When starting a business, it's important to stay on top of taxes and tax concerns. Doing business in the United States without properly managing your local, state, and federal tax payments can result in huge fines, continued bank liens, or government intervention to shut down your business. You may do so. \
We've listed the important forms and requirements to address and gathered tips to help entrepreneurs and new small business owners ensure all their tax obligations are handled correctly.
Taxes and business forms to deal with when starting a business
Entrepreneurs have several immediate management concerns when starting a business. Let's take a look at the forms you need to file and the steps you need to take to properly set up and monitor your venture's tax obligations.
1. You must file to register your business structure.
The legal structure of your business affects the taxes you pay, the forms you file, and the financial and legal benefits you receive. There are many business structures to choose from. However, most small businesses establish themselves as limited liability companies (LLCs), sole proprietorships, or partnerships of some kind.
The location and structure of your business will determine where and how you need to register your company. You must apply within the state in which you operate your business. The SBA's business registration website provides a wealth of online resources to help you successfully register your business in your state.
Different legal structures use the following formats when paying taxes:
- partnership: As a partnership, you will likely be filling out Form 1065 with the IRS.
- Corporation: Businesses file Form 1120.
- S Corps: If you want to file as an S corporation (S-corp), you must file Form 2553 and then file a 1120-S annually.
- Sole proprietorship: Sole proprietors and self-employed individuals must file a 1040 Schedule C.
Different business structures file taxes with the IRS at different times. Typically, partnerships and corporations file on March 15th, and sole proprietorships and single-member LLCs file on April 15th.
If you choose one of these business structures, carefully weigh the pros and cons of LLC taxes versus sole proprietorship taxes.
2. You must obtain a state and federal tax identification number.
The federal government and many states require businesses to have a Taxpayer Identification Number (TIN), also known as an Employer Identification Number (EIN). Businesses need an EIN to pay federal and state taxes.
- State EIN: The process for obtaining a state TIN varies by state. Visit your state's tax office or government website to find out how.
- Federal EIN: To obtain a federal EIN, submit Form SS-4.
3. You must understand and submit employee tax forms.
If you employ employees, you may need to file multiple tax forms based on the employment status of your team members.
Anthony Metsasarma, CPA at Metsasarma Advisors, recommends that every company work with a trusted payroll provider to prepare quarterly payroll tax returns, W-2 forms, and other important staff management documents. We advise you to treat the sides. The best payroll services automate important payroll processes and prevent you from accidentally violating payroll tax laws.
The most important payroll forms include Form W-4, Form W-2, Form W-3, Form 1099-NEC, Form 940, Form 941, and Form 944.
4. You must understand the contractor's tax requirements and forms.
Independent contractors have their own tax requirements. Here are the forms you should know:
- Form 1099-NEC: Form 1099-NEC is used to report non-employee compensation. Businesses and individuals use this form to report compensation paid to independent contractors that is subject to self-employment tax. Form 1099-NEC is also used by businesses or individuals who receive more than $600 in qualifying payments during a calendar year. The deadline for filing Form 1099-NEC is his January 31st, after which a copy must be sent to the recipient.
- Form 1099-MISC: Form 1099-MISC is most often used to report other payments that are not subject to self-employment tax, such as rent, awards, litigation settlements, and other qualified refunds. Form 1099-MISC must be completed and filed by January 31st for any recipient to whom he paid more than $600 in deductible expenses during the calendar year.
- Form W-9: Individuals covered by the 1099 form must also submit Form W-9: Request for Taxpayer Identification Number and Certification. Metsasalma cautions that his W-9, which expires on January 31st, is critical to ensuring businesses comply with federal tax laws. “I suggest [new business owners] Do not pay the vendor until you have a W-9 form. It is very difficult to obtain a W-9 form later,” Metsasalma advised. “This step is important because there are penalties for not issuing a 1099 form when you should.”
Form 1099-NEC and Form 1099-MISC are often confused. Employers give Form 1099-NEC to independent contractors and self-employed individuals who provide services. Form 1099-MISC reports various payments such as rent and awards.
5. Consider health insurance tax implications.
After the passage of the Affordable Care Act, businesses will need to recognize Form 1095-B or Form 1095-C depending on the number of employees. These forms are required if your company offers health insurance as part of your employee benefits plan. Failure to submit these forms will result in penalties from the government.
Tax considerations and obligations also arise when a company offers a retirement plan to its employees. The Best Employee Retirement Plan supports you by providing full administrative and tax support.
