If this is your first year filing business taxes, or you’re looking to get more streamlined with your taxes so you don’t put them off until the last minute again — look no further. We can help you create a tax compliance calendar for the rest of 2020.
Here's what you need to know:
- By January 31, employers must distribute tax forms to their employees, which includes Forms 1097, 1098, 1099; Forms 3921 and 3922; and Forms W-2 and W-2G
- Small businesses have until February 28 to submit these forms to the IRS
- If you’re filing as a sole proprietorship, returns are due April 20, 2020
- If your business is a S corporation or a partnership, the return is due March 16, 2020
- If you file for an extension, you have until October 15 to submit your taxes
- Failure to pay penalties range from 1% for each month, up to 25% of the amount of the tax that remains unpaid
- Failure to file fee is 5% of the unpaid tax required to be reported charged each month for up to 5 months
Yes, it’s that time of the year again, everyone’s favorite time: tax time! While there are much better things about owning a small business (independence!) than filing your taxes, taxes are an annual hurdle that every small business person has to clear.
Whether this is your first year in business and you’re baffled at what lies ahead — or you’re looking to get more streamlined with your taxes this year so they don’t get put off until the last, most stressful minute, you’ve come to the right place.
Here’s the essential information you’ll need to create your very own small business tax compliance calendar for 2020.
When are business taxes due?
This depends entirely on both what kind of taxes you’re talking about and what kind of small business you run.
Let’s start with federal income taxes. While many people choose (or are required) to submit income taxes on a quarterly basis, some opt for the one-time annual payment route.
- If you’re a sole proprietorship, you’ll use the same tax schedule as individuals which means that your taxes are due on April 15, 2020
- If you’re running a S corporation or a partnership, your taxes are due a bit earlier on March 16, 2020
Federal employment taxes, depending on your filing status, are submitted either bi-weekly or monthly depending on your tax filing status. The important thing to know about employment taxes is that at the end of each year you’ll have to distribute year-end tax documents to employees that document what has been withheld from their checks all year, as well as submit a copy to the Social Security Administration.
Your employees will then submit this paperwork (form W-2 for employees and form 1099-MISC for independent contractors, as well as forms 3921, 3922, 1097, 1098, and W-2G if you use them) as part of their taxes. You have until January 31 of the following year to both submit these forms to the Social Security Administration and distribute these forms. Small businesses have until February 28 to submit these forms to the IRS.
When are sales taxes due?
The most important thing to know about paying sales tax is that this happens at the state level, if you even have to pay at all. Five states — Alaska, Oregon, Montana, Delaware, and New Hampshire — don’t have sales tax. Alaska, however, does allow for local municipalities to impose a sales tax, so if you’re located there, you’ll want to dig into your city’s ordinances.
For everyone else, figuring out when and how to pay your sales taxes is an investigation you’ll want to conduct at the state level. While every state is different, here are some of the main ones:
- California: There are state, local, and district tax rates in California, so you’ll want to make sure you have all of your sales tax bases covered. When you register your business in California, you’ll be assigned a filing frequency that ranges from monthly to yearly.
- New York: The New York City sales tax rate is 4.5%, the state tax is 4%, and the Metropolitan Commuter Transportation District surcharge is .375%, bringing the total sales and use tax in New York to 8.375%. Sales taxes in New York can be filed quarterly, monthly, or annually.
- Illinois: In Illinois it’s the volume of sales taxes you collect and the status of your account with the state that dictates when you’ll file. Returns can be filed on a monthly, semi-monthly, quarterly, semi-annual, or annual basis.
What if I miss the deadline for business taxes?
First, hopefully you have already filed an extension to both file and pay later (yes, these are separate — you can request an extension to file but without an extension to pay, you’re still on the hook for the money you owe at the time you’re supposed to owe it). If you did file the extensions you need, then you have until October 15 to get your taxes done.
If not, the 2 things you’ll want to get familiar with are the failure to file penalty and the failure to pay penalty:
- The failure to pay penalty is roughly one half of 1% for each month, up to 25% of the amount of tax that remains unpaid
- The failure to file fee is 5% of the unpaid tax required to be reported charged each month for up to 5 months
The good news is that the failure to file fee is reduced by the failure to pay fee if both penalties apply. There are also late filing penalties that apply.
Ultimately, you’ll want to hurry up and file and pay as quickly as you can to avoid a mountain of penalties.
What type of tax return do I file for my business?
There are all kinds of IRS forms that you’ll want to get familiar with. The thing is, each form is different. Some small businesses need to file certain forms depending on the type of business they do, while others won’t because the IRS requires different forms for various kinds of businesses. Even within these forms there can be other forms that are required.
That said, all businesses (save for partnerships) have to file an annual income tax return. Individuals who work for themselves will have to pay self-employment taxes, and those with employees will naturally have to pay employment taxes.
When can I start doing my taxes for 2020?
The IRS has already started accepting and processing tax returns as of January 27, 2020, which means that you can file as soon as you’d like. This means that you have between today and the various due dates for the different forms and types of taxes you’re required to submit to file your taxes.
However, just because the IRS doesn’t start accepting taxes until late January doesn’t mean you have to wait until then to start. If you’ve got some downtime at the beginning of the year, nothing is stopping you from getting everything in order and having them done beforehand. Like most years, the option to file hardcopy paperwork or file electronically online are at your disposal.