Being a small company owner entails overseeing both the front and back ends of your organization. Read about company owners’ tax duties here.
What you’ll discover:
What are the many sorts of taxes that my small company could have to pay?
How do I know which tax forms to fill out and submit for my company?
Then then, who doesn’t?
When and how do I pay company taxes?
Small company owners are subject to federal, state, and municipal taxes. These obligations include anything from withholding and depositing taxes on employee pay to collecting and remitting sales tax and preparing and submitting company tax reports.
Table of Contents
What are the many sorts of taxes that my small company could have to pay?
Every small enterprises must submit an income tax return. The sort of income tax return that your firm must submit is determined by the type of business that you established. C-corporations file Form 1120, S-corporations file Form 1120-S, Partnerships file Form 1065, and sole proprietors submit a Schedule C (which is filed together with the owner’s individual income tax return). A firm must submit a state income tax return in addition to a federal income tax return in most states. A Tax Preparation Checklist will help you organize your tax records and learn about tax filing dates.
If you have staff, there are several extra taxes to consider. The following are the primary payroll taxes:
Tax on Social Security.
The Medicare tax.
Unemployment insurance.
Payroll taxes are levied at the state and municipal levels.
When you recruit your first employee, you must learn how to compute and withhold payroll taxes since you must begin withholding payroll taxes the first time you run payroll. It is advised that if you are self-employed, you learn basic best practices for reporting Social Security and Medicare taxes on your self-employment income.
When you engage independent contractors for your firm, you are not usually compelled to withhold taxes from them. Nonetheless, you may be required to file a Form 1099-NEC or a Form 1099-MISC with the IRS and the contractor to record the amount you paid.
You may be obliged to collect and submit sales tax to your state or local taxation body depending on the sort of company you run. Sales tax compliance has gotten more challenging as the number of internet enterprises has grown.
Franchise tax returns are required in several states. Don’t be misled by the term; franchise tax returns are enforced on more than simply franchisors and franchisees. You may be obliged to submit a franchise tax return even if you are not affiliated with a business in your state.
How do I know which tax forms to fill out and submit for my company?
The sort of income tax return that your firm must submit is determined by the type of business that you run. The following are the several forms of business income tax returns:
Sole proprietorships must submit Schedule C. This form of income tax return is also submitted by LLCs with just one member who have not elected to file a different type of tax return with the IRS.
Form 1065 is used by partnerships to submit their tax returns.
Form 1120-S is used by S-corporations to submit their tax returns.
Form 1120 is used by C-corporations to submit their tax returns.
If your company has workers, you must complete a Form W-2 for each employee as well as a Form W-3 that summarizes your Form W-2 data. To submit your federal unemployment tax due, use Form 940. To submit federal income and FICA taxes, use Form 941 or Form 944. Companies that engage independent contractors may be required by the IRS to submit Form 1099-NEC. You may be needed to submit sales tax forms depending on your company and the state in which you operate.
Your company may be needed to submit a variety of additional less usual tax paperwork. Contact a tax expert if you need assistance completing your company tax filings or to check the tax forms that you are needed to complete.
Then then, who doesn’t?
Regardless of the sort of company you run, it is critical to keep records that substantiate your revenue and spending. Receipts, credit card and bank account statements, canceled checks, invoices, purchase orders, tax papers (such as Forms 1099-NEC and 1099-K), and sales contracts should all be kept. You should also preserve a copy of any financial documents necessary to complete your tax return, such as your profit and loss statement and balance sheet.
If you deduct automobile expenditures, keeping a complete mileage record that details all business travel, including trip dates, locations, mileages, and business objectives, might be beneficial. Similarly, keep a journal of all business lunches and entertainment to keep track of who went with you and what the meal or event was for. Keep a trip record that details the travel expenditure and the purpose of the business journey for expenses such as hotels, flights, and taxis. These sorts of documents are highly beneficial if your company taxes are ever audited.
Taxpayers are sometimes perplexed about how long they must retain their company documents. To establish how long to keep the different kinds of company and tax documents that you have, speak with your tax specialist. Certain sorts of records may require you to keep them for a longer amount of time than others.
When and how do I pay company taxes?
The due date for business income tax payments varies depending on the kind of company and whether you run on a fiscal or calendar year. The majority of firms operate on a calendar year. The income tax deadline for Schedule C filers and C-corporations is normally April 15 of each year (or the 15th day of the 4th month following the end of the fiscal year for businesses that operate on a fiscal year). The income tax deadline for partnerships and S-corporations is normally March 15 of each year (or the 15th day of the 3rd month following the end of the fiscal year for businesses that operate on a fiscal year). State income tax returns are normally due on the same day as federal returns, with a few exceptions. Consult your accountant to confirm the exact deadlines for your company. Other files, such as Form W-2, Form 1099, and unemployment reports, also have deadlines.
If you have workers, you must withhold specific amounts and submit those amounts to different taxation authorities by making tax deposits. These tax payments are often made on a monthly or semi-weekly basis. Payroll tax collection and remittance may be tricky, so contact with a tax expert to set up a deposit plan.