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Business Tax Services

BUSINESS TAXES (OVERVIEW FROM

INTERNAL REVENUE SERVICE)

SOURCE:  https://www.irs.gov/businesses/small-businesses-self-employed/business-taxes

The form of business you operate determines what taxes you must pay and how you pay them. The following are the five general types of business taxes.

Income Tax

All businesses except partnerships must file an annual income tax return. 

Partnerships file an information return.     

The form you use depends on how your business is organized. Refer to Business Structures to find out which returns you must file based on the business entity established.

The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return. For additional information refer to Publication 583.

Estimated tax

Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. For additional information, refer to Estimated Taxes

Self-Employment Tax

Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.

Generally, you must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.

  • If your net earnings from self-employment were $400 or more.
  • If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization.

Note: There are special rules and exceptions for aliens, fishing crew members, notary public, state or local government employees, foreign government or international organization employees, etc. For additional information, refer to Self-Employment Tax.

Employment Taxes

When you have employees, you as the employer have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following:

  • Social security and Medicare taxes
  • Federal income tax withholding
  • Federal unemployment (FUTA) tax

For additional information, refer to Employment Taxes for Small Businesses.

Excise Tax

This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following.

  • Manufacture or sell certain products.
  • Operate certain kinds of businesses.
  • Use various kinds of equipment, facilities, or products.
  • Receive payment for certain services.

Form 720 - The federal excise taxes reported on Form 720, consist of several broad categories of taxes, including the following.

  • Environmental taxes.
  • Communications and air transportation taxes.
  • Fuel taxes.
  • Tax on the first retail sale of heavy trucks, trailers, and tractors.
  • Manufacturers taxes on the sale or use of a variety of different articles

Form 2290 - There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Report the tax on Form 2290. For additional information, see the instructions for Form 2290 .

Form 730 - If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Use Form 730, to figure the tax on the wagers you receive.

Form 11-C - Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering.

Excise tax has several general excise tax programs. One of the major components of the excise program is motor fuel. For additional information, refer to Excise Taxes.

Sales & Use Taxes

Sales taxes are collected by business owners who sell products to their clients.  Sales tax returns are generally due monthly.  States, counties, and localities vary on their tax rates so owners should determine with their tax accountants where their businesses have nexus, and make sure they have the required tax licenses, and that they file the required sales tax returns when due.

Use taxes are imposed on businesses who provide services and other businesses who use products for internal use in their businesses.  If businesses pay the sales tax within their own locality, and keep their purchase receipts, then they do not need to report these transactions on their annual use tax returns.  Any purchases of goods to use internally in a business, must be either paid for at the point of sale with receipts retained, or reported on the sales tax return at the wholesale pricing or the pricing of the locality (ieas) outside of the business location.  If businesses have paid for items outside of their business area, and sales tax rates are cheaper than in their business location locality, then they should pay the difference up to the sales tax rate of their locality when reporting on the sales tax return.  The same sales tax rates as used on sales tax returns will be used on use tax returns.   States, counties, and localities vary on their tax rates so owners should determine with their tax accountants where their businesses have nexus, and make sure they have the required tax licenses, and that they file the required sales tax returns when due.

Download a free sales tax table from reputed company Avalara - they update it monthly at https://www.avalara.com/taxrates/en/download-tax-tables.html and we highly recommend them as great vendors if you do a lot of sales tax reporting.

TAX COMPLIANCE

Colorado employers must register for their Colorado income tax withholding licenses at  https://www.colorado.gov/pacific/tax/register-be-withholding-submitter and their Colorado unemployment tax licenses at https://mybiz.colorado.gov/intro as soon as possible.  Other states/localities may be applied for on their websites.  I will be glad to assist with the requirements for Michigan, Florida, Pennsylvania, and other states that we and I service as well.  Get full-service payroll assistance by hiring us at Intuit PayCycle or QuickBooks Remote Payroll, or by engageing another reputable payroll provider.  

Employers must withhold employee income  taxes, social security taxes, and medicare taxes due.  These are the "trust funds" that must be deposited with the governmental authorities by the due dates, along with the employer taxes due.  Employers send Form W2 out to employees by a month following the close of the tax year.  They send a new Form 1099-NEC, Nonemployee Compensation (previously Form 1099-MISC, Line 7) for business taxpayers who pay or receive nonemployee compensation. 

Full-service Intuit Payroll Department clients get their employer/payroll taxes calculated for them during each run of payroll.  They authorize us to deduct their funds from a designated bank account on the 10th of each month for monthly taxes due on the 15th.  (Most small businesses are on a monthly payment schedule per IRS laws.  Larger clients with bigger payrolls may be required to pay more frequently.)  Intuit Payroll Department sends courtesy reminders to fund your accounts for employee paychecks and taxes about 3 days in advance of the 15th.  You might want to mark your calendars for the 10th as well to give you more advance planning.  We also prepare your quarterly and annual employer returns, crediting you with the estimated tax payments made, and file them for you by on or before the due dates.  This includes your W2s, 1099-NECs, and 1099-MISCs from our Intuit Payroll Department and our Intuit Accounts Payable Department.  Jeanine provides a courtesy annual internal audit of the payroll and accounting for full-service accounting and payroll clients at the end of each year.

The IRS released a revised Form 941Employer’s Quarterly Federal Tax Return, and its instructions to be used beginning with the second quarter of 2020 (due July 31, 2020) and containing updates to accommodate reporting of COVID-19-related employment tax credits and other relief.  

The IRS sends Letter 2800C, also called a “lock-in” letter, (see Withholding Compliance Q&As and view the Lock-In Letter Video) to instruct employers to follow a specific federal income tax withholding arrangement for an employee who doesn’t have enough income taxes withheld from their wages. The employee has 60 days from the date of the letter to discuss the determination with the IRS before the withholding arrangement takes effect. 

Jeanine can help you with your tax compliance including researching your requirements, preparing and reviewing tax returns, and representing you in IRS or state/local proceedings.  She can help with:

1) employment and payroll taxes,

2) income taxes,

3) sales & use taxes,

4) excise taxes, and

5) property taxes.

The IRS recently reminded businesses of their responsibility to file Form 8300, Report of Cash Payments Over $10,000, and encourages e-filing to help them file accurate, complete forms. A fact sheet helps businesses understand how to report large cash transactions.  Unfortunately, taxpayers who do not report cash receipts of income are technically non-compliant and could be assessed penalties and interest on these amounts if the Internal Revenue Service should happen to discover the payments in client bank accounts or as expenditures for lifestyles above the income reported on tax returns.  In a worst case scenario, taxpayers with significant consistent under-reporting of income could be prosecuted for income tax evasion (intentionally evading tax compliance liabilities).  It is better to report cash renumerations than to hide your income and it is literally the law.  Be tax compliant and pay your fair share of taxes.

Recommended readings include:  https://smallbusinessresources.wf.com/help-protect-your-business-from-email-scams/ ; levies will not be imposed on bank accounts that contain PPP funds."  Source:  Leading Tax Forward by AICPA Tax Section, February 9, 2021.  Don't forget that there are business education resources at http://www.examhttps://cp7.cpasitesolutions.com/~bctincje/BusinessEducation(MultipleProviders).phpple.com where multiple service providers offer webinars and seminars remotely at costs of free to market priced charges.  Get An Identity Protection PIN (IP PIN) (https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin).  

Jeanine is an Enrolled Agent (EA), federally licensed by the US Department of the Treasury, to represent taxpayers in Internal Revenue Service proceedings.  Her licensing required passing a 15 1/2 hour test over the US Tax Code including income taxation, employment taxation, IRS procedures, and ethics.  Jeanine completed annual multiple hours of continued professional education classes to maintain her license and improve her practice.

Businesses normally must pay estimated tax payments in addition to filing tax returns.  Jeanine can assist businesses and owners in preparing and/or reviewing the required tax returns by on or before the filing due dates.  She and her workers can calculate or assist in determining the appropriate amount of estimated taxes due by specified payment due dates.

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