To file federal taxes for your business, you need a taxpayer identification number, the correct IRS form for your entity type, complete records of income and expenses, documentation for any assets or inventory, and payroll or contractor paperwork if you paid workers during the year. What each of those looks like depends on how your business is structured, so the checklist for a sole proprietor is shorter than the one for a corporation with employees. The sections below walk through each category in the order you’ll actually use them.
Your Business Identification and Basic Information
Federal law requires every person or entity filing a return to include an identifying number.1Office of the Law Revision Counsel. 26 USC 6109 – Identifying Numbers For most businesses that means an Employer Identification Number (EIN), which the IRS issues at no cost. You need an EIN if you have employees, operate as a partnership, LLC, corporation, or nonprofit, or if you withhold taxes on payments to non-resident aliens.2Internal Revenue Service. Employer Identification Number Sole proprietors without employees can file using their Social Security Number, though many still get an EIN to keep personal and business finances separate.
Every business return also asks for the legal name of the entity, the business address, and a six-digit principal business activity code that matches your primary revenue-generating activity. These codes follow the North American Industry Classification System.3Internal Revenue Service. Principal Business Activity Codes Have your formation documents handy; if you elected S corporation status, your Form 2553 approval letter tells you which category the IRS has you in.
The Right Form for Your Entity Type
The form you file depends on how your business is legally structured, and each entity type has its own deadline. For a calendar-year business:
- Sole proprietors and single-member LLCs that haven’t elected corporate treatment report business income and expenses on Schedule C, attached to Form 1040. Due April 15.4Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)5Internal Revenue Service. Starting or Ending a Business 3
- Partnerships and multi-member LLCs file Form 1065, an information return that passes income through to each partner via Schedule K-1. Due March 15.6Internal Revenue Service. About Form 1065, U.S. Return of Partnership Income
- S corporations file Form 1120-S, another pass-through return. Due March 15.7Internal Revenue Service. About Form 1120-S, U.S. Income Tax Return for an S Corporation
- C corporations file Form 1120, which calculates the corporation’s own income tax. Due April 15.8Internal Revenue Service. About Form 1120, U.S. Corporation Income Tax Return
If a deadline falls on a weekend or federal holiday, it shifts to the next business day. Need more time? Form 4868 gives sole proprietors an automatic six-month extension, and Form 7004 does the same for partnerships, S corps, and C corps.9Internal Revenue Service. Instructions for Form 7004 An extension buys time to file but not time to pay. Interest and potential penalties still run on any balance owed after the original date.
Income Records
You need documentation for every dollar the business earned, regardless of how it came in.
Form 1099-NEC. Any business or client that paid you $2,000 or more for services in 2026 should send you a Form 1099-NEC by January 31.10Internal Revenue Service. 2026 General Instructions for Certain Information Returns The threshold rose from $600 to $2,000 for the 2026 tax year, so you may receive fewer of these than in past years. Income under the threshold is still taxable; you just won’t get an automatic form for it.
Form 1099-K. If you accept credit cards, debit cards, or payments through apps and online marketplaces, expect a Form 1099-K. Payment card processors report all transactions regardless of amount. Third-party platforms issue a 1099-K when your gross payments exceed $20,000 across more than 200 transactions.11Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill
Bank statements and internal records. Not every payment arrives with a 1099 attached. Cash, small electronic transfers, and payments from customers who aren’t required to report all need to be captured in your bookkeeping. Reconcile deposits against your ledger before filing. The IRS matches 1099 data against your return, and unexplained gaps between reported income and bank deposits are one of the fastest ways to trigger an automated notice.
Expense Records and Receipts
The tax code allows a deduction for costs that are ordinary (common in your industry) and necessary (helpful and appropriate for running the business).12Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses To claim them, you need proof. Pull together records for each category you plan to deduct:
- Rent and utilities: lease agreements or monthly invoices for office space, plus bills for electricity, internet, and phone.
- Professional services: invoices from accountants, attorneys, bookkeepers, and consultants, with proof of payment.
- Business loan interest: year-end statements from your lender.
- Insurance: policies and premium statements for business liability, property, and professional coverage.
- Supplies and materials: receipts for anything consumed in ordinary operations.
For purchases over $75, keep documentation showing the amount, date, place, and business purpose. Below $75, the IRS generally accepts credit card or bank statements as sufficient proof, though holding onto the actual receipt is safer.13Internal Revenue Service. Rev. Rul. 2003-106
Home Office
If you work from home, you can deduct a portion of your housing costs, but only for space used exclusively and regularly for business. A room that doubles as a guest bedroom doesn’t qualify.14Internal Revenue Service. Publication 587 (2025), Business Use of Your Home You’ll need the square footage of your office and of your home overall. Divide one by the other to get your business-use percentage, then apply that percentage to eligible household costs like mortgage interest, rent, utilities, and insurance.
Vehicle Use
You have two options for deducting business driving: the standard mileage rate or actual expenses. For 2026, the standard rate is 72.5 cents per mile.15Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile Either way, keep a mileage log with the date, destination, miles driven, and business purpose of each trip.16Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses Commuting between home and a regular office doesn’t count. The IRS scrutinizes this deduction heavily, and a missing log is the most common reason it gets disallowed.
Inventory and Depreciation
If your business sells physical products, gather inventory records so you can calculate the cost of goods sold: beginning inventory plus purchases during the year, minus ending inventory. Businesses reporting COGS on Form 1120, 1120-S, or 1065 use Form 1125-A to document the calculation.17Internal Revenue Service. About Form 1125-A, Cost of Goods Sold You need records of every inventory purchase, the valuation method you use, and physical or digital counts at the start and end of the year.
For equipment, vehicles, machinery, and other capital assets, the deduction spreads over the asset’s useful life through depreciation.18Office of the Law Revision Counsel. 26 USC 167 – Depreciation For each asset, gather the purchase date, cost, and the percentage used for business versus personal purposes. All of it goes on Form 4562.
Two provisions can accelerate the deduction. Section 179 lets you immediately expense up to $2,560,000 of qualifying equipment in 2026, with the deduction phasing out once total purchases exceed $4,090,000. Bonus depreciation, restored to 100% for property acquired after January 19, 2025, allows a full first-year writeoff of qualifying assets.19Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Either route requires the same supporting records: invoices, proof of payment, and documentation of business-use percentage.
Self-Employment Tax
Sole proprietors and partners owe self-employment tax on top of income tax: a combined 15.3% on net business earnings, made up of 12.4% for Social Security and 2.9% for Medicare.20Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only to the first $184,500 of net earnings in 2026; Medicare has no cap.21Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
You calculate this on Schedule SE, which attaches to Form 1040 alongside Schedule C. The input Schedule SE needs is your final net profit from Schedule C, which is why getting your income and expense records right feeds directly into this step.
Estimated Quarterly Payment Records
Business owners pay tax throughout the year in quarterly installments rather than through paycheck withholding. You’re generally required to make estimated payments if you expect to owe $1,000 or more in tax for the year after subtracting withholding and credits.22Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals The four deadlines for the 2026 tax year are April 15, June 15, September 15, and January 15, 2027.23Internal Revenue Service. Estimated Tax
You can avoid the underpayment penalty by paying at least 90% of your current-year tax or 100% of the prior year’s tax, whichever is smaller.24Internal Revenue Service. Estimated Taxes When it’s time to file, you need the date, amount, and (for electronic payments) confirmation number for each installment. These amounts get credited on your annual return, and a missing record can mean you don’t get credit for a payment you actually made.
Payroll and Contractor Paperwork
If you had employees, gather the payroll records that back up each Form W-2 you issued. Employees must receive their W-2 and copies must be filed with the Social Security Administration by February 1 of the following year.25Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) You’ll also need your four quarterly Form 941 filings, which report income tax, Social Security tax, and Medicare tax withheld plus the employer’s matching share.26Internal Revenue Service. About Form 941, Employer’s Quarterly Federal Tax Return Keep payroll registers showing each employee’s gross pay, withholding amounts, hours worked, and pay dates. Payroll software typically generates and stores these automatically.
If you paid an independent contractor $2,000 or more during 2026, you must file Form 1099-NEC reporting those payments.10Internal Revenue Service. 2026 General Instructions for Certain Information Returns The contractor’s copy is due by January 31, and the IRS copy is due February 28 on paper or March 31 electronically. To prepare these forms you need each contractor’s name, address, and taxpayer identification number, which you should have collected on a Form W-9 before paying them. Failure to file 1099s when required carries its own penalties, separate from anything on your income tax return.
Retirement and Health Insurance Records
Two categories are easy to overlook and can meaningfully reduce your bill.
If you contributed to a SEP IRA, SIMPLE IRA, or solo 401(k), pull the contribution statements showing how much you put in during the year. For 2026, the maximum SEP IRA contribution is the lesser of 25% of compensation or $72,000.27Internal Revenue Service. SEP Contribution Limits (Including Grandfathered SARSEPs) These contributions reduce taxable income directly.
Self-employed individuals who aren’t eligible for a spouse’s or employer’s group health plan can deduct 100% of premiums paid for medical, dental, and vision coverage for themselves, their spouse, and their dependents. The plan must be established under or connected to the business.28Internal Revenue Service. Instructions for Form 7206 Gather premium statements for the year and confirmation that you weren’t eligible for an employer-subsidized plan during any month you’re claiming. The deduction is calculated on Form 7206. It reduces your adjusted gross income but does not reduce self-employment tax.
If You Owe and Cannot Pay in Full
Owing a balance is not a reason to skip filing. File the return on time to avoid the late-filing penalty of 5% of unpaid tax per month, up to 25%.29Internal Revenue Service. Failure to File Penalty Businesses owing $25,000 or less in combined tax, penalties, and interest can apply for an installment agreement directly through the IRS website.30Internal Revenue Service. Online Payment Agreement Application Larger balances require contacting the IRS to negotiate terms. Interest keeps accruing on any unpaid amount regardless of your payment arrangement, so paying as much as you can by the deadline saves money even when the full balance is out of reach.