As a small business owner, it is sometimes difficult to wrap your mind around all of your federal and state obligations. Our sister product, TaxBandits, was created to help your business understand it is IRS tax filing needs. We want to share some helpful advice for navigating the small business landscape during the year-end-tax-season. Here is TaxBandits guide to understanding your small business tax obligations.
Understanding Your Small Business Tax Obligations
1. When Do My Tax Obligations Start?
You might assume that your tax obligations start once your small business starts making a profit, but that is not necessarily true. Every small business is different. If you have employees or independent contractors, you will need to file and pay employment tax and file Form 941, the Employer’s Quarterly reporting. Likewise, if you own and operate a retail business, you will need to handle sales tax on your products.
2. Does my Business Structure Affect Tax Obligations?
The legal structure of your small business affects your tax situation more than you realize. For examples, an LLC(Limited Liability Company) is a corporate structure in which the owner(s) cannot be held personally liable for the liabilities of the business. Regarding tax purposes, this means that LLCs are taxed separately from the owner(s).
At the state level, your small business will also encounter several critical obligations such as sales tax, income tax, property tax, unemployment tax and more. If you are unsure about your state and federal tax obligations the Small Business Administration can offer information and help specifically for your business type.
3. Are Employment Taxes Separate From Payroll Taxes?
This is an excellent question! If you own and operate a business with employees you, the employer, are responsible for withholding federal income tax, Social Security tax, and Medicare tax from each employee’s salary. You will also use this amount to calculate the required employer’s portion of Medicare and Social Security tax. Both of these amounts must be filed quarterly with the IRS via Form 941.
If your small business operates within a US Territory, you will need to file a Form 941-SS or 941-PR based on your location. Additionally, you will need a 94x PIN, online signature, provided by the IRS to e-file any 94x Series Forms. This PIN gives you the business owner authorization to e-sign any from within the 94x Series.
4. Employees Vs. Independent Contractors
It is critical to your small business to fully understand the difference between an independent contractor and an employee. If an employee is mistakenly paid as a contractor, you will be held liable for back taxes and fines. Small businesses must file IRS Form 1099-MISC for all independent contractors.
Your Small Business IRS E-Filing Solution
Most small businesses would like one convenient location to handle all of their tax filing needs. Luckily, Taxbandits offers 94x Series, W-2, 990 Forms, ACA filing, 1099 series, and so much more!
Quickly take care of your quarterly and annual tax obligations online using our sister products, TaxBandits. Thousands of business owners already trust our parent company’s tax products as an IRS-authorized integrated solution for generating and transmitting tax forms. If you need to e-file any small business IRS tax forms, TaxBandits provides you with a step-by-step, interview-style process with built-in error checking. Sign-up for a free account and see how easy it is to file the tax forms for your small business.