If you are a new business we understand that wrapping your mind around all of your tax obligations can be challenging. ExpressTaxFilings is here to help your business understand its IRS tax filings needs. We want to share some helpful advice for navigating the business tax landscape; because we believe that when you succeed, we succeed.
You might assume that your tax obligations start once your business starts making a profit, well not necessarily. Every business is different. If you have employees, you will need to file and pay employment tax and file Form 941, the Employer’s Quarterly report. Likewise, if you operate a retail store, you will need to deal with sales tax on your products. So to help you understand the obligations that may impact your business here is a quick overview.
1. Understanding Your Business Structure
How your business is legally structured will affect your tax situation more than you may realize. An LLC ( Limited Liability Company) is a corporate structure in which the owner or owners can not be held personally liable for the debts or liabilities of the business. For tax purposes, this means that an LLC is taxed separately from the owner. Although sole proprietors are the exclusive owner of their business, so they keep all profits after taxes and they report both their personal and business income tax on Form 1040. However, they are liable for all losses. So it is important to understand the different business structures and find the structure that best fits your business.
At the state level, you will also encounter several important tax obligations such as sales tax, income tax, property tax, unemployment tax and more. If you have any questions, the Small Business Administration can offer information based on your business structure and help determine your tax obligations for both federal and state.
2. Estimate Tax
If you are new to owning a business this one can be easy to overlook because in the past all of your income taxes were withheld before you receive your paycheck. As a self-employed business owner, you must quarterly estimate and file your federal and state income taxes to the IRS. It is imperative that you set aside enough to meet the estimated amount or you could risk late payments resulting in penalties or risk a cash flow problem.
To avoid any issues keep good records of your expenses and income. If is easy to throw your receipts into a box or folder but organized record keeping will help save time and money.
3. Employment Tax
If you start a business with employees you, the employer, will need to withhold federal income tax, social security tax, and Medicare tax from each employee’s salary. You will also be required to match your employee’s Medicare and social security tax. Both of these amounts will need to be filed quarterly with the IRS on Form 941.
If you are considering a new employee check out our previous blogs, What is the True Cost of Paying an Employee and What You Need to Complete Form 941.
4. Sales Tax
Does sales tax apply to your business? Sales tax pertains to most retail products (rarely any services). If your business has a physical location such as an office, store or warehouse, you will be required to apply for a sales tax permit. So you will be able to collect appropriate state and local sales tax from your customers. The sales tax collected will then be passed on to the state revenue office on either a quarterly or monthly basis.
Keep in mind! Some states are exempt including Hawaii, Montana, Oregon, Alaska, Delaware, and New Hampshire.
We at ExpressTaxFilings hope you found this blog interesting and informative. Please share this blog and comment down below to suggest any future topics or share any personal experience starting a business. As always we at ExpressTaxFilings take pride in being IRS-authorized to provide you with a safe, secure and accurate e-filing process that will save you time and money.
If you have any questions about e-filing your Form 941 or other tax forms with ExpressTaxFilings, we are available by phone, live chat, and email. Our expert US-based support team is here to help and will be happy to answer any question you may have about e-filing.