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Small Business Taxes Guide

Understanding your taxes can be stressful and time-consuming, especially when mistakes can present a significant financial risk to you or your business. Our years of experience mean we can notice mistakes that could negatively impact your future. We may also see opportunities and make suggestions to improve your financial situation. Stay in control and reclaim your time by working with a Padgett tax professional during the year.

Tax Preparation: A Guide for Small Business Owners

Proactively Organize Financial Documents and Business Records

Proactive organization is one of the keys to making tax season as smooth as possible for small businesses. You should carefully gather and prepare all relevant financial documents and business records. The more information you have, the better position you will be in to know—and minimize—your federal and state tax liability.

Know the Tax Deadline for Your Type of Business

You probably have the date “April 15th” in your head as the federal tax deadline. However, that is not actually the deadline for many small businesses. There are a few key tax deadlines that small business owners should be aware of. Here is an overview: 

  • January 31st: Deadline for small business employers to send W-2 forms to employees. Also, the deadline to send 1099 forms to certain independent contractors. 
  • March 15th: Taxes are due for many types of businesses, including partnerships, and S-Corporations. 
  • C-Corporations and Sole Proprietorships: Taxes are due for C-corporations and sole proprietorships. Though, there is an exception for C-corporations that use a fiscal year schedule. C-Corporations with a fiscal year-end date may have a filing deadline which is the 15th day of the fourth month, which follows their fiscal year end. Their filing due date can be in any month (including June, if their C-Corp fiscal year ends in February), and their filing deadline will always be the 15th unless the 15th falls on a holiday or weekend.

Be Ready to Consult With Tax Advisors for Small Businesses

You do not have to navigate your tax obligations alone. An experienced tax advisor for small businesses can review your situation, help gather relevant documents and records, complete and file the tax forms, and take action to ensure that your financial interests are fully protected every step of the way.

Taxes for Small Businesses FAQs

Tax rates for businesses changed significantly in 2018. At that time, the Tax Cuts and Jobs Act (TCJA) took effect. The federal law created a flat, 21 percent tax rate for all corporate income. Prior to the law, the U.S. federal corporate tax rate was between 15 and 38 percent—gradually increasing with the taxable income of the business.

As explained by the Social Security Administration (SSA), FICA stands for the Federal Insurance Contributions Act. It is a payroll tax deducted from employee wages that fund Social Security and Medicare. An employer—including a small business—is responsible for withholding the employee’s share of the FICA contribution and paying the employer’s share of this tax.

The Internal Revenue Service (IRS) explains that FUTA is the Federal Unemployment Tax Act. It is the employer who is responsible for paying this tax. Indeed, employers pay the FUTA. Small businesses that have employees must ensure that they have accounted for the FUTA.

There are a number of different tax forms that small businesses may need to file. The precise forms depend on the type and nature of your business. Some notable examples include: Form 1120 (corporate tax return), Form 1120S (S corporation tax return), Form 1065 (partnership tax return), and Schedule C (sole proprietors). Your small business may also have to file other specific federal or state tax forms based on income and expenses during the course of the year.

Estimated taxes are quarterly tax payments due on income that is not subject to traditional withholding. This includes interest, dividends, capital gains, rental income, and self-employment income. The estimated tax payments are due on the 15th of April, June, September, and January. Self-employed small business owners should pay close attention to their estimated tax obligations.

Small businesses should understand their responsibilities regarding EINs. The IRS explains that an EIN is an Employer Identification Number. Also sometimes referred to as a federal tax ID number, an Employer Identification Number is used to identify a specific company. Like an individual’s Social Security number (SSN), an EIN is nine digits long. Many small businesses must obtain an EIN to be in compliance with federal tax regulations. You should get an EIN if any of the following apply to your small business: 

  1. You operate as a corporation or a partnership; 
  2. You have at least one employee; or 
  3. Your company files an employment tax return or an excise tax return.

We encourage you to contact us with any questions.

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