Business Taxes - What to Pay, When to Panic, and How to Deduct Snacks 💸

AMS Digital
May 27
14 min read

If You're a Business Owner - Congrats, and Welcome to Tax Season, Forever

So you’ve officially started a business. You filed the paperwork, named your company something clever (or deeply regrettable), maybe even designed a logo that screams “we’re serious.”

Now buckle up, because with great ambition comes great responsibility - like paying taxes.

That’s right. You’ve unlocked the elite-level privilege of navigating one of the most ancient and unavoidable rites of entrepreneurship: the small business tax maze. It’s a lot like dating in your 30s - confusing, filled with paperwork, and no one really tells you the rules.

But here’s the good news: once you understand the basics, taxes stop being the financial boogeyman hiding in your inbox. You can keep Uncle Sam happy, stay penalty-free, and even save money if you know what you’re doing.

Let’s break down what taxes businesses actually pay - with real examples, practical insights, and just enough sarcasm to keep you reading.

🧾 What Taxes Do Businesses Actually Pay?

Think of business taxes as a buffet where you didn't choose the menu - but you still have to eat everything on the plate. The types of taxes you pay depend on how your business is structured and what it does, but here are the usual suspects:

💰 Income Tax

The big one. This is the tax on the profits your business makes. How you pay it depends on your structure:

Sole Proprietors and Single-Member LLCs: Your business income gets reported on your personal return using Schedule C. If your side hustle suddenly turned into a six-figure operation, so does your tax bill.

Partnerships: The partnership itself doesn’t pay income tax. Instead, it passes income down to the partners who report it on their individual returns.

S Corporations: Similar to partnerships - profits pass through to shareholders.

C Corporations: The only structure where the business pays its own taxes. It files a separate tax return and pays corporate income tax on its profits - which may sound fancy, but also opens the door to double taxation if you pay yourself dividends.

📌 Example: If you run a small coffee roasting business as an LLC, you’ll pay taxes on the net profit (revenue minus expenses) on your personal return. So if you made $60,000 after expenses, that’s what you report. The espresso machine doesn’t count unless you live inside it.

🧓 Self-Employment Tax

If you're self-employed, you’re both the boss and the employee - which means you’re responsible for both halves of Social Security and Medicare.

That’s 15.3% right off the top.
12.4% for Social Security, 2.9% for Medicare.
If you earn more than $200K (or $250K married), there's an extra 0.9% Medicare tax just for being successful. Yay?

📌 Example: If you’re a freelance designer who made $90,000 this year, you'll owe about $13,770 in self-employment tax - before you even whisper the word “income tax.”

👥 Payroll Taxes

If you have employees (real ones - not just your dog in a tie for your company Instagram), you’ll need to withhold and pay payroll taxes:

Social Security & Medicare - Your business pays half, and your employee pays the other half.
Federal Unemployment Tax (FUTA) and State Unemployment Tax (SUTA) - Yep, more acronyms. You fund unemployment insurance programs.
You also need to file IRS Form 941 quarterly - or risk a strongly worded letter in all caps.

📌 Example: If you pay an employee $4,000/month, expect to pay an additional $300-$500/month in payroll taxes on your end. HR software can help you sleep at night.

🛍️ Sales Tax

If you sell products (or some services, depending on the state), you need to:

Collect sales tax from customers at the time of sale.
Remit it to your state - it’s not your money to keep, no matter how tempting.
Sales tax rules vary wildly by state, so your handmade soap business might owe tax in one place but not another.

📌 Example: Sell a $20 candle in New York? You collect 8.875% in sales tax. That’s $1.78 that you must send to the state - not spend on more glitter.

⛽ Excise Tax

This one's more niche, but if you deal in gasoline, alcohol, airline tickets, or tanning salons (yes, seriously), the federal government wants its cut - through excise tax.

📌 Example: If you operate a distillery and sell whiskey, you pay a federal excise tax per gallon produced. So, every sip your customers take comes with a side of IRS.

In Short...

Business taxes can feel like a financial horror movie - but they’re totally manageable once you know the cast of characters. And the earlier you understand what your business owes, the better you can plan, deduct, and avoid the yearly panic Googling “Can I write off my stress?”

📅 When Do You Pay?

And Why Does It Feel Like There’s Always a Deadline Looming?

Running a business means getting used to the constant feeling that taxes are either due, almost due, or terrifyingly overdue. The IRS has more calendar events than your in-laws' family group chat - and you’re expected to RSVP with cash.

Let’s break it down so you don’t end up sobbing into a pile of receipts on April 14 while whispering “TurboTax” like it’s a safe word.

⏳ Quarterly Estimated Taxes - Because Once a Year Is Just Too Chill

If you expect to owe $1,000 or more in income tax for the year - which is almost every legit business owner - the IRS wants you to pay as you go.

Not “go” like after the year ends. Now. Throughout the year. On a schedule.

Here’s your cheat sheet:

1st Quarter: April 15
2nd Quarter: June 15
3rd Quarter: September 15
4th Quarter: January 15 of the next year

Yes, you read that right - your “4th quarter” tax for 2025 is due before your hangover from New Year’s is gone. Nothing screams “Happy New Year” like writing a check to the government.

📌 Example: You’re a solo web developer and expect to earn $80,000 in 2025. Based on your projected tax liability, your accountant tells you to pay $4,000 quarterly. You’d send $4K on each of those dates to stay in the IRS’s good graces.

🗂️ Annual Tax Returns - The Grand Finale

Your tax return is the big yearly wrap-up where you tell the IRS everything you made, spent, owed, and wish you could forget. Depending on how your business is structured, the due dates differ:

🧍‍♂️ Sole Proprietors & Single-Member LLCs:

File your business income on Schedule C, which gets attached to your personal tax return (Form 1040).
Due: April 15

📌 Translation: You and your business are the same in the eyes of the IRS - emotionally and financially.

👥 Partnerships & Multi-Member LLCs:

File Form 1065 (partnership return).
Also issue Schedule K-1 to each partner so they can report their share.
Due: March 15

📌 Translation: You need to be done early so your partners can do their taxes. Yes, you’re now the group project leader.

🧾 S Corporations:

File Form 1120-S.
Also issue K-1s to shareholders.
Due: March 15

📌 Translation: Same early deadline as partnerships. IRS loves a March 15 surprise party, apparently.

🏛️ C Corporations:

File Form 1120.
Due: April 15 - unless your business uses a non-calendar fiscal year, in which case it’s the 15th day of the 4th month after your year ends.

📌 Translation: Big corporations get the big deadline, but they also get more complicated tax forms - and usually, more lawyers.

😬 What Happens If You Miss a Deadline?

Two words: penalties and interest.

The IRS doesn’t take tardiness lightly. Miss your quarterly payment or annual return and you’ll get hit with:

Late filing penalties
Late payment penalties
Interest on unpaid taxes
Possibly a strongly worded letter printed in ALL CAPS

It’s not cute. Even if your spreadsheet has emojis.

🛟 Missed the Deadline? Enter: Extensions

If you're not ready to file your annual return, don’t panic - just don’t ghost the IRS either. That’s where extensions come in... but we’ll get to that next.

Because an extension is like telling the IRS, “I still love you, I just need more time.” And they’re cool with that - as long as you still pay what you owe.

Let me know when you're ready to tackle extensions next - and we’ll dive into how to file, what it does (and doesn’t) do, and how not to misuse it like a get-out-of-jail-free card.

🕰️ What’s an Extension and Is It a Trap?

Ah, the tax extension - also known as the “I’m not emotionally ready to deal with this yet” form.

Let’s clear something up right now: A tax extension gives you more time to file, but NOT more time to pay. Read that again. Tattoo it on your calendar. Whisper it to yourself at 11:59 p.m. on April 14.

If you owe money, that payment is still due on the regular deadline - even if the paperwork isn’t. The IRS is flexible about forms, not funds.

📝 What Exactly Is a Tax Extension?

For most businesses, you file IRS Form 7004, which buys you an additional 6 months to get your act together and submit your full return.

Sole props and single-member LLCs who file with personal taxes use Form 4868
Partnerships, corporations, and S corps use Form 7004
It takes about 3 minutes to file online - less time than it takes to microwave leftover pizza

📌 Example: Your partnership return is due March 15, but your bookkeeper is on vacation and you’re still trying to figure out what counts as a deductible meal. File Form 7004, and you get until September 15 to file the full return.

🧮 But What About the Money?

That’s the twist. You still have to pay what you think you’ll owe by the original deadline. This is why it's called an extension to file, not an extension to pay.

So how do you pay if you haven’t done the full return yet?

Simple - you guesstimate based on last year or current income trends. Yes, it’s slightly terrifying. But it’s better than triggering a late-payment penalty avalanche.

📌 Real-life scenario: You think your S Corp will owe about $12,000 in taxes. You file Form 7004 and send in a $12,000 estimated payment by March 15. If you were close, great. If not, the IRS may charge a little interest on the difference - but it's way better than not paying anything.

🚨 What Happens If You File the Extension But Don’t Pay?

Two things:

The IRS laughs quietly
You get hit with penalties - usually 0.5% per month of the unpaid tax, up to 25%, plus interest.

That’s the trap. Filing an extension doesn’t make your bill disappear - it just hits snooze on the paperwork. The money is still due, and if you ignore it, it gets exponentially more painful.

🤓 Who Should Actually Use an Extension?

Businesses waiting on key tax documents (like K-1s or 1099s)
Freelancers whose bookkeeping is more “vibes” than spreadsheets
Anyone who started organizing receipts two days before the deadline
You, if your accountant said “trust me, we need more time”

✅ Filing an Extension Isn’t Failure - It’s Strategy

There’s no shame in using an extension. It's not procrastination if you're doing it correctly. The IRS doesn’t care why you’re not ready - they just want to know you intend to file and that you paid your taxes on time.

Think of it as filing for a raincheck - with money.

Next up: let’s dive into what actually counts as a business expense, and which things the IRS will absolutely laugh at if you try to write them off. Spoiler: You can't deduct your Peloton just because it clears your head for meetings. Ready?

🧠 What Counts as a Business Expense and What Doesn’t?

Ah yes - the magical land of business write-offs. This is where dreams are made, taxes are lowered, and innocent laptops are claimed as “mission-critical equipment” because you once checked your email on vacation.

But before you start deducting everything from kombucha to your cat’s dental surgery, let’s talk about what actually qualifies as a legitimate business expense.

✅ First, the Two Golden Rules of Deductibility:

According to the IRS, a business expense must be:

Ordinary - Something that’s common and accepted in your line of work
Necessary - Something that is helpful and appropriate for your business (but doesn’t have to be absolutely essential)

That’s it. The bar is surprisingly low - but vague enough to inspire some truly bold deduction attempts.

📌 Example: If you're a freelance video editor, Adobe Premiere and noise-canceling headphones are ordinary and necessary. A $2,000 espresso machine with LED lights? Maybe not - unless you’re editing 12 hours a day and it’s keeping your clients alive.

📋 Common Deductible Business Expenses a.k.a. The Good Stuff

These are the tried-and-true deductions that won’t get you side-eyed by the IRS (as long as you keep receipts).

Office Supplies - Pens, notebooks, sticky notes, printer ink, highlighters you never use but buy anyway - all fair game.
Software & Subscriptions - Think QuickBooks, Canva Pro, Adobe Creative Cloud, Notion, Dropbox - even Zoom Pro if you actually use it and not just to panic-log into the wrong link.
Marketing & Advertising - This includes social media ads, your website hosting, email marketing tools, even that one TikTok creator who made your business semi-famous.
Business Meals - 50% deductible if you’re discussing actual business. No, brunch with your friend who “might open a café someday” doesn’t count.
Home Office - If you have a dedicated space in your home used exclusively for business, you can deduct a portion of rent, utilities, and internet. And no, your couch doesn’t count - even if you send invoices from it.
Phone & Internet - If you use your cell phone or internet for business, you can deduct the business-use portion. Estimate it reasonably - don’t say “100% business use” unless your TikTok is entirely spreadsheets.
Education & Training - Courses, certifications, workshops, and books that improve your skills or keep you current in your industry are deductible. That crochet-for-cats workshop? Probably not - unless you're starting a feline fashion brand.
Professional Services - Lawyers, accountants, marketing consultants, business coaches, even that one tech guy who shows up once a year to fix your Wi-Fi and eat your snacks.

🚫 What Doesn’t Count Even If You Wrote It on a Sticky Note?

Now for the heartbreakers - the expenses people try to deduct every year that don’t make the IRS laugh, they make it audit.

Personal Vacations - Even if you packed a laptop. Unless you held a business meeting in the Bahamas and have an agenda, it’s a nope.
Clothing - Unless it’s a branded uniform or required safety gear. Your dry-cleaned blazer for “looking professional” does not count - nor does your $600 Gucci belt of confidence.
Fines & Penalties - Late fees, traffic tickets, parking violations while doing deliveries - all off-limits. The IRS doesn’t reward rebellion.
Over-the-Top Client Gifts - You can deduct up to $25 per person. That’s it. You can spend more, but only $25 is deductible. So that $200 bottle of Dom Perignon you gave your real estate partner? Beautiful gesture. Terrible tax move.
Groceries (Probably) - Unless you’re a food stylist, private chef, or running a food blog with content creation to prove it, groceries for your home fridge are just... groceries.

🤓 Pro Tip: Document, Justify, and Don’t Push Your Luck

The IRS doesn’t have time to sort through vibes. They want documentation. So keep receipts, label them, and store them in a folder or cloud drive. And if you're stretching the definition of “business use,” be ready to explain why your ring light was critical to filing Schedule C.

📌 Best Practice: Every time you buy something for your business, ask: “Would I feel comfortable explaining this deduction to someone in a government-issued suit?”

If the answer is yes - deduct with confidence. If the answer is “I hope they don’t ask,” maybe don’t.

📊 Pro Tips for Keeping It Together

How Not to Have a Breakdown During Tax Season

Running a business without keeping organized records is like cooking spaghetti blindfolded - something will probably boil over, and there will definitely be a mess.

So how do you stay on top of taxes, deductions, receipts, and expenses without screaming into a pile of crumpled W-2s?

You build systems. You act like the IRS might show up tomorrow - and you don’t wait until April to remember you spent $1,273 on “something business-ish” back in July.

Here’s how to keep your tax life together without needing therapy... or at least, without needing more of it.

✅ Track EVERYTHING

No, not “most things.” Not “the big ones.” We mean everything.

Every Uber to a client meeting, every Canva Pro subscription, every last-minute office supply Target run - if it’s business-related, track it. Don’t rely on your memory. Your brain thinks you spent $20 on snacks last month. Your credit card says it was $238 and included a small blender.

Use tools, not sticky notes.

QuickBooks
Wave
FreshBooks
Excel or Google Sheets (if you're brave and love manual data entry)
Even Notion if you’re a techy perfectionist with too much time

📌 Bonus Tip: Link your business bank account and credit card to your accounting software and categorize transactions weekly. Future you will be so grateful.

💳 Separate Your Accounts

This one’s non-negotiable: don’t mix personal and business finances. Ever. Not even once “just for now.”

Why? Because the IRS frowns deeply upon financial mingling. If your business checking account also pays for your dog’s chew toys, it becomes hard to prove what was truly deductible.

You need:

A dedicated business checking account
A business credit card (even if it’s just a separate personal card you only use for business at first)
No more “Oops, I used the wrong card” moments

📌 Example: Buying printer ink? Business card. Buying margarita mix? Personal card. Easy.

🧾 Save Receipts Like a Tax Prep Dragon

The IRS doesn’t care about your intentions - they care about documentation. And no, a fuzzy memory and a screenshot from your bank app don’t count.

Keep paper receipts in folders if you’re old-school
Or use apps like Shoeboxed, Expensify, or even Google Drive
Snap a picture the moment you get it. Name it. Date it. Move on.

📌 Pro move: Create folders by month or by category. That way, you’re not frantically digging through your inbox searching for “weird PayPal charge from last June.”

The IRS generally wants you to keep documentation for 3 years, but 7 years if you're being extra cautious or filing anything weird like claiming a loss.

🧠 Hire a Pro (Seriously)

Unless your idea of self-care is reading tax code by candlelight, consider hiring an accountant or bookkeeper.

They don’t just plug in numbers - they:

Help you maximize your deductions
Warn you if something you’re doing is tax-illegal
Catch things you’d never notice (like that sneaky $500 duplicate expense)
Can save you thousands in mistakes, fines, or “oops I forgot to file that” fees

📌 When to hire a pro:

If you make more than $50K per year
If you have employees
If you have inventory or complex business assets
If the phrase “Form 1065” makes your eye twitch

Don’t think of it as an expense - think of it as preventive financial medicine. It’s cheaper than panic-filing your taxes while whispering “TurboTax help me” at 3 a.m.

🏁 Final Thought

You're Officially Smarter Than Most People in April

Let’s be honest - taxes are never going to be the highlight of your entrepreneurial journey. No one starts a business and says, “You know what I’m really excited about? Quarterly estimated payments.”

But here’s the truth: once you understand the basics, get your systems in place, and accept that the IRS will always send you mail in all caps, tax season becomes manageable. Maybe even mildly satisfying.

Think of it this way - staying on top of your business taxes is like doing financial yoga. A little uncomfortable at first, but it makes you flexible, focused, and way less likely to pull something when April rolls around.

With smart planning, solid tracking habits, and a few professional allies in your corner, you can:

Deduct what you deserve
Avoid surprise penalties
Sleep soundly knowing your receipts are organized
And maybe even file early like a business wizard

💡 And One Last Shameless But Helpful Plug

If the words “marketing expense” and “write-off” ever cross paths in your life - AMS Digital is here for you.

We help businesses grow through smart digital marketing strategies that not only boost your revenue but also give you legitimate, trackable expenses that your accountant will high-five you for.