IRS to push tax filing deadline to May 17

Source: https://tinyurl.com/2vh8ju6f

Written by: By Ben Popken

The Internal Revenue Service building in Washington. Taxpayers — and the IRS — will have more time to process their taxes this year.

The new deadline gives taxpayers and the IRS more time to process tax returns.


The tax filing deadline for taxpayers will be pushed back from April 15 to May 17, the Treasury Department and the Internal Revenue Service announced Wednesday.

The one-month extension applies both to filings and payments, and is only for federal income taxes, not state income taxes.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” IRS Commissioner Chuck Rettig said in a statement.

The IRS this year began accepting 2020 returns on Feb. 12, instead of its customary January start date. But it had kept the filing deadline at April 15, resulting in a shorter filing season.

At the same time, the agency was also charged with issuing a new round of stimulus payments as part of the recently passed $1.9 trillion coronavirus relief bill.

The relief also does not apply to estimated tax payments, the IRS said, which are still due on April 15.

The IRS has already extended the tax filing deadline to June 15 for people in declared disaster sites such as Texas, after extreme weather left residents without power for days. Because of Texas' significant population, 29 million, it meant that nearly 1 in 10 taxpayers would get a tax extension.

Last year, the IRS moved its deadline by three months, to July 15, amid the chaos of the pandemic.

“This extension is absolutely necessary to give Americans some needed flexibility in a time of unprecedented crisis,” Representative Bill Pascrell, Jr., D-N.J., Chairman of the House Ways and Means Subcommittee on Oversight, said in a statement.

“Under titanic stress and strain, American taxpayers and tax preparers must have more time to file tax returns," he said.

The agency has said that its staff is fully ready for tax season, but it also implored taxpayers to file electronically when possible — or face potential delays with processing their returns and refunds.

As of last week, the agency had processed 25 percent fewer returns than last year, prompting Democrats to call for an extension.

Over the past 10 years, the IRS budget has been cut by roughly 20 percent.

According to the Tax Policy Center, a nonpartisan think tank, tax revenues could increase by over $1 trillion if the IRS budget were to increase by $100 billion over 10 years. About three-quarters of that revenue would come from additional audits

Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave for workers and tax credits for small and midsize businesses to swiftly recover the cost of providing Coronavirus-related leave

Source: https://tinyurl.com/qpvkgpf

IR-2020-57, March 20, 2020

WASHINGTON — Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.

The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.

Key Takeaways

• Paid Sick Leave for Workers

For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees' children's schools are closed or child care providers are unavailable.

• Complete Coverage

• Employers receive 100% reimbursement for paid leave pursuant to the Act. 
• Health insurance costs are also included in the credit. 
• Employers face no payroll tax liability. 
• Self-employed individuals receive an equivalent credit. 
• 
  
Fast Funds

Reimbursement will be quick and easy to obtain.

• An immediate dollar-for-dollar tax offset against payroll taxes will be provided
• Where a refund is owed, the IRS will send the refund as quickly as possible.

Small Business Protection

Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

• Easing Compliance
• Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.

Background

The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid child care leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.

Paid Leave

The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee's pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee's pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee's pay.

Paid Sick Leave Credit

For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.

For an employee who is caring for someone with Coronavirus, or is caring for a child because the child's school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Child Care Leave Credit

In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee's regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Prompt Payment for the Cost of Providing Leave

When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.

Examples
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Small Business Exemption

Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer's business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.

Non-Enforcement Period

Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.

For More Information

For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.

Tax Day postponement to July 15 'welcome news' for small business

Source: https://tinyurl.com/s88ycdo

Author: Jane Thier@thier_jane

Dive Brief:

• On Friday morning, Treasury Secretary Steve Mnuchin shared on Twitter that Tax Day would be pushed back from April 15 to July 15 as the nation attempts to cope with the impacts of coronavirus. Shortly after Mnuchin tweeted, the Internal Revenue Service announced the postponement officially.

• "At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties," Mnuchin wrote. "I encourage all taxpayers who may have tax refunds to file now to get your money."

• The decision comes after widespread complaints about the Trump Administration’s previous plan, announced earlier this week, to give people who owe the IRS an additional 90 days to pay, without penalties or interest, while still requiring them to file their returns by April 15, NBC News reported.

Dive Insight:

Per the IRS’ online announcement, the filing deadline for tax returns remains April 15, 2020. The office urges taxpayers who are owed a refund to file "as quickly as possible."

In its Wednesday announcement on the initial 90-day delay, the Internal Revenue Service cautioned that the delay applied only to federal income taxes, not state income taxes.

"Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia," the agency said on its website. "State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details."

Mnuchin had said Wednesday that, in light of the crisis, individuals can delay paying up to $1 million in tax payments and corporations can defer payments on up to $10 million. During the deferment period, neither individuals nor corporations would be subject to interest or penalty payments, he said.

The revised delay is another part of the government’s effort to keep $300 billion in the economy as individuals and corporations alike grapple with an unprecedented financial upset caused by the coronavirus.

As non-essential businesses are ordered to temporarily close and consumer spending dries up, many small business owners are struggling to keep their cash flow and revenue up to par, as well as retain their staff and provide for their customer base.

"Small business owners right now are dealing with enormous change and business continuity challenges," Jared King, co-founder CEO of automated accounts receivable software service Invoiced, told CFO Dive Friday. "So filling and paying taxes is really the last thing they need, given the circumstances."

King believes that for small businesses, the delay may be a lifeline in a situation that would otherwise have them risking bankruptcy.

"Deferring this year's tax preparation and payment will be welcome news for just about any small business, as it will give them a temporary cash management advantage to make payroll, cover supplier payables and continue operations," he said.

He clarified that putting aside concerns about paying and filing taxes on time would create the space to address more urgent concerns. "Perhaps more importantly," King said. "The ability to just not deal with taxes while they face other more existential challenges will be key."

In response to the pandemic, Invoiced is currently offering its accounts receivable automation function to nonprofits organizations for free. The program took effect last week and will continue being free for up to six months.

Four common tax errors that can be costly for small businesses

Source: https://tinyurl.com/vosuhkx

A small business owner often wears many different hats. They might have to wear their boss hat one day, and the employee hat the next. When tax season comes around, it might be their tax hat.

They may think of doing their taxes as just another item to quickly cross off their to-do list. However, this approach could leave taxpayers open to mistakes when filing and paying taxes.

Accidentally failing to comply with tax laws, violating tax codes, or filling out forms incorrectly can leave taxpayers and their businesses open to possible penalties. Using IRS Free File or a certified public accountant is the easiest ways to avoid these kinds of errors.

Being aware of common mistakes can also help tame the stress of tax time. Here are a few mistakes small business owners should avoid:

Underpaying estimated taxes
Business owners should generally make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. If they don’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty.

Depositing employment taxes
Business owners with employees are expected to deposit taxes they withhold, plus the employer’s share of those taxes, through electronic fund transfers. If those taxes are not deposited correctly and on time, the business owner may be charged a penalty.

Filing late
Just like individual returns, business tax returns must be filed in a timely manner. To avoid late filing penalties, taxpayers should be aware of all tax requirements for their type of business the filing deadlines.

Not separating business and personal expenses
It can be tempting to use one credit card for all expenses especially if the business is a sole proprietorship. Doing so can make it very hard to tell legitimate business expenses from personal ones. This could cause errors when claiming deductions and become a problem if the taxpayer or their business is ever audited.

Preparing for a Disaster (Taxpayers and Businesses)

Source: https://tinyurl.com/y332s2bo

Planning what to do in case of a disaster is an important part of being prepared. The Internal Revenue Service encourages taxpayers to safeguard their records. Some simple steps can help taxpayers and businesses protect financial and tax records in case of disasters.

Listed below are tips for individuals and businesses on preparing for a disaster.

Preparing for Disasters (Video)

Take Advantage of Paperless Recordkeeping for Financial and Tax Records

Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format.

Be sure you back up your electronic files and store them in a safe place. Making duplicates and keeping them in a separate location is a good business practice. Other options include copying files onto a CD or DVD. Also, many retail stores sell computer software packages that you can use for recordkeeping.

When choosing a place to keep your important records, convenience to your home should not be your primary concern. Remember, a disaster that strikes your home is also likely to affect other facilities nearby, making quick retrieval of your records difficult and maybe even impossible.

Document Valuables and Business Equipment

The IRS has disaster loss workbooks for individuals ( Publication 584, Casualty, Disaster, and Theft Loss Workbook) and businesses ( Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.

One option is to photograph or videotape the contents of your home and/or business, especially items of greater value. You should store the photos with a friend or family member who lives away from the geographic area at risk.

Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

Continuity of Operations Planning for Businesses

How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When you hire new employees or when there are changes in how your company functions, you should update your plans and inform your people.

There are real benefits to being prepared for disasters. The following preparedness strategies are common to all disasters. You plan only once, and are able to apply your plan to all types of hazards.
Get informed about hazards and emergencies and learn what to do for specific hazards.
Develop an emergency plan.
Learn where to seek shelter from all types of hazards.
Back up your computer data systems regularly.
Decide how you will communicate with employees, customers and others.
Use cell phones, walkie-talkies, or other devices that do not rely on electricity as a backup to your telecommunications system.
Collect and assemble a disaster supplies kit. Include a portable generator.
Identify the community warning systems and evacuation routes.
Include required information from community and school plans.
Practice and maintain your plan.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time and so do preparedness needs. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.

Count on the IRS
Immediately after a casualty, you can request a copy of a return and all attachments (including Form W-2) by using Form 4506, Request for Copy of Tax Return (PDF).

If you just need information from your return, you can order a free transcript by calling (800) 829-1040 or using Form 4506-T, Request for Transcript of Tax Return (PDF). Requests for Transcripts are also available using the online and mail options found on the Get Transcript page. Transcripts are available for the current year and returns processed in the three prior years. IRS.gov is an indispensable resource as you prepare for and recover from disaster.

IRS Small Business Self-Employed Tax Center

The Importance of Budgeting in Business

Source: https://wlf.com.au/importance-budgeting-business/

Some business owners begin their operation with a wave of optimism and enthusiasm but without a well thought out budget they find it is not possible to create a successful action plan.

When running a business it’s easy to get bogged down with day to day problems and miss the bigger picture. Successful businesses allocate time to create and manage budgets, prepare and review business plans and regularly monitor their financial situation and business performance.

Budgeting identifies current available capital, provides an estimate of expenditure and anticipates incoming revenue. By referring to the budget businesses can measure performance against expenditure and ensure that resources are available for initiatives that support business growth and development. It enables the business owner to concentrate on cash flow, reducing costs, improving profits and increasing returns on investment.

Budgeting is the basis for all business success. It helps with both planning and control of the finances of the business. If there is no control over spending, planning is futile and if there is no planning there are no business objectives to achieve.

A budget is a plan to:

• control the finances of the business
• ensure that the business can fund its current commitments
• enable the business to meet it objectives and make confident financial decisions; and
• make sure that the business has money for future projects.

The benefits of budgeting should never be underestimated when running a business:

• budgeting estimates revenue, plans expenditure and restricts any spending that is not part of the plan
• budgeting ensures that money is allocated to those things that support the strategic objectives of the business
• a well communicated budget helps everyone understand the priorities of the business
• the process of creating a budget provides opportunities to involve staff, resulting in them sharing the organisation’s vision; and
• engaging the team in reviewing and comparing the budget with actuals can provide information that highlights the strengths and weaknesses of the business.

If you’re running your business without a proper budget you may find you’re actually just running around in circles and not meeting your long-term goals. By taking the time now to set a budget, you will free up time in the future and give yourself the best chance of achieving the rewards you want for your hard work.

-Karen Banks, Advisor

3 accounting tools every entrepreneur must know

Source: Staff HBX Business Blog https://goo.gl/ufffd3

If you are an entrepreneur, or even just thinking about starting a business, you should spend some time considering the financial implications of your idea and the practical aspects of your business model. Being able to move money around to purchase supplies, pay creditors and attract investors is oftentimes just as important as developing your idea. These three accounting concepts are a “must-know” for all entrepreneurs.

Cash Flow

The time-tested saying of “Cash is King” is really true—especially for entrepreneurs. For many businesses, especially new ones, where credit lines are limited and financing is difficult, cash proves to be one of the most critical assets. It serves as the fuel to your company’s engine. Without it, you can’t meet payroll or pay suppliers and will find it more difficult to build inventory, reach customers and grow the business. 

Understanding and projecting cash flow allows companies to plan for the future and ensure that there is always enough money in the bank to keep the business running (and hopefully growing). Paying attention to cash inflows and outflows allows entrepreneurs to plan accordingly, prevent any unnecessary cash shortages, and use excess cash productively to grow the business.

The Balance Sheet

The balance sheet is a snapshot of the financial health of a business at a particular point in time. It allows those interested in the business to quickly see what resources are available and how those resources were financed. An easy way to think of the balance sheet is to think of it as a way to view the health of the business because it shows both the assets and liabilities—or what you have right now and what you owe others. 

Entrepreneurs can use the balance sheet to help keep the business in check. While sales may be increasing exponentially, keeping an eye on the liabilities side of the balance sheet is important to the long term success of the business. Even though investors care about growth potential, they also care about how much the company owns versus how much it owes. The balance sheet gives investors, and potential buyers, a solid understanding of the where the company stands today. 

Profitability 

Profitability is how much is left from each dollar of sales after all expenses have been subtracted. This may seem obvious for those interested in starting a business—but it can sometimes fade into the background during the early stages of a company. Often times, it’s necessary to take a loss early on to reach a target market, accumulate customers, increase visibility or launch successfully, but this cannot be a long term strategy. Entrepreneurs must have a path to profitability to attract investors and succeed over time.

Small Business Taxes: The Virtual Workshop

Source: https://goo.gl/mpDpQP

Welcome to Small Business Taxes: The Virtual Workshop.

We designed this workshop to help you, a new business owner, understand and meet your federal tax obligations. This workshop is constructed so that the first three lessons... What You Need to Know about Federal Taxes and Your New Business, What You Need to Know about Schedule C and Other Small Business Taxes and Tax Forms; And How to File and Pay Your Taxes Electronicallyare for everyone, no matter what kind of business you have or whether you have employees.

Then, in What You Need to Know When You Run Your Business Out of Your Home and How to Set Up a Retirement Plan for You and Your Employees, we'll discuss some information that may be relevant to you now-- or that may become relevant once your business has become established. The final four lessons... What You Need to Know about Federal Taxes when Hiring Employees or Independent Contractors, How to Manage Payroll so You Withhold the Correct Amount from Employees, How to Make Tax Deposits and File a Return to Report Your Payroll Taxes. And Hiring People Who Live in the U.S. but Who Aren't U.S. Citizens, ....are for those employers who already have, or who are thinking about hiring, employees. Because this is a virtual workshop, you can choose the lessons that apply to you.

Using the navigation buttons on the screen, you can go directly to the information you need. You also can pause and bookmark lessons so you can review information at a later time. Best of all, you can return to lessons you didn't need when you started your business but might need now; for example, if you decide to start a retirement plan or your business has grown enough that you want to hire employees-- all the information will be here when you need it. Throughout these lessons, you'll hear from small business owners like yourself, and we hope that by watching these owners learnhow to meet their federal tax obligations, you'll learn how to meet yours as well. Best wishes on your new business.

Video here: https://www.irsvideos.gov/Business/virtualworkshop?=undefined

Self-Employed Individuals Tax Center

Source: https://goo.gl/aHMAbu

• Who is Self-Employed?
• What Are My Self-Employed Tax Obligations?
• How Do I Make My Quarterly Payments?
• How Do I File My Annual Return?
• Am I Required to File an Information Return?
• Business Structures
• Home Office Deduction
• Married Couples Business - What is a Qualified Joint Venture?
• Considering a Tax Professional
• Online Learning Tools

Who is Self-Employed?

Generally, you are self-employed if any of the following apply to you.

• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business)

Back to top

What are My Self-Employed Tax Obligations?

As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly.

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, anytime the wording "self-employment tax" is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax).

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040. But in some situations your loss is limited. See Pub. 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) for more information.

You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions (PDF).

Back to top

How Do I Make My Quarterly Payments?

Estimated tax is the method used to pay Social Security and Medicare taxes and income tax, because you do not have an employer withholding these taxes for you. Form 1040-ES, Estimated Tax for Individuals (PDF), is used to figure these taxes. Form 1040-ES contains a worksheet that is similar to Form 1040. You will need your prior year’s annual tax return in order to fill out Form 1040-ES.

Use the worksheet found in Form 1040-ES, Estimated Tax for Individuals to find out if you are required to file quarterly estimated tax.

Form 1040-ES also contains blank vouchers you can use when you mail your estimated tax payments or you may make your payments using the Electronic Federal Tax Payment System (EFTPS). If this is your first year being self-employed, you will need to estimate the amount of income you expect to earn for the year. If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated taxes for the next quarter.

See the Estimated Taxes page for more information. The Self-Employment Tax page has more information on Social Security and Medicare taxes.

Back to top

How Do I File My Annual Return?

To file your annual tax return, you will need to use Schedule C (PDF) or Schedule C-EZ (PDF) to report your income or loss from a business you operated or a profession you practiced as a sole proprietor. Schedule C Instructions (PDF) may be helpful in filling out this form.

Small businesses and statutory employees with expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C. To find out if you can use Schedule C-EZ, see the instructions in the Schedule C-EZ form.

In order to report your Social Security and Medicare taxes, you must file Schedule SE (Form 1040), Self-Employment Tax (PDF). Use the income or loss calculated on Schedule C or Schedule C-EZ to calculate the amount of Social Security and Medicare taxes you should have paid during the year. The Instructions (PDF) for Schedule SE may be helpful in filing out the form.

Back to top

Am I Required to File an Information Return?

If you made or received a payment as a small business or self-employed (individual), you are most likely required to file an information return to the IRS.

Back to top

Business Structures

When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. Visit the Business Structures page to learn more about each type of entity and what forms to file.

Back to top

Home Office Deduction

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.

Back to top

Married Couples Business - What is a Qualified Joint Venture?

Married Couples Business
The employment tax requirements for family employees may vary from those that apply to other employees. On this page we point out some issues to consider when operating a married couples business.

Election for Married Couples Unincorporated Businesses
For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a "qualified joint venture," whose only members are a married couples filing a joint return, can elect not to be treated as a partnership for Federal tax purposes.

Back to top

Considering a Tax Professional

Tips for Choosing a Tax Return Preparer

Back to top

Online Learning Tools

The Small Business Taxes: The Virtual Workshop is composed of nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities. The IRS Video Portal contains video and audio presentations on topics of interest to small businesses, individuals and tax professionals.

Back to top