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Small Business Taxes

Business taxes vary and it depends on the structure, the industry, and the state the business is held in. Small business owners also need to file personal federal and state income taxes. For more on Federal and State tax obligation, visit the Small Business Administration’s website.

 

You will need to choose your business’s tax year. The following are available tax years you can select from:

Calendar tax year:

Begins on January 1 and ends on December 31. Applicable to a business without special accounting needs.

 

Fiscal tax year:

Applicable to a business with 12-month accounting period not ending in December.

Short tax year:

Applicable to a business that was not in existence for a full 12-month accounting period; or

Applicable to a business that changed its accounting period.

 

To learn more about possible tax years, visit IRS’ website.

Get a Federal Tax ID

To obtain a federal tax ID number, also known as Employer Identification Number (EIN), please refer back to our

Business Registration section.  

 

There are several federal taxes to consider when starting a business:  

  • Income Tax  

  • Self-employment Tax

  • Employment Taxes

  • Excise Tax  

 

For more detail on these taxes, visit the IRS Business Taxes page

Paying Federal Taxes 
 

The IRS requires individuals (including sole proprietors, partners, and S-corporation shareholders) to pay quarterly estimated taxes, if they are expected to owe $1,000 or more when their federal or state tax returns are filed.   

 

To figure out and pay your estimated federal tax use Form 1040-ES. The IRS allows for electronic payments. They are due April 15, June 15, September 15, and January 15 (of the following year).  

State Taxes
  

To file and pay business taxes in Massachusetts, you will need to register your business with the MA Department of Revenue (DOR). You can register online on their Mass Tax Connect's page.

 

The following information and documents are needed for:

Sole Proprietor:

  • Employer Identification Number (EIN)

  • Your Legal Name

  • Business Mailing Address

  • Starting Date of your business

Corporations:

  • Your Social Security Number (SSN) or Employer Identification Number (EIN)

  • Your Legal Name

  • Business Maling Address

  • Starting Date of your business

  • Contact information, titles, and social security numbers of all additional business officers.

Non-Profit:

  • IRS Determination Letter recognizing an organization as a 501(c)(3) - If you need a copy, you can request one with the IRS.

To learn more about business tax requirements, check out the Department of Revenue Small Business Workshops series.

For additional resources on Massachusetts’ business taxes, including calculating and paying estimated state tax, go to the Department of Revenue’s website.

Tax tips and additional IRS resources

Use tax deductions to lower your bill  

Your expenses could include:

  • vehicle expenses

  • wages

  • business travel

  • contract labor

  • supplies

  • equipment

  • depreciation of assets

  • rent on business property

  • utilities

  • insurance

  • repairs

Most of these expenses can be used to minimize your business taxes by writing off those as operational expenses.

Write off your startup costs  

 

The IRS allows you to deduct up to $5,000 in business startup costs and up to $5,000 in organizational costs, but only if the taxes are $50,000.00 or less.  

 

Typical costs to set up a business include:  

  • business insurance

  • office space

  • real estate

  • office supplies

  • business cards

  • business assets

  • professional fees (i.e., hiring accountants)

  • small business loan fees

  • home office deduction -

if you’re operating your business from a home office

Tax Checklist for Small Businesses
Income

Gross receipts
Sales records
Receivables
Interest from bank accounts

Expenses

Marketing
Communications
Travel
Personnel
Operational
Legal
Financial
Depreciation

Cost of Goods

Current inventory
Change in inventory
Inventory purchases
Materials and supplies
Inventory removed for personal use

Additional IRS resources:
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