Do I have to file a separate tax return for my business in 2025-2026?
- Rebecca Tabert, CPA
- Aug 1
- 8 min read
Running a business and confused about taxes? Here’s how to know if you need to file a separate return for 2025–2026 and what it means for you.
Business taxes can feel confusing, especially when you are unsure whether your business needs its own tax return or if it all goes on your personal one. The answer depends on how your business is set up some businesses file their own returns, while others report their income and expenses on the owner’s personal return. Knowing the difference is crucial for meeting deadlines, avoiding penalties, and staying in good standing with the IRS. With updated rules and deadlines for 2025–2026, now is the perfect time to understand how business tax filing really works.
What Is a Business Tax Return and How Does It Differ From a Personal Return?
A business tax return reports the income, expenses, and other financial information for your business. It determines how much tax the business owes or how much profit passes through to you as the owner. Unlike a personal tax return (Form 1040), which focuses on your individual income, a business return focuses on the finances of your business as its own entity.
Here’s how they differ:
Personal tax return (Form 1040): Reports wages, investments, and other personal income. Sole proprietors and single-member LLCs also report business activity here using Schedule C.
Business tax return: Filed separately for corporations, S corporations, and partnerships. Examples include:
C Corporations: File Form 1120.
S Corporations: File Form 1120-S.
Partnerships & Multi-member LLCs: File Form 1065.
For 2025–2026, these forms remain standard, but the IRS may adjust supporting schedules, especially for entities claiming credits or reporting digital assets. Understanding which form applies to you is the first step toward filing correctly.
Who Needs to File a Separate Business Tax Return in 2025–2026?
Whether you need a separate business return depends on your business structure. The IRS treats different entities in very different ways:
Sole Proprietors & Single-Member LLCs:
Short Answer: → No separate return. Report income and expenses on Schedule C with your personal Form 1040.
Longer Answer: You do not file a separate return. Instead, your business income and expenses are reported on your personal return using Schedule C (attached to Form 1040). For California Single-Member LLCs, you will need to file a Schedule C and a Form 568 with the state.
Partnerships & Multi-Member LLCs:
Short Answer: → Yes. File Form 1065 and provide Schedule K-1s to partners.
Longer Answer: You must file a separate business return using Form 1065. The partnership itself does not pay tax. Instead, it issues Schedule K-1s to each partner, showing their share of income or loss.
S Corporations:
Short Answer: → Yes. File Form 1120-S and issue Schedule K-1s to shareholders.
Longer Answer: You file a separate return using Form 1120-S. Like partnerships, income passes through to shareholders via Schedule K-1s.
C Corporations:
Short Answer: → Yes. File Form 1120. The corporation pays its own taxes.
Longer Answer: You file a separate return using Form 1120. Unlike other entities, C corporations pay their own corporate income tax directly.
Why this matters in 2025–2026:
The IRS continues to require digital asset reporting for businesses that sell or exchange cryptocurrencies or other digital assets.
Some states are adopting pass-through entity tax (PTET) elections, changing how owners report and pay their share of business income.
If you are unsure which category you fall into, checking how your business is registered with your state and the IRS can help clarify your filing requirements.
What Goes on a Business Tax Return, and How Do Pass-Through Entities Affect My Taxes?
A business tax return is more than just a list of profits. It is a detailed report of your company’s financial activity for the year.
This includes:
Income: All revenue from sales, services, or other sources.
Expenses: Operating costs like rent, payroll, supplies, insurance, and utilities.
Deductions & Credits: Tax-saving opportunities such as Section 179 (equipment), R&D credits, or energy efficiency incentives.
Balance Sheets & Schedules: For certain entities, assets, liabilities, and shareholder/member information are also required.
Pass-Through Entities Explained:
Pass-through entities (sole proprietorships, partnerships, S corporations, and some LLCs) do not pay federal income tax at the business level.
Instead, profits (or losses) “pass through” to the owners, who report them on their personal tax returns.
These owners often receive a Schedule K-1, which details their share of the business’s income or loss.
Why this matters:
Pass-through income may qualify for the Qualified Business Income (QBI) deduction, which can reduce taxable income by up to 20%.
For 2025–2026, the IRS has added new reporting requirements for digital assets and updated schedules for certain credits (like energy-related credits).
Understanding what goes on your business return is essential because mistakes, such as misreporting income or forgetting a required schedule, can lead to audits or penalties.
When Are Business Tax Returns Due for 2025–2026?
Business tax deadlines depend on your entity type. Missing these can lead to costly penalties, so it is important to mark them clearly:
2025 Deadlines (for 2024 tax year):
Partnerships & S Corporations: March 17, 2025 (normally March 15, but extended because the 15th falls on a weekend)
C Corporations & Sole Proprietors (Schedule C): April 15, 2025
Extensions:
Partnerships & S Corporations: Extended deadline September 15, 2025
C Corporations & Sole Proprietors: Extended deadline October 15, 2025
2026 Deadlines (for 2025 tax year):
Partnerships & S Corporations: March 16, 2026
C Corporations & Sole Proprietors (Schedule C): April 15, 2026
Extensions:
Partnerships & S Corporations: Extended deadline September 15, 2026
C Corporations & Sole Proprietors: Extended deadline October 15, 2026
Important notes:
If your business operates in multiple states, state deadlines may differ.
If your business deals with digital assets, watch for additional reporting requirements with your 2025–2026 filings.
Filing an extension gives you more time to file the return, not more time to pay any taxes owed.
How Do You Prepare and File a Business Tax Return?
1. Gather financial records:
Collect all income records, expense receipts, bank statements, payroll reports, and prior-year tax returns.
Ensure your books are up to date. Consider using accounting software or working with a bookkeeper.
2. Confirm your business classification:
Double-check whether you are a sole proprietor, partnership, S corporation, C corporation, or LLC.
Your entity type determines which IRS form you must file.
3. Prepare the correct forms:
Schedule C (sole proprietors and single-member LLCs)
Form 1065 (partnerships and multi-member LLCs)
Form 1120-S (S corporations)
Form 1120 (C corporations)
4. Review deductions and credits:
Identify eligible deductions (operating expenses, depreciation, etc.).
Check for updated credits (e.g., research & development, energy efficiency).
5. File your return:
File electronically for faster processing and confirmation.
If mailing, use certified mail or a reliable courier to ensure delivery.
6. Keep copies of everything:
Store copies of your return and supporting documents for at least 3–7 years in case of audit or future reference.
Pro tip: Even if you use tax software, a CPA can help maximize deductions and ensure compliance with IRS and state regulations, especially with the 2025–2026 updates.
Common Myths About Business Tax Returns
Myth: If my business did not make a profit, I do not need to file.
Reality: Even if you operated at a loss, most entities are still required to file a return. In fact, reporting losses can benefit you by carrying them forward or offsetting other income.
Myth: My LLC is separate from me, so it always files its own return.
Reality: Single-member LLCs are typically treated as disregarded entities, meaning their income is reported on your personal return using Schedule C. Only multi-member LLCs file a separate return.
Myth: Filing an extension gives me more time to pay my taxes.
Reality: An extension only gives you more time to submit your paperwork, not more time to pay. Any unpaid taxes start accruing interest and penalties after the original deadline.
Myth: I can mix personal and business expenses as long as I track them.
Reality: Commingling funds can create tax and legal problems. Always keep business finances separate from personal to maintain accurate records and avoid IRS issues.
Myth: Small businesses do not get audited.
Reality: Small businesses are often scrutinized by the IRS, especially for cash-based industries or those claiming large deductions. Keeping accurate records reduces audit risk.
(FAQ) Frequently asked questions about Business Tax Returns for 2025–2026
Question: Do I need an EIN to file a business tax return?
Answer: Not always. Sole proprietors without employees can use their Social Security number. Partnerships, corporations, and LLCs with employees need an EIN.
Question: Can I file my personal and business taxes together?
Answer: It depends on your entity type. Sole proprietors and single-member LLCs report business income on their personal return (Schedule C). Partnerships, corporations, and S corporations must file separate business returns.
Question: What happens if I miss the business tax filing deadline?
Answer: You may face late-filing penalties, interest on unpaid taxes, and potential state-level penalties. The longer the delay, the higher the cost.
Question: Do I still need to file if my business did not make money?
Answer: Yes. Even with zero income or a loss, most entities are still required to file an informational or tax return.
Question: Can I deduct the cost of hiring a CPA or tax preparer?
Answer: Yes. Professional tax preparation fees are deductible as a business expense, making them a valuable investment in compliance and accuracy.
Question: How do I file a business tax return if my company uses cryptocurrency?
Answer: Businesses that buy, sell, or hold cryptocurrency must report these transactions. The IRS requires detailed reporting of digital asset transactions for 2025–2026. Please make sure to consult an experienced and qualified tax professional to ensure you are reporting it correctly.
Question: Do I need to file business taxes in multiple states?
Answer: If you operate or earn income in more than one state, you may need to file separate state returns. Rules vary by state, so check each state’s tax agency.
Question: Can I switch my business from a Schedule C filer to an LLC or corporation for tax purposes?
Answer: Yes, but the process involves registering your new entity with your state and updating your IRS classification. It may change your filing requirements and deadlines.
More Reading
Final Thoughts
Filing business taxes can feel overwhelming, but knowing whether your business needs its own return, and which forms and deadlines apply, makes the process far more manageable. Your filing requirements depend on your entity type, how your business is structured, and whether you operate in multiple states or deal with digital assets. As 2025–2026 deadlines approach, staying organized and consulting with a qualified tax professional can help you avoid penalties, maximize deductions, and keep your business compliant.
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