Filing business taxes early is rarely a bad idea. If you’re expecting a tax refund, filing early means you’ll receive the refund sooner.

But that’s not the only benefit, and there are plenty of advantages to filing taxes early. Keep reading to learn some of the reasons to get ahead of the game and file before the deadline next year.

6 Reasons to File Business Taxes Early

The life of a business owner is usually very busy, and it probably seems difficult to find time to focus on organizing your business financial information and filing your business tax documents. However, making time to do that sooner than later offers plenty of benefits.

 Avoid Paying Penalties

First, if you file early, you don’t have to worry about paying penalties for not meeting tax deadlines. For example, imagine you plan to complete and file your returns during the first week of April, to meet an April 15 deadline. If on April 1, you face an unexpected circumstance—your business is flooded due to a storm, your top employee quits or takes a leave of absence, or you receive a huge rush order for your product—and suddenly, you are preoccupied with other things. Your good intentions for tax filing may get cast aside, causing you to delay filing and potentially rack up penalties.

Not only does the IRS charge Failure to File penalties and Failure to Pay penalties, but it also charges interest on penalties. Those charges accrue by the month or partial month that a return is unfiled and unpaid and can add up quickly.

Get Refunds Faster

The IRS processes tax returns and pays tax refunds as they are received. If you’re expecting a refund, you’ll be more likely to receive it early if you filed your tax return early.

Most taxpayers file close to the deadline, which means the IRS has a large backlog of returns to process right around the filing deadline. By filing early, you can avoid the rush and expect the IRS to process your return faster and send your refund sooner.

Prepare for Next Year’s Taxes Sooner

You can’t file taxes until the tax year is complete. But that means your business is already operating in a new year before you start working on tax filing for the previous year. When you file early, you can go ahead and close the books on the previous year and focus all your attention on the current year.

When you don’t have to worry about last year’s taxes anymore, you’re free to focus on determining the right strategies to minimize your tax liability in the current year.

Avoid the Last-Minute Rush

Waiting until the last minute to complete any project often results in mistakes. Everyone does their best work when they can do so unhurriedly. By filing your taxes early, you can avoid the last-minute rush, take your time and make sure you’re getting all the figures right.

If you plan to hire an outside tax advisor or accountant (which is highly encouraged), you may also save money by filing early. Tax professionals also get overwhelmed during the last-minute rush and may charge extra fees for rush jobs.

Opportunity for Tax Planning Strategies

When you file taxes early, you have more time to take advantage of various tax planning strategies that may help reduce your tax bill. For example, if you complete your tax return early and find that you owe more money than expected, you may still have time to take advantage of tax credits and deductions that could help you reduce your tax bill.

Reduce Tax Stress

Most business owners (80%) feel at least some stress at tax time, according to a recent survey conducted by Freshbooks. More than half (60%) of small business owners said they’d rather do one or more of the following than do their taxes: hanging out with their mother-in-law for a day, getting a mullet haircut, getting a root canal, removing a nest of angry bees, or licking a pole on the subway.

For most business owners, all the stress is due to a lack of preparation and waiting until the last minute. By making a commitment to file early, you can reduce your tax-related stress.

How to File Business Taxes Online

The easiest way to file taxes today—and the quickest way to get a tax refund—is to file online. The IRS encourages business owners to file taxes online and makes it easy to file and pay taxes online. Follow these steps to file online:

1. Assemble the right documents. You’ll need records of business transactions during the tax year to calculate income, expenses, and deductions.
2. Locate the right IRS tax form, based on your business structure. If your business operates as a sole proprietorship or a single-member LLC, you can report all business income and expenses on a Schedule C attachment to your personal income tax return. But if your business is organized as a corporation or you choose to treat your LLC as a corporation, you’ll have to prepare a separate corporate tax return using Form 1120 for C-corporations or Form 1120S for S-corporations. Multi-member LLCs are considered partnerships and usually file Form 1065.
3. Complete the form. Using your business financial information, complete the correct form with the figures from the tax year.
4. Submit your tax return online. The IRS provides several options for submitting your return online. You can also pay any taxes that are due online.

While the IRS does try to make the tax filing process easy, it is highly encouraged that you don’t try to tackle your taxes on your own – invest in a trusted accountant and/or tax advisor who can help you avoid making any costly mistakes.

How Early Can You File Taxes?

Typically, the IRS will begin accepting tax returns in mid to late January following the tax year. For 2024 tax returns, the IRS has announced that it will begin accepting e-filed returns on Jan. 29, 2025.

What is the Deadline to File Taxes?

Your deadline to file business taxes will depend on your business structure and the type of tax return form you are required to file. If your business is a sole proprietorship or single-member LLC, you use a Schedule C. A Schedule C is part of your personal tax return (Form 1040) and has no separate filing deadline. It’s subject to the same April 15 deadline as your personal return.

If you’re taxed as a C-corporation and file a Form 1120, you must file it by the 15^th day of the fourth month following the close of the tax year. For most taxpayers, that’s April 15.

If your business is an S-corporation or a partnership, you need to file a Form 1120S or Form 1065. These forms are due by the 15^th day of the third month following the close of the tax year, which is March 15 for most taxpayers. This form cannot be sent to the IRS with your personal income tax return; it must be sent separately.

Tips for First-Time Business Tax Filers

Filing taxes early is always a good idea. If you’re filing small business taxes for the first time, you may also benefit from these additional tips:

• File the right forms. The form you should file depends on your business structure. If your business is a C-corporation, you need to file a Form 1120, and if it’s an S-corporation or partnership, you need to file Form 1120S or Form 1065. If you operate your business as a sole proprietorship or a single-member LLC, you’ll file a Schedule C with your personal tax return.
• Separate business and personal expenses. It’s always wise to keep business and personal expenses separate, and if the IRS ever audits you or your business, blended personal and business expenses will be a red flag. Using a dedicated business account and funneling all business expenses through that account can be good ways to keep expenses separate. You should also have separate credit cards, loans and other types of financing for your business and personal credit as much as possible.
• Explore deductions. Tax deductions decrease your taxable business income, which allows you to have a lower tax liability. Most small businesses qualify for many deductions, including business mileage, business interest and bank fees, legal and professional fees, business insurance, home office expenses, and business travel expenses.
• Contact a tax professional. It’s a good idea for business owners to connect with a tax professional who is familiar with the federal tax laws as well as in the states and localities in which the business operates. The right tax professional can help you make wise decisions that can help limit your tax liability and ensure that your business remains compliant.

 FAQs for Filing Business Taxes Early

At what point does a small business need to file taxes?

A small business must file taxes when it has earned $400 or more during a calendar year. The business owner must typically file taxes by March 15 or April 15 of the following year, depending on the type of business structure they operate.

What is the penalty for filing business taxes late?

The IRS charges failure to file penalties starting at 5% of unpaid taxes per month or partial month that the tax return is late. It also charges monthly failure to pay penalties when taxes are owed and unpaid. The IRS also charges interest on both the tax liability and the penalties.

What are the biggest tax mistakes business owners can make?

Some of the biggest tax mistakes business owners can make include failure to file returns, failure to pay taxes when due, and failure to separate business expenses from personal expenses.

Can you save money by filing business taxes early?

You may save money by filing business taxes early, as you will not have to pay rush fees to a tax preparer when you start the process early in the season. Also, by paying early, you can save money on any potential penalties you may have had to pay by filing late. If the IRS owes you a refund, filing early may also help you get the refund earlier.

What documents do you need to file taxes early?

To file business taxes early, you need the same documents you would need to file at any time. That includes business financial records that document all revenues and all expenses from the tax year.

If you have questions about business taxes, you aren’t alone. Filing and paying taxes are dreaded tasks for many business owners. But with a little bit of planning and strategy, you can tackle your business taxes and even learn to find ways to save money along the way.

10 Tax Tips for Small Businesses

There’s a lot to know when it comes to small business taxes, but these are some of the most important tax tips to know to properly manage your business tax strategy.

Find a Trustworthy Accountant

Smart small business owners are always on the lookout for ways to minimize their tax liability.  Finding a reputable and trustworthy accountant with whom you can partner to not just file your taxes, but to help you build and regularly adjust a tax strategy. Small business owners need more than just an accountant who will prepare financial statement and submit their taxes – you need a partner who can work with you throughout the year, tracking revenue and spend to help avoid cash flow problems.  At the same time, they are giving regular advice and insight to ensure you are able to claim all credits and deductions available to you and your business while also helping you to avoid any pitfalls that could get you into trouble with the IRS.

Keep Your Business Finances Organized

For many business owners, managing taxes is stressful because of their lack of preparation and organization, according to a recent survey from Freshbooks. If you develop an organized system of tracking revenue and expenses, and stick to the system throughout the year, it will be much easier to pull the data you need when it’s time to file taxes. Using a financial and accounting software program or platform can be helpful for recording, tracking, and organizing your tax-related information.

Maximize Deductions

Tax deductions decrease your business’ recognized income, which allows you to pay lower taxes, and many small businesses qualify for many deductions, including:

• Business mileage
• Business interest and bank fees
• Legal and professional fees
• Business insurance
• Home office expenses
• Business travel expenses

By tracking all business expenses, you may be able to quickly lower your business’s taxable income, which will reduce the amount you’ll owe in taxes.

Consider Tax Credits

A tax credit is different from a deduction: Rather than reducing your taxable income, a tax credit allows you to subtract the amount of the credit from the amount of tax you owe. Small businesses may qualify for tax credits for employing workers from marginalized groups, purchasing an electric vehicle, providing childcare for employees, increasing energy efficiency in their buildings, and taking other actions. During the COVID-19 pandemic, the government offered tax credits for businesses that kept workers employed, and some businesses are still eligible for those Employment Retention Tax Credits.

Create a Plan for Paying Taxes

Most businesses are required to pay different types of taxes, including income tax, payroll tax, employment tax, excise tax, and state and local taxes. To keep all of your tax obligations straight, your business should have a plan for paying them and budget line items to ensure you have the funds available.

Consider Deferring Revenue and Expenses

Business owners can control the amount of tax they owe each year, to an extent, by adjusting revenue and expenses. For example, if you think your tax bill may be higher than you’re prepared to pay, you can defer some revenue to the following year by delaying the sending of an invoice or pushing a project to the next calendar year.

If your tax bill is manageable for the current year but may be higher next year, you can also defer expenses to the next year by waiting until January to purchase or finance new equipment, for example.

Consider Accelerating Payments

If you want to reduce your taxable income and you have a business loan, consider accelerating payments on the loan. This means you make extra, voluntary payments to reduce the balance of your loan more quickly—and because interest on a business loan can be a deductible business expense, you’ll also reduce your taxable income while paying off your loan faster.  Just be sure that the extra payments you make are not directly to the principal of the loan as principal payments are NOT deductible.  One of the easiest ways to do this is, for example, make your standard January payment during the December before.

Remember Quarterly Payments

Business owners are typically responsible for making quarterly tax payments based on the business revenue during the previous quarter. Quarterly tax payment deadlines are in April, June, September, and January. If you miss required quarterly tax payments, the IRS will charge penalties and interest.

Note any Changes in National and Local Tax Laws

Tax laws change regularly, so it’s wise to stay informed about any changes in national and local tax regulations. If you have a tax advisor, they will probably be able to keep you posted on any changes that might affect your business.

Follow Tax Deadlines and Extensions

Your deadline to file business taxes will depend on your business structure

• Sole proprietors and single-member LLCs would file a schedule C along with their Individual income tax returns. Individual returns are typically due April 15, unless this date falls on a weekend or holiday. Extensions can be requested by filing Form 4868 which would give you until October 15^th to file.
• C-corps would file a Form 1120, which has a deadline of the 15^th day of the fourth month after the close of a tax year. For most c-corps that date falls on April 15^th.  C-corps can also request an extension by filing form 7004.
• Partnerships, multi-member LLCs and S-Corps filing deadlines will be March 15^th, unless you operate on a fiscal year basis. If you need to file an extension, you can request one using form 7004 which gives you until September 15^th.

More >> Why Small Business Taxes Should be Filed Early

Biggest Tax Mistakes for Small Business Owners to Avoid

Filing taxes correctly is important for both maintaining compliance and mitigating the risk of an IRS audit. Here are some of the biggest tax mistakes that business owners sometimes make and how to avoid them.

Not Separating Personal and Business Expenses

When you start a business, it may seem simple to purchase business supplies with a personal credit card or personal funds, and to mingle personal and business expenses. However, this is a mistake. Over time, as the business grows, earns revenue, and has more expenses, it will become increasingly difficult to separate personal and business expenses. As a result, it’s impossible to prove that business expenses qualify the business for tax deductions.

Misclassifying Employees

When a business has employees, the IRS expects to collect payroll taxes including Social Security, Medicare, and unemployment taxes. If you are paying workers without filing appropriate employment tax forms, you must ensure that you can justify that the workers qualify to be independent contractors according to IRS rules. If not, you may be required to pay employment taxes in arrears.

Failing to Keep Thorough Records

Without thorough financial records, it’s impossible to file and pay business taxes appropriately. Tax filing requires you to report accurate revenue figures, payroll figures, and other business expenses to make sure you qualify for any deductions and pay the appropriate amounts.

 Small Business Taxes Checklist

When you’re ready to prepare for small business tax filing, use this checklist to make sure you don’t forget anything.

• Gather financial information from the tax year.
• Find the right tax form based on your business structure.
• Consider tax deductions and tax credits that might apply to your business.
• Consider deferring revenue or expenses.
• Consider accelerating payments.
• Remember to calculate any estimated tax payments into your final tax bill.
• File by the tax deadline.

Small Business Tax Filing Requirements

Different types of business entities must meet different tax filing requirements. Here’s a look at the requirements for common small business structures.