Small Business Tax Questions and Answers

Navigating small business taxes can feel overwhelming, but understanding your options is key to optimizing your financial strategy. Whether it’s sorting out filing requirements, maximizing deductions, or keeping on top of ever-changing tax laws, the right insights can make all the difference for your business. 

Join our Raleigh CPA firm as we break down essential questions and practical tips to help you confidently manage your tax responsibilities and keep your business on a steady path to success. Get answers to your small business tax questions with the guidance of CPAs who are sharing important tax deadlines, implications, and classifications.

How Often Should I Pay My Small Business Taxes? 

Small businesses generally make estimated tax payments quarterly. The IRS requires these quarterly payments if you expect to owe more than $1,000 in taxes for the year. Federal deadlines typically fall in April, June, September, and January. Additionally, if your business has employees, payroll taxes might be due more frequently—either monthly or even semi-weekly—depending on your total deposits. 

What Important Small Business Tax Deadlines Should I Be Aware Of? 

Small business owners should be mindful of several key tax deadlines.

Federal Tax Deadlines

One of the most common small business tax questions involves important tax payment deadlines.

• Quarterly Estimated Tax Payment Dates:

  • April 15
  • June 15
  • September 15
  • January 15 (of the following year)

• Annual Tax Returns:

  • Sole Proprietors and Single-Member LLCs generally file by April 15.
  • S-Corporations usually file by March 15.

Sales and Use Taxes in NC

Businesses collecting sales tax in North Carolina typically file returns on a monthly or quarterly basis, depending on your sales volume. Check with the North Carolina Department of Revenue for your specific filing frequency and due dates.

NC Payroll Taxes

If you have employees, North Carolina requires employers to deposit payroll taxes following a schedule that might be monthly or semi-weekly. Ensure you verify your specific deposit requirements with the state guidelines.

How Can I Minimize My Federal Income Tax Liability as a Small Business Owner?

How Does My Business Structure Affect My Tax Obligations?

Understanding your business structure is key to navigating your tax obligations. The way you choose to structure your business determines how income is taxed, the filing requirements, and the deductions or credits you can claim. 

Sole Proprietorships

• Report business income and expenses on your personal tax return.
• Pay taxes at your individual rates and handle self-employment taxes.

Partnerships

• Income passes through to partners, who report their share on their personal tax returns.
• Each partner is responsible for self-employment taxes on their share.

LLCs

• Typically treated as pass-through entities with income taxed on owners' personal returns.
• Can elect to be taxed as corporations for potential tax advantages.

S-Corporations

• Income passes through to shareholders, avoiding double taxation.
• Can offer savings on self-employment taxes by allowing owners to take a reasonable salary and additional distributions.

C-Corporations

• Taxed separately at the corporate level, with dividends subject to double taxation.
• May offer benefits such as easier access to capital and enhanced liability protection.

Common Tax Deductions for Small Businesses

Understanding the deductions available to small businesses can significantly reduce your taxable income.

Ordinary and Necessary Business Expenses

These include costs incurred in the day-to-day operation of your business, such as rent, utilities, office supplies, and wages. The IRS allows deductions for expenses that are both ordinary and necessary for your trade.

Home Office Deduction

If you use part of your home exclusively for business, you may qualify for a home office deduction. This deduction can cover a portion of your mortgage or rent, utilities, and maintenance expenses based on the percentage of your home used for business.

Vehicle and Travel Expenses

Expenses related to business travel—whether for mileage, airfare, lodging, or meals—are typically deductible. Ensure you maintain detailed records to substantiate these expenses.

Under the new 2025 IRS guidelines for standard mileage rates, you can now deduct 70 cents per mile for business-related travel—a rate designed to account for increased fuel, maintenance, and overall vehicle expenses. 

Depreciation of Business Assets

The cost of business assets like equipment, machinery, and vehicles can be deducted over their useful life through depreciation. This spreads the expense out over several years, matching the asset's useful life with its deduction.

Employee Benefits and Payroll

Costs associated with providing employee benefits, such as health insurance and retirement plan contributions, are deductible. Additionally, wages and payroll taxes paid to employees qualify as deductible expenses.

Business Interest and Loan Expenses

Interest paid on business loans and certain other financial obligations is often deductible. This deduction helps offset the cost of financing your business operations or expansion.

Retirement Contributions

Contributions to qualified retirement plans, such as SEP IRAs or 401(k) plans for employees, can also be deducted, providing both a tax advantage and a benefit for your workforce.

What Expenses Are Not Eligible for Small Business Deductions? 

When determining deductible expenses, it’s important to separate business-related costs from those that are personal or otherwise ineligible.

Here’s a list of expenses that are generally not eligible for small business deductions:

• Political Contributions and Lobbying Costs: Donations or expenses related to influencing legislation are generally excluded.
• Certain Meals and Entertainment: Only a portion of business meals might be deductible, and many entertainment expenses do not qualify unless they meet strict IRS criteria.

Are There Tax Credits for Small Business Owners? 

Small business owners have access to a variety of tax credits designed to reduce their overall tax burden while encouraging specific business practices and investments. These credits can help offset costs associated with hiring, innovation, accessibility improvements, and energy efficiency, among others. 

Here’s a list of common tax credits available to small businesses:

• Disabled Access Credit: Assists in covering the costs of making your business more accessible to individuals with disabilities.
• Energy Efficiency Credits: Rewards investments in energy-efficient equipment and improvements to reduce environmental impact.

What Are the Tax Implications for Contract Employees vs Full Time Employees?

Understanding tax implications for worker tax classifications is crucial for business owners when structuring your workforce. Each classification comes with distinct responsibilities and financial impacts, affecting how you manage payroll, tax withholding, and benefits.

Contract Employees (Independent Contractors)

Tax Responsibilities

Independent contractors are responsible for paying both the employer and employee portions of Social Security and Medicare taxes through self-employment tax. This means they must handle their own quarterly estimated tax payments.

Expense Deductions

Contractors can deduct business-related expenses on their Schedule C, potentially reducing their taxable income. While this doesn’t directly impact your business, it may affect negotiations on rates and contractual terms.

Lack of Withholding and Benefits

Since taxes aren’t withheld from their payments, you won’t need to manage payroll tax deductions for them. However, this also means they don’t receive employer-sponsored benefits such as health insurance or retirement contributions, which might influence how you structure compensation.

Full-Time Employees

Automatic Withholding

For full-time employees, you are responsible for withholding federal, state, and payroll taxes directly from their paychecks. This simplifies the tax filing process for the employee but adds administrative tasks for your business.

Employer Contributions

In addition to withholding, your business must contribute to payroll taxes like Social Security and Medicare. These contributions are a mandatory cost and should be factored into your overall employee compensation strategy.

Access to Benefits

Full-time employees often receive benefits that can affect taxable income, such as health insurance and retirement plan contributions. Offering these benefits can enhance employee retention and satisfaction, but also requires careful financial planning.

How Do I Calculate My Estimated Small Business Taxes?

1. Calculating your estimated taxes begins with projecting your annual income and then subtracting allowable deductions to determine your taxable income. 
2. Once you have a rough estimate of your taxable income, apply the appropriate tax rates—including self-employment taxes if applicable—to calculate your total annual tax liability. 
3. Finally, divide this amount by the number of estimated tax payment periods (typically four for quarterly payments) to determine how much you should pay each period. 

It’s also important to account for any tax credits or adjustments you might be eligible for, and consider consulting a tax professional or using reliable tax software to ensure accuracy given the complexities of your specific situation.

Should I File My Business Taxes Myself or Hire a CPA? 

Deciding whether to file your business taxes yourself or to hire a small business CPA depends on several factors, including the complexity of your business finances, your comfort level with tax laws, and the time you can devote to managing your taxes.

Benefits of Working with our Raleigh-Durham CPAs

Partnering with a local accounting professional like C.E. Thorn, CPA, PLLC offers personalized service tailored to the unique needs of small businesses in the Raleigh-Durham area. 

Benefits of working with our small business accounting team includes: 

• Experience and Knowledge in Local Tax Regulations: Navigate complex tax scenarios with guidance from our professionals familiar with local requirements.
• Minimized Liabilities: Identify opportunities to reduce your tax burden and optimize deductions.
• Compliance Assurance: Ensure adherence to both federal and state tax requirements.
• Time Savings: Free up valuable time to focus on growing your business with professional oversight.

Contact Our Small Business Accountants in Raleigh Today

Take control of your small business finances with the guidance you deserve. Contact us now to schedule a consultation and discover how our personalized, local tax support can help your tax process, minimize liabilities, and identify opportunities for tax deductions.

Get started today by contacting the tax planning professionals at C.E. Thorn, CPA, PLLC at  919-420-0092 or by filling out the contact form below.