| So you've recently started your business, filed for | | | | If you are operating as an employer, there is |
| an EIN (Employer Identification Number), perhaps | | | | some very important information you must |
| you've even opened your business bank account, | | | | remember. Previously, because you were working |
| now what? If you're like many new entrepreneurs | | | | for someone else as a traditional employee, that |
| of today who have transitioned from working a | | | | business was responsible for withholding and |
| traditional job, you may be feeling a little lost. | | | | submitting your federal income taxes, state and |
| You might be asking yourself questions like: | | | | local income taxes, FICA, and Medicare taxes. |
| • Am I responsible for paying quarterly | | | | Being your own boss now, you are responsible |
| taxes? | | | | for paying those taxes. In most cases, the best |
| • What is the amount I should send to the | | | | way to handle paying any Federal or State taxes |
| IRS every quarter? | | | | you may owe, is to file quarterly estimated taxes. |
| • What about FICA, Medicare, and State | | | | Unfortunately, what many entrepreneurs don't |
| taxes? | | | | know is that not every new business is required |
| • If I hire help, am I supposed to withhold | | | | to file and pay quarterly taxes to the IRS. |
| taxes from their payroll? | | | | Quarterly estimated taxes are owed against |
| Answers to these questions and many more can | | | | profits of the business. The key word here is |
| be quite confusing to a new business owner. As a | | | | 'profit.' Often times, after you complete your |
| tax professional who has been helping people and | | | | annual tax return (see above) and have legally |
| small business owners for the past 20 years, I | | | | claimed your business tax deductions and claimed |
| cannot tell you how many times I have | | | | any tax credits you are entitled to, you may end |
| encountered these types of questions and my | | | | up with a loss and therefore Federal or State |
| clients were quite relieved to have me as their | | | | taxes will be due. In a case like this, you would |
| tax partner to educate them about their new tax | | | | not be penalized for having NOT paid your |
| responsibilities. I am hoping that after you read | | | | estimated taxes and may even end up with a |
| this article, you will feel that this information | | | | refund being owed to you. It can sometimes be |
| helped you to prevent possible problems that | | | | hard to foresee this outcome so many small |
| may arise down the road. | | | | business owners play it safe and pay their |
| Once you file for an EIN, the IRS now recognizes | | | | quarterly taxes anyway. |
| your business and they expect you to be | | | | Some business owners will ask how much should |
| compliant and file appropriate tax returns. But | | | | they pay? I usually suggest roughly 25% of their |
| what are the appropriate tax returns might you | | | | gross revenue earned for the previous three |
| ask? That all depends on what type of business | | | | months. This way, when you do file your annual |
| you started. | | | | tax returns, if you do owe a balance, because |
| • If you started a sole proprietorship, or LLC, | | | | you have been paying something every quarter, it |
| you file a Schedule C along with your Federal | | | | will help you having to pay a large amount all at |
| form 1040. | | | | one time.. The same type of approach can be |
| • If you started a Partnership, you file Federal | | | | applied to your State taxes. You can arrange to |
| form 1065 for the business and you still file your | | | | pay your resident State every quarter. You |
| Federal form 1040 for your personal return. | | | | should check with your respective State to |
| • If you started an S Corporation, your | | | | determine what your State tax % is. FICA and |
| business files Federal form 1120-S along with a | | | | Medicare are paid when you file your annual tax |
| Schedule K-1 and information from the K-1 gets | | | | return. |
| transferred into your Federal form 1040. | | | | That's the next topic I want to briefly discuss -- |
| • If you started a C-Corporation, you | | | | employees of the business -- including you. Many |
| business files Federal form 1120 and you still file | | | | times I have come across small business owners |
| your Federal form 1040 for your personal return. | | | | who were operating as employers and were not |
| • If you are an employer and hire employees | | | | aware that they were required to file Quarterly |
| to work for you, or even if you own a | | | | Employer Tax Returns and pay any employer |
| Corporation and employee yourself, you are | | | | taxes owed on wages paid. One time a client who |
| required to file Employer's Quarterly Tax Returns | | | | owned a beauty salon that was incorporated |
| and Employer's Annual Tax Return. As an | | | | even asked me "you mean, I have to file |
| employer, you are also required to issue a W-2 to | | | | Quarterly Employer Tax Returns and a Business |
| your employees. If you're working with | | | | Tax Return for the corporation, and my personal |
| independent contractors and you pay them $600 | | | | tax return?" My reply... YES!! She was so confused |
| or more for the year, you are expected to issue | | | | and could not understand why she was required |
| them a 1099-MISC. | | | | to file all of these different types of returns |
| • If your business is required to collect sales | | | | because she was only one person. |
| taxes against the sales you make, you are | | | | So keep in mind that regardless of which business |
| required to file Quarterly Sales Tax Returns. | | | | return you are required to file as determined by |
| (Check with your State to see if you're supposed | | | | your business structure, you are still responsible |
| to collect sales taxes on the services or products | | | | for filing an individual 1040. |
| you are selling.) | | | | |