tax responsibilities for business owners

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

david@plemonscpa.com

www.linkedin.com/pub/david-plemons/a/b60/9a4

Get Connected & Learn More

www.MyGenFCU.org

Email: SmallBiz@MyGenFCU.org