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Forms for Business Taxes |
There are 4 types of forms you'll have to fill out. I've broken each type
into sections on this page:
Income |
Self-employment | Employment |
Excise. Of these four, only the first two are currently of concern to me.
Income Tax
No getting around it, every business with sales of $400.00 or more fills out income tax forms.
Who is everyone?
| Sole Proprietor (Schedule C); |
| Partnership (Form 1065); |
|
C-Corporation(1120); |
|
S-Corporation(1120S); |
|
Limited Liability Company (filing depends on choices). |
At the end of the year, W2s must be sent to employees and 1099s to any subcontractor to whom you pay more than $599.00.
What forms for Income Tax?
| Sole Proprietor- 1040 + Schedule C (or C) |
| Partner in a Partnership (Individuals) - 1040 and Schedule E (various other Schedules may be needed) and a 1065 (annual return of income) |
| Corporation- 1120 (or 1120-A) or S Corporation - 1120S |
| S Corporation Shareholder - 1040 and Schedule E |
What's this Estimated Tax Stuff?
Generally, we pay taxes on income, including self-employment tax by making regular payments of estimated tax during the year. If you as an individual are going to owe more than $1000 or as a corporation $500, you gotta do these estimates.
If the bulk of your income has come from wages, you were actually paying your taxes on a pay-as-you-go plan. When people get income that has not been taxed, they are required to pay estimates to both Federal and State governments on 1/15, 4/15. 6/15, and 9/15 of each year.
Here is what to fill out and make the correct deposits for before you send in your return:
| Sole Proprietor- 1040-ES (Estimated Tax for Individuals) |
| Partner in a Partnership (Individuals) -
1040-ES
(Estimated Tax for Individuals) |
| Corporation- 1120-W |
| S Corporation Shareholder - 1040-ES (Estimated Tax for Individuals) |
Self-employment tax (SE tax)
Self-employment 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. You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies:
| Your net earnings from self-employment were $400 or more | ||||||
| You had church employees income of $108.28 or more. How did they come up
with that figure?
|
|
|
I asked my Mom to give a more complete
explanation of this SE rebate: IRS permits an Adjustment of 50% of your Social Security and Medicare Tax to be taken against your Gross Income before reaching Adjusted Gross Income. |
You and I as taxpayers get to take half our Social Security & Medicare taxes (against our Schedule C profit) off the bottom of the front of the 1040. That is called an "Adjustment". Other Adjustments are: Deductible IRAs, Medical insurance paid by someone in business, alimony paid out, moving expenses, and a few other things. They come right "off the front" which means the front of the 1040. Why is that good? Because the lowest right hand number on the bottom of the 1040 is Adjusted Gross Income (AGI). AGI is used to calculate a lot of other things, including many states' taxes. Ohio starts with the Federal AGI. |
|
Employment taxes
If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. An independent contractor is someone who is self-employed. Generally, you do not have to withhold taxes for an independent contractor. A true independent contractor is like a plumber who works by contract in their own time, with their own tools, and in a method of their own choosing. A plumber trains himself. (An employee is trained by the employer). A plumber may hire someone else to do the work at your house. A plumber is liable for his work and the liability follows after he leaves. When an employee is fired, the liability for the work remains (usually) with the employer.
If you aren't sure whether or not you have employees, read the section called IC vs. Employee on this site. I'm going to be using ICs in my business so I will only briefly mention:
Employment taxes include the following:
| Social security and Medicare taxes - Form 941 |
| Federal income tax witholding - Form 941 |
| Federal unemployment (FUTA) tax - Form 940 |
| Depositing employment taxes - Form 8109 |
Mom says:
The IRS send employers a booklet of coupons: twelve 8109s. By the fifteenth of each month, the employer is to deposit the employee's withheld federal Income Tax and the Employees and employer's halves of FICA (Social Security and Medicare).
There are much tighter rules for larger employers.
The IRS is trying very hard to get every employer to now make these deposits on-line.
What do people I hire have to fill out?
Have them fill out an I-9 (pronounced "eye-nine") and a W-4 Form. Each new hire must also now (within 20 days) fill out a "New hire" form. If your employees qualify for and want to receive advanced earned income credit payments, they need to give you a completed W-5.
What's on the:
I-9 - Verification that each new employee is legally eligible to work in the US of A.
W-4 - This makes sure that your employees and you are in synchronicity with the IRS about how many hours they actually worked.
W-5 - This is for people who get money back for having kids.
Excise taxes
I'm not going to need to look at Excise Taxes right now for my business. But for your convenience, this section describes the excise taxes you may have to pay (read Form 510) 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 |
I don't think I need to fill out Form 720 because I have an internet business and I don't think it is subject to:
| 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. |
But you may have to so check it out.