Filing & Paying Business Taxes (Part 5)
Filing & Paying Business Taxes
Continued from last week
Employment Taxes. If you have employees, you will need to file forms to report employment taxes. Employment taxes include the following items. Social security and Medicare taxes. Federal income tax withholding. Federal unemployment (FUTA) tax.
For more information, see Publication 15 (Circular E), Employer’s Tax Guide. That publication explains your tax responsibilities as an employer. To help you determine whether the people working for you are your employees, see Publication 15-A, Employer’s Supplemental Tax Guide. That publication has information to help you determine whether an individual is an independent contractor or an employee. If you incorrectly classify an employee as an independent contractor, you may be held liable for employment taxes for that worker plus a penalty. An independent contractor is someone who is self-employed. You do not generally have to withhold or pay any taxes on payments to an independent contractor.
Information Returns: If you make or receive payments in your business, you
May have to report them to the IRS on information returns. The IRS compares the payments shown on the information returns with each person’s income tax return to see if the payments were included in income. You must give a copy of each information return you are required to file to the recipient. In addition to Forms 1099, 1098, 5498, and W-2G, you may have to use other returns to report certain kinds of payments or transactions.
Form 1099-MISC. Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your business. These payments include the following items. Payments of $600 or more for services performed for your business by people not treated as your employees, such as fees to subcontractors, attorneys, accountants, or directors. Rent payments of $600 or more, other than rents paid to real estate agents. Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. Royalty payments of $10 or more. Payments to certain crew members by operators of fishing boats. You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment.
Form W-2. You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes, and advance earned income credit payments.
This column is offered as a public service with the understanding that each person's tax situation is different; and that you should consult your CPA before taking any action based upon comments made in this article. Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates”. I can be reached at 825-2771.
Continued next week