Federal/State/Local Tax
 

Most importantly, get a Federal Employer Identification Number from the IRS. Assuming that you are not planning on operating a sole proprietorship without employees, you need to send the IRS information about your business. Use IRS form SS-4. Do this just after you create your business entity. (Banks, customers, suppliers, etc. may ask you for this number so you really should get one as soon as possible.) Apart from that, some pretty good free information can be obtained at the IRS website. They have publications for businesses which can be downloaded for free (everybody loves free!). To get to the IRS website offering free business information

 

Here are the basic federal taxes that your business may have to pay, depending on the state you live in and the type of business you operate.

 

Once a year, businesses will have to report to the IRS and (probably) the State Tax Agency the amount of money earned by the business in the prior year. The actual amount of federal income tax that your business pays each year is determined partly by the type of legal entity you have created. Therefore, the different legal entities file different forms with the IRS.

 

Sole proprietors file IRS form Schedule C along with the owner’s regular 1040. If your sole proprietorship business has net income, then you must also file Schedule SE along with the regular 1040 to determine the Social Security and FICA taxes you must pay.

 

Partnerships, Limited Partnerships and Limited Liability Companies file IRS form 1065 to report partnership income (but remember that you will have to report your share of the partnership’s income on your 1040 return as well). Just like for a sole proprietorship, please note that as a partner in a general partnership you are required to file Form Schedule SE.

 

A C-Corporation files 1120 or 1120-A. Remember that the C-Corporation must pay income taxes on its profits and the stockholders must also pay taxes on the dividends they receive (this is the infamous “double taxation of C-Corporations). So the corporation’s profits will be taxed as it receives income, and then taxed again when those profits are distributed to the shareholders. Moreover, if you are an employee of the corporation as well as an owner, you need to pay income taxes on the salary paid to you.

 

S-Corporations file IRS form 1102-S.

 

Note that as far as the IRS is concerned, you and your business are two separate entities, and both had better have their taxes in order!

 

If you have employees, you have the headache of withholding taxes from their paychecks and periodically sending that money to the federal government. Each time you hire an employee, that new employee needs to fill out an IRS Form W-4, listing the exemptions and additional allowances claimed by the employee. You then use this form to withhold the proper amount from the employees’ paychecks, and send that money on to the federal government. At the end of the year, you must give each employee an IRS Form W-2. The W-2 will simply list the amounts withheld from the employees’ paychecks and sent to the federal government. There must be a separate copy of the W-2 for each of the taxing jurisdictions (federal, state, and local governments) plus one more for the employees’ records. You will also have to send a copy of the employees’ W-2s to the IRS yourself. Also, if your business involves more than /month in “tips” to employees, your employees must report such tips to your business. Your business then has to withhold the appropriate amounts from the employees’ wages.

 

Social Security, Medicare, and Federal Unemployment taxes will all have to be paid if you have employees. Social Security and Medicare taxes must be withheld from the employees wages and your business will have to match the employees’ “contributions” to these federal programs. These taxes are paid together and appear on the annual tax return for the business. And just like the income tax, if your business involves more than /month in “tips” to employees, you need to account for these tips as part of these payroll taxes.

 

If you have employees during the course of 20 weeks of the year or you paid your employees a total of more than ,500 in a year, you probably have to pay the federal unemployment tax. The federal unemployment tax, unlike Social Security and Medicare, comes solely out of your own pocket, with  contribution from the employee. Note that if your business’ federal unemployment tax burden exceeds 0 per quarter for two quarters, then you need to make monthly deposits of the money owed. Form 940 is used annually for a business to report its Federal Unemployment Tax due. Please note that IRS form 940EZ can be used by a business if your business (i) has employees in only one state, (ii) pays all  taxes sums due by the 940EZ date, (iii) the Federal Unemployment Taxes paid are also taxable by the state governments.

 

Paying federal business taxes requires two actions: (1) EACH QUARTER, using IRS Form 941 , report the income and payroll taxes withheld from the employees’ paychecks and, (2) EITHER MONTHLY OR SEMI-WEEKLY deposit the funds you have withheld by sending a check to a bank authorized to receive money on behalf of the IRS.

 

Reporting must be done every financial quarter. Money deposits of payroll taxes must be done every month or every other week, depending on the size of your payroll contributions. For the first year of your business, deposits will be monthly. After that, the IRS will tell you how often you must deposit the withheld payroll taxes.

 

Federal excise taxes are imposed on the sale or use of certain items of property or certain transactions and on certain occupations. If your business involves firearms, alcohol, motor fuel, trucks, or gambling you really need to look into the excise taxes. Depending on the type of business you operate, your business may have to pay excise taxes. IRS Form 720 lists the broad categories that this tax applies to. Form 720 needs to be filed every fiscal quarter. If your business uses heavy trucks, buses, or trailers, on public highways, then your business may have to pay a special excise tax levied on such vehicles and IRS Form 2290 would have to be filed.

 

Depending on your home state’s laws, you will need to file sales tax, employee withholding tax, income tax, and possibly others. The best way to find out exactly what you will need to file is to either contact a local accountant, or, if you want to save some money (and that is why you are here after all), contact the state yourself. The state tax departments often have guide books to help small businesses (and large businesses) comply with the tax code.

 

Your state will almost certainly require your business to have an employer identification number issued by the state. Your state employment development office can provide you with more information and the proper forms. (Do not confuse the number assigned to your corporation, partnership, or LLC by the Secretary of State with the Employer Identification Number. These are two different numbers, issued by two different state agencies.)

 

Again, just like federal taxes, there are legal penalties for not paying state taxes and these penalties include criminal penalties.

 

Now you definitely need to consult your local authorities. There really is no way to guess what possible local taxes, fees, etc. you may be subject to

 

But remember that there are multiple levels of local taxation. There may be a county assessment on assets and a city or municipal tax on income.

 

In addition to business taxes required by the federal government, there are some state and local taxes. Each state and locality has its own tax laws. The most common types of taxes requirements for small and medium business include:

In most states, business owners are required to register their business with a state tax agency and apply for certain tax permits. For example, in order to collect sales tax from customers, many states require businesses to apply for a state sales tax permit.

 

: Nearly every state levies a business or corporate income tax. Tax requirement depends on the legal structure of your business. For example, if your business is an LLC, the LLC gets taxed separate from the owners, while sole proprietors report their personal and business income taxes using the same form.

 

 In addition to federal employment taxes, business owners with employees are also responsible for paying certain taxes required by the state. All states require payment of state workers’ compensation insurance and unemployment insurance taxes. Five states (California, Hawaii, New Jersey, New York, and Rhode Island) and Puerto Rico require businesses to pay for temporary disability insurance.

 

An  if you owe ,000 or less in tax during an annual filing period.
The Department will notify you by mail that we switched you to an annual filer. We mail letters, the Form TR-100 Sales and Compensating Use Tax Annual Filing Opportunity, in March.
If you would like to continue filing a quarterly return instead of an annual return, you must notify the Department.

 

A  if

You have not been notified that you are an annual filer 
And your taxable receipts, purchases subject to tax, rents and amusement charges are less than 0,000 during the previous quarter.

(Most vendors file quarterly when they first register to collect sales tax.)

A  beginning with the first month of the next sales tax quarter if you file an annual or quarterly sales tax return and:

Your combined total of taxable receipts, purchases subject to tax, rents and amusement charges is 0,000 or more in a quarter, or
You are a distributor as defined under Article 12-A of the Tax Law and you have sold a total of 100,000 gallons or more of motor fuel or diesel motor fuel (taxable or nontaxable)

 

State Sales and Use Tax is imposed on all retail sales, leases and rentals of most goods, as well as taxable services.

 

Texas cities, counties, transit authorities and special purpose districts have the option of imposing an additional local sales tax for a combined total of state and local taxes of 8 1/4% (.0825)

 

For Quarterly Business’s Use Tax Return – Form ST-100 Series

For Annual ST-101 Series

For Monthly ST-809 Series

For Quarterly ST-810 Series

Individual Purchaser’s Annual Report of Sales and Use Tax – Form ST-140

Business’s Use Tax Return – Form ST-130

Seller’s Report of Sales Tax Due on Casual Sale – Form ST-131

Individual Purchaser’s Periodic Report of Sales and Use Tax – Form ST-141