tax responsibilities for business owners
DESCRIPTION
With tax season around the corner, Generations Federal Credit Union and SCORE Mentors presents, "SCORE: Tax Responsibilities for Business Owners" on 11/20/14. David Plemons, CPA walks small business owners through the ins and outs of business owner responsibilities for tax season.TRANSCRIPT
Tax Responsibilities for
Business Owners
SCORE SAN ANTONIO
Hipolito F. Garcia Federal Bldg
615 E. Houston St. Ste 293
San Antonio, TX 78205
210-403-5931
http://sanantonio.score.org
David PlemonsDavid Plemons CPA, Inc.
Tax Responsibilities for
Business Owners
Agenda
• Types of business organizations
• Bookkeeping Systems and Accounting Methods
• Record Keeping
• Employment Taxes
• Tax Withholding
• Filing Requirements as an Employer
• Information Returns
• Methods of Filing
• Where to Get Help
• Useful Information
4Tax Responsibilities for Business
Owners
Types of Business
Organizations
Sole Proprietorship
6
Sole ProprietorshipSubject to local and county personal property Tax
Depending on company industry, possibly subject to State and Local Sales Tax
Files a Schedule C for the profit or loss of the business which is attached to the taxpayers 1040
Subject to a 15.3% self employment tax
Not subject to state franchise tax
Tax Responsibilities for Business
Owners
General Partnership
7
General PartnershipGenerally not subject to State Franchise Tax
Subject to Local and County Personal Property Tax
Depending on company industry, possibly subject to State and Local Sales Tax
Files a separate return, Form 1065
Generally subject to a 15.3% self employment tax
Tax Responsibilities for Business
Owners
Limited Partnership
8
Limited PartnershipSubject to State Franchise Tax
Subject to Local and County Personal Property Tax
Depending on company industry, possibly subject to State and Local Sales Tax
Files a separate return, Form 1065
General Partner is usually subject to a 15.3% self employment tax
Limited partners are not subject to the 15.3% self employment tax
Tax Responsibilities for Business
Owners
“C” & “S” Corporation
9
“C” Corporation
Subject to State Franchise Tax
Subject to local and county personal property Tax
Depending on company industry, possibly subject to State and Local Sales Tax
Files a separate return, Form 1120
Entity pays it’s own tax not the owners
Subject to Double Taxation issues
“S” Corporation
Subject to State Franchise Tax
Subject to local and county personal property Tax
Depending on company industry, possibly subject to State and Local Sales Tax
Files a separate return, Form 1120-S
Self employment tax advantages
Not subject to Double Taxation issues
Tax Responsibilities for Business
Owners
Limited Liability Company (LLC)
10
LLCSubject to State Franchise Tax
Subject to Local and County Personal Property Tax
Depending on company industry, possibly subject to State and Local Sales Tax
Single owner LLC is treated as a Sole Proprietor. Multiple owners are treated like a partnership. Elections can be made to be taxed differently
Generally members are subject to the 15.3% self employment tax
Tax Responsibilities for Business
Owners
Bookkeeping &
Accounting
Methods
Bookkeeping Systems
12
Single Entry
Simplest to keep
Daily and monthly summary of business receipts
Monthly summary of expenses
Disadvantage - Does not produce a balance sheet
Double Entry
Built in checks and balances – Debits and Credits
Tracks assets
Easy to generate balance sheet
Disadvantage – Higher cost to maintain
Tax Responsibilities for Business
Owners
Accounting Methods
13Tax Responsibilities for Business
Owners
• Set of rules used to decide when and
how to report income and expenses
Cash Accrual
* Once selected you need IRS permission to change
Recordkeeping
• Records must be sufficient to substantiate
items of income, deductions, and credits
– Accurate tax returns
– Source of receipt
– Documentation of deduction or credit
• Travel, transportation, entertainment, gifts
– Provide proof
14Tax Responsibilities for Business
Owners
Recordkeeping
• Records must be kept as long as their
contents are material to your tax situation
– Generally 3 years
• Exceptions:
– Employment tax record (4 years)
– Records relating to basis of assets (life of
asset)
– Change in accounting method (indefinitely)
– Non deductible IRA contributions
15Tax Responsibilities for Business
Owners
Employment
Taxes
Employee vs. Contractor
17
“TRIC”
Tools
Do you provide the “tools” for the
trade?
Risk
How much “risk” is the person taking?
Integration
Is the person an “integral” part of your business
Control
How much “control” do you
have?
Tax Responsibilities for Business
Owners
Employment Taxes
18
• Employment taxes
– Withholdings from employee
– Employer’s share
• State unemployment taxes
– Form C-3 (quarterly)
• Paid to IRS
– Form 940 (annual) & 941 (quarterly)
• Employer Identification Number (EIN)
– Necessary for most employers
Tax Responsibilities for Business
Owners
Tax Withholding
Tax Withholding
• Based on gross wages
• Secure W-4 form
– IRS Pub 919
• Tipped employees
– Form 4070 (See Pub 1244)
• INS I-9 form
– Form found at www.uscis.gov
20Tax Responsibilities for Business
Owners
Filing
Requirements
Filing Requirements as an Employer
22
• Used to pay Federal Unemployment Tax – filed annually
Form 940
• Required to be given to each current and former employee by January 31st following the end of the calendar year covered
Form W-2
• For payments of $600 or more to independent contractors
Form 1099 MISC
• To report Backup Withholding
Form 945
• Quarterly Federal Employment Tax Return
Form 941
Tax Responsibilities for Business
Owners
Filing Requirements Form 941
23Tax Responsibilities for Business
Owners
Due Dates for Filing Form 941
Quarter Ends Due Date
Q1 Mar 31 Apr 30
Q2 Jun 30 Jul 31
Q3 Sept 30 Oct 31
Q4 Dec 31 Jan 31
Form 941items to note:
• Do not file more than one per quarter
• If you cease to do business or pay wages you need to file a final return
• You incur your tax liability when you pay your wages, not when you file
• Do not confuse deposit requirements with filing requirements
• Small Businesses with liabilities of $1000 or less can file annually
Filing Requirements Form 941
24Tax Responsibilities for Business
Owners
• See IRS Pub 15 for details
Deposit Requirements for Employment Taxes
When to Deposit/Pay Tax Liability Due Date
Monthly $50,000 or less 15th of following month
Semi-Weekly More than $50,000 Wed or Friday of following week
Next Day $100,00 or more Next Banking Day
Information Returns
and Methods of
Filing
Information Returns
26Tax Responsibilities for Business
Owners
Form 1099-MISC
Payments of $600 or more*Exclude corporations unless
reporting legal services to attorneys
Withhold 28% if W-9 form not
received
Information Returns
27Tax Responsibilities for Business
Owners
Form 1099-K
Sent from Merchant Services
Excluded from 1099-MISC
Methods of Filing/Payment
28Tax Responsibilities for Business
Owners
EFTPSElectronic Federal
Tax Payment System
For Individuals &
Business
Can pay all business
taxes
Convenient
Automatically enrolled with
EIN
Methods of Filing/Payment
• E-file
– Individual, corporate, partnership, and
employment tax returns (forms 940 and 941)
– Automatic extensions to file
– Forms 1099
– Forms W-2 thru Social Security website -
http://www.socialsecurity.gov/employer/
• File paper forms
29Tax Responsibilities for Business
Owners
Additional Taxes
30Tax Responsibilities for Business
Owners
Texas Franchise Tax
Gross SalesCost of goods sold
or
Payroll X 1% = Total tax due
No tax due if gross sales are less than $1M
Additional Taxes
31Tax Responsibilities for Business
Owners
Personal Property Tax
Taxes on personal
property owned by business
Tax paid to tax assessor
Where to Get Help
SCORE – www.score.org
33Tax Responsibilities for Business
Owners
IRS – www.irs.gov
34Tax Responsibilities for Business
Owners
IRS – www.irsvideos.gov/SmallBusinessTaxpayer
35Tax Responsibilities for Business
Owners
Other resources for help
36Tax Responsibilities for Business
Owners
www.sba.gov www.socialsecurity.gov
Other resources for help
37Tax Responsibilities for Business
Owners
www.dol.gov www.business.usa.gov
David Plemons, CPA – www.plemonscpa.com
38Tax Responsibilities for Business
Owners
David B. Plemons, CPA
Free 30 minute initial
consultations.
Mon thru Friday 8:00am – 5:00pm
8207 Callaghan Rd. Suite 150
210.615.9300
Useful
Information
IRS Tax Map – taxmap.ntis.gov/taxmap
40Tax Responsibilities for Business
Owners
SCORE SAN ANTONIO
Hipolito F. Garcia Federal Bldg
615 E. Houston St. Ste 293
San Antonio, TX 78205
210-403-5931
http://sanantonio.score.org
Thank You
David B. Plemons, CPA
210.615.9300
www.linkedin.com/pub/david-plemons/a/b60/9a4