Working for yourself means handling more than just clients and sales; it also involves managing your own taxes. Unlike W-2 employees, business owners are responsible for tracking their income and expenses, choosing the right tax structure and making quarterly estimated tax payments in addition to filing an annual return.
For many solopreneurs and small business owners, these moving parts can make tax season feel challenging. H&R Block, the CNET Editor’s Choice for best tax software overall, offers tax tools that help you simplify tax filing and reduce the risk of errors.
How business structure affects your tax strategy
How your small business is taxed depends on its structure, since each one has different rules for reporting income and paying taxes. For example, a sole proprietor or single-member LLC typically reports business income on Schedule C as part of their personal tax return.
Partnerships and certain LLCs file tax returns (Forms 1065 and 1120-S, respectively) but generally don’t pay taxes on their income. Instead, they issue Schedule K-1 forms that show each owner’s share of the business income and the owners report this income on their individual returns. S corporations allow owners to pay themselves a salary and take additional income from the company as tax-free distributions, while C corporations file their own corporate return.
These differences affect more than just which forms are filed. They also influence whether you need to make quarterly estimated tax payments and how your profits are taxed. Choosing a business structure isn’t just about minimizing taxes in the short term; it also determines how complex your return will be and how closely the IRS may review your compensation, deductions and recordkeeping.
Do LLC owners need to file quarterly taxes?
If you expect to owe taxes for the year based on your business activity, it’s likely you’ll need to file quarterly taxes to stay compliant and avoid potential underpayment penalties.
H&R Block works with small business owners across a range of business structures, offering support from trained tax professionals who understand how different entities are taxed and how those rules apply.
Why income reporting is becoming more complicated
Many small businesses and solopreneurs earn money from multiple sources. Client payments, online sales and occasional transactions can all show up during the year, making your income harder to track and report accurately.
If you sell goods online or receive payments through third-party platforms, you may get a 1099-K showing your gross sales. But that income still has to be reported even if you don’t receive a tax form. And money earned from side projects and hobby sales still counts as taxable income in most cases.
How that income is classified also matters. Income treated as business income may qualify for certain deductions, while casual or hobby income is usually more limited in what can be deducted. Misreporting income is one of the most common reasons for IRS notices and audits. Capturing all of your income and understanding how different types of earnings are taxed can help minimize that risk.
H&R Block’s tools guide business owners through income reporting and make it easy to import common tax forms. For those who need extra help, H&R Block’s paid tiers include trained tax professionals who can provide guidance on newer reporting rules and emerging income categories.
Why separating your personal and business expenses matters
Deductions are a key way to lower your taxable income, but only if you have accurate records of your business expenses. The IRS generally allows deductions for expenses that are ordinary and necessary for running a business, so what qualifies depends on the type of work you do.
When personal and business expenses are mixed together, it becomes harder to support deductions and easier to make mistakes. Clear records make it easier to identify which costs are deductible and to report them correctly at tax time.
Good expense tracking also makes filing easier. Instead of sorting through receipts at the last minute, organized records provide a clearer picture of your business finances and reduce the risk of missing deductions or overstating expenses.
H&R Block provides multiple options for managing expenses alongside tax preparation. Its bookkeeping and payroll services can help small businesses streamline recordkeeping and prepare more complete financial information before filing.
Choosing the right level of tax help
If you’re comparing tax services based on price alone, you’re only seeing part of the picture, since cost depends heavily on how complex a return is. A business with one income stream and few expenses may have very different needs than a company with multiple employees, inventory or owners.
Access to trained professionals can also help reduce uncertainty and avoid costly mistakes. H&R Block offers tiered options that range from do-it-yourself filing to working directly with a tax professional. Its network includes CPAs, enrolled agents and other tax pros with specialized knowledge of small business taxes.
Rather than forcing business owners into a single model, H&R Block’s approach allows them to choose the level of support that fits their situation, while still keeping everything within one system.
The bottom line
Small business taxes involve important decisions about business structure, income reporting, expense tracking and timing, all of which affect compliance and cash flow. Handling those pieces separately can make taxes harder than they need to be. A more integrated approach helps business owners stay organized, reduce errors and understand their financial picture more clearly.
H&R Block provides multiple ways for small business owners and solopreneurs to manage their taxes, from digital tools to professional preparation and year-round services. By connecting filing, expenses and expert support in one place, it offers a flexible system that adapts to different business needs while helping owners stay prepared throughout the year.
