02/ 11/ 2008
by Michael Bess, IRS, senior stakeholder liaison
What to know before you file
Business cards? Check. Catchy slogan? Check. Small-business tax payments? Uh-oh.
One of the biggest challenges facing small businesses today is keeping up with employment tax and personal estimated tax payments. Failing (or simply forgetting) to set aside funds and keep these payments up to date can cause a business to quickly pyramid outstanding liabilities for multiple tax periods. Late payments, the IRS cautions, can mean added penalties and interest, making it difficult for small-business owners and earnest entrepreneurs to catch up.
One tool to help businesses stay on track with their tax payments is the IRS's Electronic Federal Tax Payment System (EFTPS), an online service that accepts both employment and estimated tax payments. Payments can be made online at any time or by phone. Visit www.EFTPS.gov or call 800-555-4477 for more information.
The IRS understands that preparing a tax return can be more complicated for small-business owners than for the average wage earner. In addition to the familiar Form 1040, small-business owners or self-employed individuals need to complete Schedule C or C-EZ, making sure all income from the business is accurately reported.
Businesses with employees have additional requirements, including reporting annual wages paid on Form W-2. All W-2s, along with a Form W-3 transmittal document, must be submitted to the Social Security Administration by Jan. 31, and copies provided to employees no later than Feb. 29.
Business owners are also required to file Form 1099-MISC for each non-employee worker paid more than $600 during the year. These forms should be transmitted to the IRS using Form 1096 no later than March 2.
Fortunately, virtually all business returns can now be filed electronically. Electronic filing is an easy and smart way to not only keep track of your business tax forms and payments but also to guarantee they reach the IRS safe and error free. Due to internal checks built into the electronic filing system, the accuracy rate is 99 percent. And it's fast, too:
You will receive an official acknowledgement of receipt within 48 hours, most times within minutes of the transmittal.
For more pre-filing tax tips, visit www.IRS.gov. A series of fact sheets with other important reminders for small businesses can be located through keyword search "Tax Gap."
