Menu
Close
As an entrepreneur, you have a lot on your plate—from growing your business to managing daily operations. One crucial responsibility that often goes overlooked is filing informational returns. While these forms don’t directly determine your tax liability, they are essential for reporting business activities to the IRS and ensuring you stay compliant with tax laws.
Understanding the types of informational returns that apply to your business helps you stay on top of deadlines and avoid costly penalties.
Informational returns are forms used to report specific types of income, business transactions, or activities to the IRS. Unlike income tax returns, these forms don’t calculate tax liability, but they help the IRS verify income and expenses across different taxpayers. These filings ensure transparency in your business dealings and help guarantee that all parties properly report their earnings and deductions.
Depending on your business structure and activities, you may be required to file one or more of the following informational returns:
If your business paid $600 or more to independent contractors, freelancers, or other nonemployees for services, you must file Form 1099-NEC. This ensures that your contractors report their income correctly. The deadline to send 1099-NEC forms to both recipients and the IRS is typically January 31st.
Use Form 1099-MISC to report other types of payments, such as rent, prizes, or legal settlements, that don’t fall under the 1099-NEC category. The filing deadline varies depending on the nature of the payment and its tax implications.
If your business is a partnership or a multi-member LLC taxed as a partnership, Form 1065 must be filed. While the partnership itself doesn’t pay taxes, this form reports the business’s income and expenses. Partners receive a Schedule K-1, which details their share of profits or losses to include in their personal tax returns.
For businesses structured as partnerships or S corporations, a Schedule K-1 is issued to each partner or shareholder. It outlines their share of the business’s income, deductions, and credits, which must then be reported on their individual tax returns.
S corporations are required to file Form 1120-S to report income, losses, and shareholder distributions. Similar to partnerships, the business itself is not taxed, and instead, shareholders report their share of the income on their personal tax returns via Schedule K-1.
If you have employees, you must provide them with Form W-2, which details their earnings, Social Security and Medicare contributions, and withheld taxes. A copy must also be sent to the Social Security Administration.
Employers are required to file Form 941 quarterly to report wages paid, payroll taxes withheld, and the employer’s contributions to Social Security and Medicare.
Missing or inaccurate filing of informational returns can result in IRS penalties and potential compliance issues. These forms are also crucial for maintaining clear financial records, simplifying tax preparation, and reducing the likelihood of audits. By keeping track of filing deadlines and requirements, you can avoid unnecessary fines and make your business operations run smoothly.
As your business continues to grow, it’s essential to stay informed about the required informational returns. Whether you're paying contractors, managing payroll, or running a partnership, knowing which forms to file will save you time, reduce stress, and keep you in good standing with the IRS.
If you’re unsure which forms apply to your business, consulting with an accounting professional can help ensure you’re on the right track.
Need help with your business’s financial reporting? Let’s connect today, and together, we’ll make sure your compliance is on point for continued success.
