7 Common Small Business Tax Questions Owners Are Asking

As laws change and your business develops, you need to proactively stay on top of your tax obligations. Whether you’re a new entrepreneur or a seasoned business owner, tax season always brings business tax questions to mind. 

To help make things easier, we’ve compiled answers to the most common business tax questions owners are asking.

1. What documents do I need to file taxes for my small business?

As a small business owner, the most important action you can take to be ready for tax time is to maintain accurate financial records. Small business owners generally must report their income on their individual income tax return, making sure that all business income and expenses are accurately reflected.  

Keep meticulous records of all income, cost of goods sold, expenses, fixed assets and loans relevant to the current tax year. Accuracy and detail are key.

Working with a qualified bookkeeper or accountant trained to categorize and track this information in alignment with tax laws can help make business tax time a breeze.

2. What business expenses are tax deductible?

The IRS states that business-related expenses must be “ordinary and necessary” to be tax deductible. Here’s a list of common types of small business tax deductions:

• Advertising and marketing
• Business insurance
• Continuing education and training
• Depreciation of assets
• Legal and professional fees
• Meals with clients or employees
• Office supplies
• Phone and internet
• Rent and/or home office
• Software, app and portal subscriptions
• Travel expenses, including meals
• Vehicle and/or mileage for business use

An accountant can help you navigate the nuances of tax law related to education, meals and vehicle expenses.

3. Are business meals 100% tax deductible?

While business meals are deductible, there are certain criteria that determine what and how much is deductible. When filing your 2025 taxes, follow these rules:

• Client and business meals are 50% deductible. This includes meals with customers, vendors, consultants and other business associates, as well as business travel meals and meals at business meetings with external parties.
• On-site employee meals are 50% deductible. This includes meals during meetings, training sessions or overtime work, as well as breakroom snacks, coffee and refreshments that qualify as de minimis fringe benefits.
• Company-wide events and public-facing meals are 100% deductible. This includes holiday parties, team picnics and social gatherings, as well as meals provided at events open to the public, such as seminars.

For deductions to apply, qualifying meals require an owner or employee of the business to be present, and the meal must be consumed with a business contact. As with all business qualifying expenses, the IRS requires the expense to be "ordinary and necessary," and the meal may not be "lavish or extravagant."

Note: Beginning in 2026, on-site employee meals will no longer be deductible. Client meals and company-wide events will continue to follow the same rules.

4. Am I eligible for a home office deduction?

Post-pandemic, many small business owners now work from a home office. Business use of your home is tax deductible if you meet the IRS requirements. For example, you must show that there’s dedicated home office space used as your principal place of business. Storage of inventory may qualify for a deduction, too. 

Any deductions for home office use must be accurately reported on your personal income tax returns to ensure compliance with IRS regulations. Your tax accountant can help you determine if you qualify and the best method for taking advantage of the home office deduction.

5. What tax forms do I need based on my business type?

Filing the right business tax forms is key to staying compliant with the IRS. It all starts with understanding your business structure.

Employers are also responsible for withholding and remitting federal income tax for their employees, ensuring compliance with federal tax obligations. If you have employees, you’ll need these additional forms throughout the year: 

• Form 941 quarterly for payroll taxes
• Form 940 annually for unemployment tax
• W-2s for full-time and part-time employees 
• 1099s for independent contractors who were paid more than $600 

Working with a tax professional can help ensure you’re filing the correct forms at the right time.

6. Should I make quarterly estimated tax payments?

The IRS requires most small business owners to make quarterly estimated tax payments if they expect to owe $1,000 or more when their return is filed at the end of the year. Your business structure also determines how much in taxes you can expect to pay.

The best approach to estimating how much to pay depends upon the predictability of your income throughout the year and your overall financial picture. 

Not paying or underpaying your estimated taxes on time can be costly. The penalties increase not just with time, but in the amount you'll owe as well. 

The 2026 deadlines for estimated tax payments are: 

• First quarter: April 15, 2026
• Second quarter: June 15, 2026
• Third quarter: September 15, 2026
• Fourth quarter: January 15, 2027

7. My business lost money this year. Is there a tax break?

If your business expenses are higher than your income for the tax year, you might have a Net Operating Loss (NOL). And while losses are worrisome, this common situation can sometimes work in your favor come tax time:

• You can use losses to offset income in other tax years.
• You can carry losses forward to reduce future tax bills.
• You might be able to use business losses to offset other income sources.

These rules can help your business recover from tough years by reducing your tax burden in better years. NOLs can be carried forward indefinitely (no expiration), but they’re limited to 80% of your taxable income in any given year. With the expiration of the CARES Act (2020-2023), NOLs no longer can be carried backward to previous tax years. 

Get expert answers to your business tax questions

Navigating business taxes doesn’t have to be overwhelming. By understanding your tax obligations, tracking your expenses carefully and staying on top of important deadlines, you can approach tax season with confidence. 

As you prepare for tax season, remember that Navy Federal Credit Union is here to help you manage your business finances effectively throughout the tax year and beyond. Find out more about our business solutions and products, including loans, credit cards and resources for Veteran entrepreneurs.