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Tax HelpBusiness Tax Forms | Income Tax Calendar Everybody needs tax help, or rather, tax relief. The focus of this tax help is not to get you out of trouble, but to give you tax help that will keep you out of trouble. Regardless of your business, the tax man is your business partner. It is important to recognize that up-front and understand what has to be done to make the most of an unpleasant situation. The government tells you where you can do business, how you do business, who you can hire, how much you can pay them, what transactions you must report, what information you can disclose, what liability you have, how safe the workplace should be, what taxes to collect, and the amount of profits to give them. The government, whether it is local, state, or federal, is involved with your business, and they take the issue of paying taxes seriously, and they act in a manner that demonstrates that they want you to take the issue seriously, too. But they do give you tax help if you need it. Your business is obligated to return to the government on all jurisdictional levels a portion of the revenues generated by your business enterprise. The manner (taxes and/or fees) and the amounts you are required to pay varies according to jurisdiction. Local governments collect business license fees. Some are flat rate, and some are based on a percentage of the gross revenues. Most local jurisdictions require the business to collect and and pay sales
tax on goods sold. Local departments of revenue give give you tax help,
either by phone or personal visit. Many sole proprietors are engaged in home based businesses and work out of their home. Home-based businesses are allowed to deduct a percentage of certain home costs that are attributable to that portion of the home used in the production of income. Such costs include a percentage of utilities and telephone services, mortgage expense, property taxes, etc. Also, you now may deduct 100% of your health insurance costs as a business expense. There are several home-based business deductions that can be claimed, but most self-employed individuals miss these deductions because they are unaware of them. As a sole proprietor, the IRS views your business as a pass through business entity. The IRS views you and your business as one. Therefore, any income generated by your business belongs to you, and the taxes related to your business income pass through to your personal income tax return. As a sole proprietor, you will be taxed on the profit (gross revenues minus any allowable business expense deductions ) of the business. Another tax that is unique to the sole proprietor is the self-employment tax. Since you do not get a paycheck from your sole proprietorship, the social security and Medicare taxes are not withheld. Your business partner (the government) has devised a way to make sure you pay this money by forcing you to pay what is known as self-employment tax. It is a tax on income equal to approximately15.3 percent of the first $90,000 of your reported income. This tax is reported on your individual income tax return. Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return. Your figure and report self employment (SE) tax on Schedule SE (Form 1040). But, the brains that write tax code also included a deduction for one-half of your self-employment taxes from your gross income. Don't miss this deduction; unless you to donate more of your income to the government. Since the IRS doesn't want to wait until the end of the year to get the money that rightfully belongs to them, you are required to pay taxes throughout the year on earnings. You estimate the taxes you will owe and then make quarterly payments on that amount. For more information about estimated tax see IRS Publication 505. Sole proprietors are required to report your business profits or losses on Schedule C of Form 1040. The income earned through your business is taxable to you as an individual. This is true even if you do not withdraw any money from the business. While you are required to report your gross revenues, you are also allowed to deduct business expenses incurred in generating that revenue. If your business efforts result in a loss, the loss will generally be deductible against your total income from all sources, subject to special rules relating to whether your business is considered a hobby and whether you have anything "at risk." As the business grows, employees are eventually hired, and then the issue of withholding taxes comes into play. Payroll taxes. There are several payroll taxes that business owners have to deal with. If you have employees, you are responsible for paying a variety of taxes to federal, state, and local government. The government authorities mandate that the business owner withhold certain taxes from the paychecks of the employees. Federal income tax withholding, Social Security and Medicare taxes, and Federal unemployment tax (FUTA). You generally must withhold federal income tax from wages paid to an employee. Form W-4 is used to calculate the specific amount. Social security and Medicare taxes pay for benefits that workers and families receive under the Federal Insurance Contributions Act (FICA). Social security tax pays for benefits for the retired, survivors, and disability insurance distribution provisions of FICA. Medicare tax pays for benefits under the medical care provisions of FICA. As an employer, you must withhold a percentage of these taxes from your employee and you must match the withholding amount. As a business owner, you are solely responsible for paying FUTA which is a combined federal and state program that provides unemployment compensation to the unemployed. FUTA payments are calculated using Form 940. The employee does not pay FUTA so nothing is withheld from the paycheck. Payroll taxes are deposited with the IRS through your bank. The IRS requires most banks to act as depositories. Check with your tax professional to make sure you are not required to use the Electronic Federal Tax Payment System (EFTPS). Regardless of the payment method, you will then report them on Form 941, the Employer’s Quarterly Federal Tax Return To deposit the taxes, you forward money per the bank specifications. You will also need to file a Federal Tax Deposit Coupon, Form 8109, with the deposit. The IRS typically sends these forms to you at the beginning of each calendar year. If you don’t receive any, you can download the form from the IRS site or ask your tax professional. You must deposit employment taxes either once or twice a month. The IRS will send you a schedule at the end of each year for the subsequent year. File within a few days of each pay period. Collecting employment taxes is serious business to the IRS. Since the taxes include money deducted from an employee’s paycheck, the IRS views an employer’s non-payment as a form of theft. If you fail to pay, you can expect the IRS to come down hard on your business and, potentially, shut it down. Paying taxes is a pain, but pay them. The other option is a lot worse. For additional individual income tax forms go to online tax forms.For additional business income tax forms go to Federal Income Tax forms.
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