tax calendar

Tax Date Calendar for Small Businesses

April 15 may be in your rear view mirror, but your business still has tax-related obligations throughout the year. Don’t let these dates sneak up on you unexpectedly. Know what you need to file and when for the upcoming year:tax preparation

June 17, 2019: Q3 Estimated Quarterly Income Tax Payments Due

If your business pays estimated quarterly taxes, and these payments were prepared along with your Simma Flottemesch & Orenstein tax return, this is the deadline for your Quarter 2 payment.

September 16, 2019: Q3 Estimated Quarterly Income Tax Payments Due

Time to make your Quarter 3 payment.

September 16, 2019: S-Corp and Partnership Extension Deadline

Did you receive an extension for your S-Corp or partnership tax return? Then this is your deadline for submitting the return and payment.

October 15, 2019: Extension Deadline for Individuals, Sole Proprietors, LLCs and Corporations

This is the deadline for submitting your return and payment for any extended individual, sole proprietor, LLC or C-Corp tax returns.

December 31, 2019: 401(k) Deadline

Any contributions to you or your employee’s 401(k) but be completed by the end of the year if they’re to count toward your 2019 return.tax calendar

January 15, 2020: Q4 Estimated Quarterly Income Tax Payments Due

The taxes that were estimated for Quarter 4 are due in mid-January.

January 31, 2020: 1099 and W-2 Mailing Deadline

For your traditional employees, you must get their W-2 forms in the mail by the end of January. Any 1099s for contractors you worked with during 2019 must be postmarked by January 31 as well.

March 16, 2020: S-Corp and Partnership Tax Return Deadline

S-Corps and partnerships must file their 2019 tax return and submit payment by March 16, a month before the individual return deadline.

April 15, 2020:

  • Tax filing deadline for individual, sole proprietor, LLC and C-Corp returns
  • Q1 estimated quarterly income tax payments due
  • Simple Employee Pension (SEP) contribution deadline
  • IRA contribution deadline, for both traditional and Roth IRA accounts

Read More

self employment taxes

What Are Self-Employment Taxes?

Self-employment taxes are established by SECA tax—Self-Employment Contributions Act tax. This tax is a stand-in for FICA paid by employers and employees. When you are employed, withholding covers Social Security and Medicare program contributions. Employers must also make additional contributions to these on behalf of each employee. Self-employment taxes exist to contribute to these programs by the self-employed. The self-employed do not escape these tax obligations, and are instead burdened with the full contribution, rather than sharing the FICA contributions with their employer.self employment taxes

If you earn $400 or more from your self-employment income, you are required to file a tax return. Generally, 92.35 percent of your net earnings from self-employment are subject to the self-employment tax. Your contributions will be made in the following way: 12.4 percent to Social Security for the first $128,400 of earnings (for 2018) and 2.9 percent to Medicare on all earnings.

Figuring the tax

Schedule SE helps you calculate how much self-employment tax you owe. This amount is then reported on your 1040 as “Other Taxes.” Fortunately, a portion of your self-employment tax payments can be deducted as an adjustment to income on your 1040. Whether you itemize deductions or not, you can claim 50 percent of your self-employment tax payment as a taxable income deduction.

Estimated taxes

Again, when you work as an employee, withholding throughout the year contributes to your total tax liability. When you’re self-employed, this isn’t an automatic mechanism. Therefore, it may be worth paying estimated taxes throughout the year, in quarterly installments, to avoid underpayment penalties. Discussing your options and forming a plan with a Simma Flottemesch & Orenstein team member will help you prepare for and determine your best course of action.self employment taxes

Reducing your self-employment tax

If you’ve read our previous posts on the tax implications of selecting your business entity, then you should know that S Corp elections have the opportunity to reduce your self-employment tax liability. Under this entity, you would be paid a salary out of earnings and the remaining profits would be distributed to yourself, shareholders, partners or left in the business. The amount in excess of your salary is subject to income tax, but not self-employment taxes. In an upcoming blog, we delve into determining a reasonable salary from your S Corp.

Schedule C calculates your net profit from self-employment. Be very thorough in preparing this form, deducting every possible business expense. Business expenses must be ordinary and necessary to operate your business. Deducting these expenses will lower your net profit, and, in turn, lower your self-employment tax bill. We will dive more in-depth on what qualifies as a deductible business expense in our next blog.

 

Read More

colleagues

Business Structures: Ownership and Liability Differences

The most common differences in business structures are ownership, liability and tax considerations. When it comes to liability, it’s important to consider where you, as an owner, could personally afford liability risks. Protecting personal assets is a key reason people incorporate their business, and while some structures are easier to form than others, it can be difficult to change your entity’s structure down the line, so avoid restricting your business’s ability to grow in your selection.

Sole Proprietorship: Sole proprietorships are simplest to form, and if you don’t register your business as another entity, you’ll automatically be considered a sole proprietorship. Owned by one individual, this structure comes with the greatest personal liability. As the business grows, your personal liability will increase. Therefore, this structure is best for lower risk businesses. Also consider that it is difficult to obtain outside funding for sole proprietorships.

Partnerships: Partnerships are owned by two or more people. The partners will share in any profits, losses and decision-making responsibilities. These entities require an operating agreement that outlines the roles of its owners and the percentage of profits they each receive. Consider that you will be held liable for both decisions you make, and those made by other owners. Funding for these entities will generally come from the personal accounts of its owners, their personal credit or by taking on more partners.board room

Limited Liability Company (LLC): Forming an LLC protects you from personal liability if you don’t act in a manner that is in any way illegal, unethical or irresponsible when carrying out business activities. Personal assets and company assets are deemed separate under this entity. This structure is great for medium-high risk businesses and owners with a lot of personal assets they want to protect.

Corporation: Incorporating your business makes it a separate entity from its owners. That entity can be sued, own and sell property, and sell ownership rights in the form of stocks. No individual owner has sole or primary control. Instead, most corporations have a Board of Directors to answer to. More specifics apply depending on the type of corporation…

C Corp: C-corps are ideal for medium-high risk businesses, businesses that need to raise outside funds and businesses that intend to go public or eventually be sold. As you can see, forecasting where you would like to see your business go or grow into, is important to many of these considerations.

S Corp: S-Corps are intended for smaller corporations. There can be no more than 100 owners, and all must be United States citizens.

B Corp: B-Corps differ from other types of corporation in purpose, accountability and transparency. In some states, B-Corps are required to submit annual benefit reports to demonstrate that they are indeed contributing to the public good.

Closed Corporations: Closed corporations are similar to B-Corporations. However, these generally smaller companies are usually barred from public trading.high rise

For a more simplified depiction of this breakdown, reference the following table:

Business structure Ownership Liability Taxes
Sole proprietorship One person Unlimited personal liability Personal tax only
Partnerships Two or more people Unlimited personal liability unless structured as a limited partnership Self-employment tax (except for limited partners)

Personal tax

Limited liability company (LLC) One or more people Owners are not personally liable Self-employment tax

Personal tax or corporate tax

Corporation – C corp One or more people Owners are not personally liable Corporate tax
Corporation – S corp One or more people, but no more than 100, and all must be U.S. citizens Owners are not personally liable Personal tax
Corporation – B corp One or more people Owners are not personally liable Corporate tax
Corporation – Nonprofit One or more people Owners are not personally liable Tax-exempt, but corporate profits can’t be distributed

 

Later this week, we’ll delve into the tax differences and implications of each of these business structures.

Read More