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Business taxes can be daunting for startups, small and mid-sized businesses who routinely face financial challenges and budget restrictions. The IRS website shares updated information on tax incentives to assist businesses, including provision of deferred taxes and business tax credits. It is vital to understand federal tax and filing schedules so that you stay compliant with tax obligations without additional financial burden. Small and mid-sized businesses can benefit greatly from professional assistance, given the time sensitivity and need for data accuracy associated with tax filings. Regular, high-volume workloads, experienced by CPA and bookkeeping businesses, can lead to missing tax filing or reporting deadlines. Bookkeeping and CPA businesses can leverage the experience that comes with partnering with the right firm to ensure timely reporting.
Below is a detailed checklist of business taxes and the proposed deadlines to help you plan efficiently:
Income tax payable differs by business structures. The amount paid by an S Corporation will be different than that paid by a proprietorship. Filing dates are also dependent on business structure as some businesses must file an annual income tax return. Partnership structures are required to file returns that include income earned, deductions, losses, and gains. Partners within a partnership structure subsequently report profits or losses through their individual tax returns.
Action item: Income tax return filing deadline for partnerships and corporations is March 15, 2021. A proprietorship business generally follows the same schedule as that for individuals, and the deadline for filing returns is April 15, 2021. Deadlines may vary in different states. If you are in doubt, seek professional assistance in accounting and bookkeeping.
Regular tax payment must be paid on earnings or income received during the year. Sole proprietors, partners, and S corporation shareholders are required to pay estimated tax if the estimate is equal to or more than $1000 at the time of filing the return. Employees typically have taxes withheld from their income. Estimated tax payment also needs to be made on income received from self-employment, capital gains, dividends, and interest earned. Estimated tax payments can also be used to pay self-employment tax, or tax payments toward Social Security and Medicare. The tax rate for self-employment tax is 15.3%; 12.4% for Social Security and 2.9 % for Medicare.
Action item: Estimated taxes can incur a penalty if underpaid. The penalty is also applicable on late payments, even if a refund is due. Estimated taxes can be different for the fishing and farming industry. Estimated tax payments are due as per the following schedules:
A company must make payments on behalf of employees for Social Security, Medicare, Federal income withholding, and Federal unemployment (FUTA) taxes. Businesses are then required to report these taxes to the IRS by filing the right forms, such as Form 940 (FUTA), or Form 1099 (miscellaneous income).
Action item: Businesses are required to pay employment tax if they have withheld an employee’s share of payroll taxes for the period between September and December 2020. The deadline for paying withheld taxes is April 30, 2021. Businesses can deposit the amount in the individual’s regular payroll withholding schedule.
Excise tax is independent of income tax. Startup, small and mid-sized businesses with projects related to transportation (airway and highway), fuel, logistics, or retail may need to pay excise tax. Industry rules determine whether this payment is made on an annual, monthly or quarterly basis. The tax is levied at the time of import or sale by manufacturer or retailer, and use by the consumer.
Action item: Customarily, excise cost is included in a product’s price. The companies selling or manufacturing these products are required to pay taxes to the IRS and complete Form 720.
Partnering with professionals to calculate taxes
Partnering with trained professionals is key to ensure sustainability for startups, small and mid-sized businesses. Leveraging the industry experience an accounting partner brings will help your business save time and money in multiple ways, including:
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