form 1040. Instead, S Corporations use Form 1120-S, which acts as the annual tax return for an S Corporation. This form provides information for each individual shareholder, reporting their income, losses, and dividends to the IRS. It’s often used by companies (with under 100 shareholders) who file their business as an S Corporation to avoid additional corporation taxes.
Schedule K-1 – Similar to Form 1120-S, a Schedule K-1 form is used to provide the IRS with income, loss, and dividend information for the previous tax year. The form most commonly used by S Corporation shareholders and business partners, although it can also be used by investors and ETFs in some situations. The Schedule K-1 form is issued by the business in question and must be provided to the taxpayer by March 15th of the following year.
As you can see, there are many different forms that must be completed when running a business, which is why using payroll software is the preferred option over using a manual payroll system. If your current payroll system is outdated, underperforming, or simply too complicated, we highly recommend taking advantage of a 30-day trial of UZIO, an all-in-one payroll, and HR platform, to see how much easier taxes can be!