Tuesday, March 26, 2024

How To Pay Business Taxes

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The Impact Of Your Business Structure

How to Pay Taxes on Your Small Business

The IRS states that your business structure will affect how to pay small business taxes and the forms youll need to submit:

Sole proprietorship In a sole proprietorship, youre the only owner of the business. Its the simplest structure. You dont have to file a separate tax return for your business. You handle everything through your individual tax return, and all the income passes directly to you. When you prepare your individual tax return, youll include a Schedule C form, which calculates your net profit or loss from the sole proprietorship.

Partnership A partnership is similar to a sole proprietorship except it has more than one owner. The business income still passes through to the owners. You divide it up according to ownership percentages set during your original partnership agreement. While the partnership itself doesnt pay business tax, youll have to file an extra informational return, Form 1065, which lists the total income, deductions, net profit and how it was divided between the partners.

Corporation Corporations have the most complicated system for how to pay small business taxes because the income is taxed twice. First, every year your business will need to fill out its own tax return, and will owe corporate income tax on any profits.

After that, you and the other owners decide whether you want to pay out any of the after-tax profits to yourselves, as a dividend. Youll have to report this dividend income on your personal tax return as well.

Coronavirus Tax Relief For Self

Coronavirus Aid, Relief, and Economic Security Act permits self-employed individuals making estimated tax payments to defer the payment of 50% of the social security tax on net earnings from self-employment imposed for the period beginning on March 27, 2020 and ending December 31, 2020. This means that 50% of the social security tax imposed on net earnings from self-employment earned during the period beginning on March 27, 2020, and ending December 31, 2020, is not used to calculate the installments of estimated tax due. Please refer to Publication 505, Tax Withholding and Estimated TaxPDF, for additional information.

When To Pay Estimated Taxes

For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you dont pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.

If a payment is mailed, the date of the U.S. postmark is the date of payment. If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that isnt a Saturday, Sunday or holiday.

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Paying For Tax Preparation

Paying for tax preparation can be divided easily between your business tax form and your personal tax return. Ask your tax preparer to divide your bill into two parts: one part for the preparation of the business tax form, and one part for the preparation of your Form 1040.

Then pay the bill for the business tax form with your business account or card. Self-employment taxes are considered a personal expense, so you shouldn’t pay those with your business account.

What Are Estimated Taxes

Writing Note Showing Pay Taxes. Business Photo Showcasing Amount of ...

If you earn or receive income that isn’t subject to federal withholding taxes throughout the year — side hustle earnings or income from a rental property, for example — you’ll pay as you go with estimated taxes. Estimated tax is a quarterly payment based on your income for the period. Essentially, estimated tax allows you to prepay a portion of your income tax every few months to avoid paying a lump sum when your tax return is due.

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Documents For Your Tax Return

As you prepare for your small business tax return, here are some of the documents you may need to put everything together.

Gross receipts, invoices and all other sales records Youll need this information to calculate your total income for the year.

Inventory records, for the cost of goods sold If your business bought raw materials and inventory before selling the final product to customers, keep the purchase records so you can deduct the cost of goods sold.

Bank and credit card statements With this information, you can identify your income and business deductions throughout the year.

Business expense receipts To identify all your deductions, it helps to have the actual receipts. Keep track of business expenses like travel, equipment, office supplies, insurance, repairs, advertising, professional fees and rent.

Depreciation schedules For long-term business assets that apply for depreciation, you should record when you bought each asset and at what cost, whether you sold any of them, and the amount of personal use for an asset . This information is used to calculate your depreciation deduction.

Payroll documents Youll need to confirm how much you paid in wages to employees and contractors, as well as the taxes you paid on their behalf. You can do so through their W-2s, their 1099s, Form 940 and Form 941.

Previous tax returns If youve submitted tax returns for your business in the past, you can use that old information as a guide to prepare this years return.

What If I Don’t Pay My Estimated Taxes

It’s a good idea to post a calendar reminder as the quarterly deadline approaches to avoid paying a late penalty. You may be charged a penalty if:

  • You owe more than $1,000 in taxes after subtracting withholdings and credits.
  • You paid less than 90% of the tax for the current year through estimated taxes.

The penalty could be waived in some situations. If you want to delve further into estimated tax penalties and conditions of a waiver, see the instructions in IRS form 2210.

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Do I Also Have To Pay Estimated State Taxes

It depends. If you live in one of the few US states with no income tax, your responsibility ends with the estimated federal taxes we’ve discussed. However, if your state does levy income taxes, you will make estimated tax payments using the same deadlines as for federal taxes. Visit your state’s department of revenue website or consult your tax adviser or tax software service for more personalized information.

Common Taxes For Small Business Owners

How Do Small Businesses Pay Taxes?

Income tax Youll owe income tax on your earnings from running the business, both on your salary and on any profits. Depending on the structure, your business itself may need to file a separate tax return and pay its own income taxes before the profits can go to you personally.

Self-employment tax Self-employment taxes pay for Social Security and Medicare. Typically, employers will cover half of this tax, and employees will cover the other half. But when youre self-employed, you need to cover the entire share yourself.

Employment taxes If you have any employees, youll be paying several taxes on their behalf. Youll pay part of their Social Security and Medicare taxes, as well as federal unemployment tax. Youre also supposed to withhold part of their paychecks to cover their estimated taxes, which they calculated using Form W-4 when you first hired them.

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How To Figure Estimated Tax

Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES, to figure estimated tax. Nonresident aliens use Form 1040-ES to figure estimated tax.

To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.

When figuring your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for the prior year as a starting point. Use your prior year’s federal tax return as a guide. You can use the worksheet in Form 1040-ES to figure your estimated tax. You need to estimate the amount of income you expect to earn for the year. If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter. You want to estimate your income as accurately as you can to avoid penalties.

You must make adjustments both for changes in your own situation and for recent changes in the tax law.

Corporations generally use Form 1120-W, to figure estimated tax.

Who Has To Pay Estimated Taxes

If you filled out the IRS W-4 form, which provides directions for your employer about how much to withhold from each paycheck, you might not need to pay estimated taxes. If you aren’t a W-4 salaried employee, however, you probably need to keep estimated tax payments on your radar. According to the IRS, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when your return is filed, and if your employment type falls into one of these categories:

  • Independent contractor or freelancer

There are other sources of income that fall under the estimated tax umbrella, including:

  • Dividends and interest earned from investment sales
  • Royalties for past work
  • Social Security benefits, if you have other sources of income
  • Prizes and awards

You may also need to pay estimated tax as a full-time employee if your employer isn’t withholding enough from your salary. To update your W-4 with the correct withholding amount, use the IRS Tax WIthholding Estimator tool, complete a new W-4, Employee’s Withholding Allowance Certificate form and submit it to your employer.

Estimated taxes are due, regardless of whether you’re paid by direct deposit, check or digital payment services like PayPal, CashApp, Zelle or Venmo. Note: While you should be paying taxes on that income already, a new rule under the American Rescue Plan requires third-party payment networks to report $600 or more payments to the IRS.

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Pay County And Municipal Real And Personal Property Taxes

The Maryland Department of Assessments and Taxation values real and personal property owned by businesses, and then certifies those assessments to local governments. Some Maryland counties and towns collect real and personal property tax based on those values.

Remember, a business that owns or leases personal property, or maintains a traders license with a unit of local government, is required to file a Personal Property Tax Return. For more information on how to file, visit the Maintain Good Standing Status page.

If a property is owned by a charitable or educational organization and is used for the charitable or educational purpose, that property may qualify for a property tax exemption under the statute of law as stated in Tax Property Article 7-202. To apply for a property tax exemption, please complete this application.

Completing And Filing Your Business Tax Return

Forms and Instructions

Most small business owners pay taxes on their company’s income through their personal tax returns Corporations must pay tax on business income through a corporate tax returnForm 1120.

  • A single-owner business reports business income on Schedule C.
  • A partner in an S corporation, a partner in a partnership, or a member of a multiple-member LLC reports their share of business income on Schedule K-1.
  • Corporate owners who receive dividends should complete Schedule B showing the dividends they received.
  • S corporation owners may also receive income as an employee. This income is reported on a W-2 form and included on the owner’s tax return.

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Where To Pay County Taxes

Washington County Trustee Rick Storey said property owners can view and pay their 2022 tax bills by going online at washingtoncountytn.org and clicking on Pay Property Taxes under the drop down menu of the How Do I icon located at the top right of the home page. County property taxes can be paid at the trustees offices at the Washington County Courthouse in downtown Jonesborough, and 378 Marketplace Blvd., Suite 1, Johnson City. Those offices are open weekdays from 8:30 a.m. to 4:30 p.m.

County taxes can also be paid at the following Bank of Tennessee branches:

501 E Jackson Blvd., Jonesborough

1328 W. State of Franklin Road, Johnson City

112 E. Mountcastle Drive, Johnson City

100 Med Tech Parkway, Johnson City

402 Roy Martin Road, Gray.

Residents paying taxes at Bank of Tennessee locations must provide their tax notice to ensure it is properly processed. The bank will accept check or cash only.

Credit card payments will be accepted via tnpayments.com or by phone at 1-855-777-3468. When paying by credit card, a convenience fee of 2.65% plus $1 will apply. Also, e-check is acceptable on the website with a fee of 1.75% plus $1.

The county does not profit from any of these charges.

Washington Countys property tax rate this year remains unchanged at $2.15 for every $100 of assessed value.

How Do I Calculate My Estimated Taxes

There are a few ways to calculate your quarterly tax payments depending on your business model and annual earnings.

  • If you earn a steady income, estimate the tax you’ll owe for the year and send one-fourth to the IRS each quarter. For instance, let’s say you’ll earn $80,000, which places you in the 22% marginal tax bracket. You’ll owe $17,600 in federal taxes or $4,400 each quarter in 2022.
  • If your income varies throughout the year, you can estimate your tax burden based on your income and deductions in the previous quarter. The IRS Estimated Tax Worksheet can help you do the math.

If you’ve overestimated your earnings at the end of the year, you can complete a 1040-ES form to receive a refund or apply your overpayment to future quarterly taxes. If you underpaid, the form can help you calculate what you still owe.

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How New Irs Rules Could Affect Venmo Etsy And Cashapp Users

Some users of digital wallets and e-commerce platforms must start reporting small transactions, sowing fears among small-business owners.

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By Alan Rappeport

WASHINGTON This year, Dennis Turbeville, a woodworker in Washington, used the mobile payment service Venmo to sell his wares, collect payments on a rental property and split personal expenses with family and friends.

He carefully tracks income for his business, Austen Morris Custom Furniture, with QuickBooks software and works with an accountant to make sure everything he owes to the federal government is paid correctly.

But Mr. Turbeville is concerned that a recent tax change intended to crack down on tax evasion by small businesses and those operating in the gig economy will mean more paperwork and headaches from the Internal Revenue Service. He is hopeful that if there are any unintended discrepancies, his business will be too small to attract an audit.

A tweak to the tax code enacted last year was intended to ensure that those who use services such as Venmo, CashApp, Etsy, StubHub and Airbnb to collect money are reporting all their income to the I.R.S. The change was part of the Biden administrations efforts to narrow the $7 trillion tax gap between revenue that is owed and revenue that is collected.

Emily Cochrane contributed reporting.

Payment Methods And Fees

How to Pay Business Taxes 2020

Electronic Bank Draft

You will need your routing number and checking or savings account number. There will be a .50 cent handling fee to use this service. Please allow 3-4 business days for E-Check transactions to apply to your tax account. Please note that your payment will be postmarked the date you submitted the payment, unless your payment is scheduled for a future date.

Note: Make sure that your bank authorized ACH withdrawals from your account before using this service. A rejected ACH withdrawal could result in additional fees.

Debit & Credit Card

The Department accepts MasterCard, Discover, Visa, and American Express. Debit cards are accepted and processed as credit cards. Please allow 5-6 business days for debit and credit card transactions to apply to your tax account. Please note that your payment will be postmarked the date you submit payment. There will be a convenience fee of 2.0% + $0.25 per card transaction, regardless of amount

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How Do I Pay My Estimated Taxes

When filing your estimated taxes, use the 1040-ES IRS tax form, or the 1120-W form if you’re filing as a corporation. You can fill out the form manually with the help of the included worksheets, or you can rely on your favorite tax software or tax adviser to walk you through the process and get the job done. From there, you can pay your federal taxes by mail or online through the IRS website. You’ll also find a complete list of accepted payment methods and options, including installment plans.

Corporate Tax Rates In The Netherlands

If you own a private limited company or public limited company , you will have to file returns for corporate income tax in the Netherlands on behalf of your company . Foundations, charities, and associations only have to file returns for corporate tax in the Netherlands in specific situations. You may be exempt, depending on your profit levels. Read more about filing your corporation tax return. Check out the corporate tax rates in the Netherlands on government.nl.

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