How often does a small business have to pay taxes?

How often does a small business have to pay taxes?

While businesses are only required to file an income tax return once a year, there are several other factors to consider when discussing business taxes. One of these is the due date of the business’s tax return which is dependent upon the structure of the business. Others include additional tax filing obligations that businesses encounter such as estimated taxes and payroll taxes.

Payroll Taxes

Any business with employees is required to withhold and report payroll taxes periodically throughout the year. How often these need to be reported to the government depends on the amount of the business’s total payroll. Higher total payroll obligations must report, and deposit withheld money more frequently than those with a lower total payroll. Businesses must file an Employer’s Quarterly Federal Tax Return (Form 941) along with each deposit. The deposits themselves can be made online through the Electronic Federal Tax Payment System (EFTPS) or can be mailed in.

Estimated Taxes

For businesses that show a profit, they may be required to file estimated taxes based on the profits earned in previous quarters. These payments are then applied to the tax liability of the business at the end of the year. When these estimated taxes need to be filed depends on the structure of the business. Sole proprietors are required to file estimated taxes quarterly on January 15, April 15, June 15, and September 15. Corporations file their estimated taxes on the 15th day of the fourth, sixth, ninth, and twelfth month of their fiscal year.

Return Due Date

Depending upon the structure of a business, its taxes may be due on a different date than others. The taxes for a sole proprietorship are due on April 15 like those of individuals. Partnerships that operate on a fiscal calendar mimicking the calendar year must also file by April 15. However, if the fiscal year ends at any other time, that partnerships’ taxes are due on the 15th day of the fourth month after the end of their fiscal year. Corporations have a similar structure with those following the calendar year due by March 15 while others are due by the 15th day of the third month after the close of their fiscal year.

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How do taxes work for a small business?

How do taxes work for a small business?

Owning a business is a dream that many people share. When you are going to be a business owner, it is important to understand all of the expenses that your company will incur. One cost that a lot of business owners do not always think about is their taxes. There are a variety of different taxes that a business may need to pay.

Income Taxes

Similar to individuals, all business owners also need to pay taxes. The way taxes are paid is based on the way the company is legally structured. Businesses that are organized as single-person LLCs or sole proprietorships and S-corporations will pay their business income taxes through their personal income tax returns. Those that have more complex structures, including multi-owner LLCs and other partnerships, will pay taxes through a business tax return. The tax paid is based on the net income of the company and the underlying tax rate.

Payroll Taxes

All business owners are also obligated to pay payroll taxes. If you have people that work for you, it will be required that you pay FICA and FUTA taxes on a quarterly basis. These taxes can be significant as they will end up costing more than 7.5% of your payroll. You also are obligated to withhold a similar tax from your employee’s paycheck and remit it to the IRS.

Sales Taxes

Depending on the state that you operate in, you may have to pay a sales tax as well. Most of the time, sales taxes are passed directly to the customer. However, you are going to have to retain this tax revenue and remit it to the local taxing authority.

Real Estate Taxes

Many businesses see the value in owning their own real estate. If you do own real estate as opposed to renting, you will also have to pay real estate taxes to your local county. If you have a mortgage on the property, the monthly payments may be escrowed.

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Do you need to register your small business?

Do you need to register your small business?

Starting a small business is an exciting experience. After weeks, months, or even years of planning, you are finally getting to see your dream become a reality. But amid all the anticipation, it is important to take care of the legal side of the process. The first question you should ask yourself is whether your small business needs to be registered. In most cases, the answer to that question is yes.

The registration of small businesses takes place at the state level, and different states will have slightly different rules regarding what types of businesses have to register. There are some basic parameters, however, that apply to most states.

One-person operations are usually not required to be registered with the state. These businesses are deemed inseparable from their owners (that is to say, the business and the owner are one and the same entity). In some states, the same can be said for partnerships.

If a business is larger or has its own fictional name, then it must be registered with the state. This is also true for corporations, limited liability companies, or limited liability partnerships.

So what exactly does registration entail? Typically, a state will require documentation of the business’s official name, as well as its location and the names of its principal operators. Some states charge a processing fee for the registration.

While registration always occurs at the state level, there are also some municipalities and counties that also require small businesses to register with them. Be sure to check with local authorities to find out if your business requires further registration.

With your mind on the founding of your new small business, having to register with the government may seem an annoying task. At the end of the day, however, it is not an especially complicated process, and its completion ensures you are starting your career in business on the right side of the law.

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Why does your lender want a Form 4506-T from you?

Why does your lender want a Form 4506-T from you?

In the simplest terms, it’s a form that lenders use to verify you filed a tax return and confirm the income you reported on your mortgage application. On the other hand, it can also prove that you didn’t file a tax return. It sounds simple enough. If you have a job that provides you with a Form W-2 every year, then you may not need to file one at all. Rather than request the Form 4506-T from you, the lender may just call your payroll office or send an employment confirmation form to your employer to confirm your work there and how much you make, but it may be a more complicated process.

It starts to get tricky and annoying if you don’t have a regular 9 to 5 job. Then the lender can get real picky about the information you provide. Are you self-employed? For how long? Did you give the lender copies of your tax returns? How do they know the tax returns are legitimate? That’s where the Form 4506-T comes in handy for them. What if you don’t work at all and your retired or disabled and don’t have a filing requirement, then the Form 4506-T is used to prove you didn’t file a tax return.

A problem that has developed over the years is the fraudulent use of the Form 4506-T by scammers and others to access personal information from the I.R.S. To counter this the I.R.S. now only sends the information to the taxpayer themselves. That doesn’t do the lender any good if they want direct access to the report. Then they have to contract with an organization that can access the data directly.

Why would lenders and the I.R.S. put such a burden on innocent taxpayers merely trying to buy a property you might ask. It is to stop scams & the kind of reckless lending standards before the financial crisis when lenders and borrowers were in a free for all arrangement and not verifying information at all in some cases.

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Is a tax return transcript the same as a tax return?

Is a tax return transcript the same as a tax return?

When you’re applying for a mortgage, auto or business loan, you’ll be asked for a variety of documents to prove your income. The lenders will typically ask for your credit history, information on your debt, recent paystubs, legal documents like divorce decrees and your tax information. It’s important to understand the difference between your federal tax return and your tax transcript.

Knowing The Difference Between Your Tax Return And Tax Transcript

You should already be familiar with tax returns. Each year, you file a tax return to determine whether you owe taxes to the government, or if the Internal Revenue Service must submit a refund to you. It’s a process that every working person in the United States goes through. The information on a tax return is detailed. It shows your income, deductions and tax credits. There are sometimes additional forms that need to be filled out in conjunction with your tax return for certain deductions. While your tax return contains valuable information for lenders, it’s not always easy to get a clear picture of your income.

A basic tax transcript clearly shows your line items such as your adjusted gross income. Something to note is that if you make a mistake on your tax filing and have to adjust it, the original tax transcript will not show any update to your taxes. You can request a tax account transcript that shows your income information plus your marital status, return type, and taxable income. There is also a combination of both of these tax transcripts available called a record of transcript.

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