Upcoming Tax Deadlines for Small Business & Individuals

October is a big month for Small Businesses and Individuals alike!

Monday, October 16th

• C corporations: File calendar year Form 1120 if you timely requested a 6-month extension
• Individuals: File Form 1040, 1040a, or 1040EX if you timely requested a 6-month extension 

Tuesday, October 31st

• File Form 720 for the third quarter.
• File Form 230  and pay tax on wagers accepting during September
• File Form 2290 and pay the tax for vehicles first used during September
• File Form 941 for the third quarter
• Deposit FUTA owed through sep if more than $500 

Tax Options for the Self-Employed

Photo by Bonnie Kittle on Unsplash

From the U.S. Small Business Administration comes this insightful article on how to manage Self-Employment Taxes and the options those individuals have.

Self-Employment Tax Wrinkles
By BarbaraWeltman, Guest Blogger
Published: February 14, 2017
Updated: February 21, 2017

Individuals whose businesses are incorporated do not have to think about self-employment tax. Any salary they take from their corporations as owner-employees are subject to FICA taxes. In contrast, those with other types of business entities—sole proprietorships, partnerships, and limited liability companies (LLCs)—are not employees; they are self-employed individuals. As such they meet their Social Security and Medicare taxes obligation through the payment of self-employment tax.

Self-employed individuals pay what amounts to the employer and employee share of FICA tax; the employer share is deductible. In other words, they pay 15.3% (comprised of 12.5% for Social Security tax and 2.9% for Medicare tax). The self-employment tax is applied to net earnings from self-employment, although only net earnings up to an annual threshold ($118,500 for 2016; $127,200 for 2017) are taken into account for the Social Security tax portion. In basic terms, net earnings from self-employment are income minus expenses. It sounds simple enough, but there are some ins and outs that may impact your payments.

$400 threshold

While FICA taxes apply to the first dollar of wages paid to an employee, there is no self-employment tax due if net earnings from self-employment are less than $400.00. So a self-employed individual with only losses for the year, or someone with a modest sideline business, may be below the threshold for self-employment tax.

However, if net earnings are $400.00 or more, then the tax applies to all net earnings. There’s no exemption for this amount.

Optional payments

Self-employed individuals who have modest earnings may want to voluntarily pay self-employment tax. The reason: This enables such individuals to earn Social Security credits, which translate into higher benefits in retirement.

There are two optional methods for figuring earnings: one for farmers and one for all other self-employed individuals (nonfarm optional method). The farm optional method applies for 2016 returns if gross farm income was not more than $7,560 or net farm profits were less than $5,457. The nonfarm optional method can be used if net nonfarm profits were less than $5,457 and also less than 72.189% of gross nonfarm income but you had net earnings from self-employment of at least $400 in two of the prior three years. The nonfarm income optional method cannot be used more than five times by a self-employed individual

Determining self-employment income

In most cases, it’s easy to know what is or is not self-employment income for purposes of the self-employment tax. But there continues to be confusion about certain types of payments. Here are some recent matters concerning this issue:

• Payments for past performance. A former employee received a payment resulting from 34 years of services for a company. The IRS said it is subject to self-employment tax because there is a nexus between the income received and a trade or business. A court said the same thing for retirement payments made to a former Mary Kay sales person.
• Separate lines of work. A plastic surgeon who conducted his medical practice through a single-member professional limited liability company (PLLC) also had a minority interest in a limited liability company that ran a surgery center. The Tax Court said that his earnings from the surgery center were not subject to self-employment tax because he was a mere investor here; the activities did not have to be grouped as a single activity. He did not manage the center or have any day-to-day responsibilities there.

It should be noted that the IRS has yet to issue regulations explaining the extent to which a member’s distributive share from an LLC is subject to self-employment tax. This issue is on the IRS’s Priority Guidance Plan for 2016-2017.

Final thoughts
Self-employment tax must be taken into account in figuring estimated tax payments, and the first estimated tax payment for 2017 is due by April 18, 2017. Self-employed individuals should work with a tax professional to make sure this tax obligation is being handled properly.

Employee Benefits that Count as Taxable Income

As a small business owner, you always want to save wherever you can, but that doesn't mean cutting corners.  Cutting corners, like NOT hiring a professional to do your taxes or payroll could end up in either losing you money or making an error like deducting employee benefits you shouldn't (Number 6!).  That's why Accounting Works is offering affordable and competitive prices on Payroll Services to all small businesses.  With accounting software that allows employees to download their own W2s and Paystubs, you don't have to worry about going back and forth.  Not to mention our tax expertise to find you opportunities to save money and grow your business.

Credit: Getty Images

7 Employee Benefits You Didn't Know Were Taxable Income
With tax season upon us, it's important to understand what employee perks and benefits will count towards your employees' taxable income.

By Rebecca Wessell

With more perks and benefits becoming standard (and with tax day coming up), it's important to know which perks are considered taxable income for your employees. Here are some perks you may not realized are considered taxable by the IRS:

1. Gym or health memberships
I didn't know this one until recently (when our company offered us gym memberships), but the IRS considers a gym or health membership a fringe benefit, and therefore taxable income. The IRS will tax you on the fair market value of the gym membership, so if the gym membership is $50 per month, your employees will be taxed on that extra $600 per year.

One exception to this is if the gym facility is on-premise or employer-owned. In this case, employees won't typically be taxed on the gym, and the employer can usually write it off as a deduction. This is how big companies like Google can provide truly free gym memberships for their employees.

2. Business frequent flyer miles converted to cash
You probably knew that cash gifts to employees are considered taxable income, but you probably didn't know that the IRS doesn't care how the cash becomes cash in your employee's hands.

If you have a small business or corporate credit card and you allow employees to convert your business's points or frequent flyer miles for cash, that may be considered taxable income.

3. Season tickets
While providing infrequent or one-off tickets to events is considered a "de minimis" fringe benefit (and not taxable), providing season tickets can taxable. Depending on how expensive the season tickets are, this could be a pretty considerable tax burden to your employees.

It may be more cost-effective to your employees to provide the occasional ticket rather than a season pass.

4. Clothing
If you provide clothing to your employee that can replace everyday clothing (i.e., not a uniform), this may also be taxable. This doesn't include providing company t-shirts once a year or small value items.

However, if you frequently give your employees clothing and it amounts to a significant amount, they may need to pay taxes on them.

5. Vacation expenses
With some companies now providing "paid paid vacation" for their employees, you should also know that the IRS considers that a taxable fringe benefit. If your business pays for any vacation expenses for its employees, whether airfare, hotels or meals, this must be included in the employee's gross income.

Another kicker? None of these expenses is deductible to you as the employer.

6. Spousal travel or meals
There are some exceptions to this rule. Namely, the exceptions are if the spouse is also an employee or is there for a genuine business purpose, or if the expense would be deductible by your employee anyway.

Otherwise, any expenses, such as food, lodging or travel, covered for your employee's spouse will be taxed come April.

7. Personal use of employer vehicle
If you provide cars or other vehicles for employees, the employee's personal use of the vehicle will be taxed. This includes commuting to and from work, running personal errands or letting a non-employee use the vehicle.

And it's important to keep good records. Because if you don't keep records on when the employee uses the vehicle for business or personal purposes, then all of the usage will be taxed.

To view original article visit Inc.com

Last Minute Tax Tips for Small Businesses

When you’re running a business it’s hard to do it all. Filing your taxes in a timely manner can be difficult and if you’re a business owner this is especially true because you typically have a lot on your plate. The problem with waiting until the last minute to file your taxes is that you may miss some things that will work to your advantage. Here are some of the things you want to pay attention to when you’re filing this year:

Free Filing

If you made less that $57k in the past year, you are eligible to use free e-filing software. What’s great about this is that there is little to no out of pocket expense to you and it's typically self-explanatory. You get asked questions about your business and finances, and you fill out the form like you would any other questionnaire. 

Start-Ups

Did you start your business last year? You qualify for a $5k deduction since starting a business is considered a capital expense. This may not apply to everyone but it definitely applies to some, and if you did start a new business last year, congrats! It’s not easy. 

Education

Did you take a class or course to receive training to improve your business? If so, that also qualifies as a deduction. Things like seminars and conventions count too!

Driving

Mileage is one of the easiest deductions for you to qualify for. Whether it’s meeting clients, getting supplies or doing research around town, you can get a deduction for using your own vehicle to run your business. Most business owners have to do this at some point or another, just make sure that you keep track of your miles and maybe even use a helpful app to do it for you!

Working from home

Being your own boss is great, but if you also get to work a lot from home and have a dedicated space just for that, that also qualifies as a deduction. You do have to specify square footage but that shouldn’t take too long to figure out. 

Insurance

There’s no one looking out for you but yourself when you’re self-employed, this is why getting health insurance is on you. Not to worry though, IRS knows that this can be a costly expense for someone who has their own business and sometimes either offers assistance or a tax break to ensure you’re healthy enough to run your business. 

Software and subscriptions

Quickbooks, Photoshop, Paypal - if you’re a business owner you may be familiar with some of the these software programs. Most of these require a monthly subscription which can end up costly hundreds of dollars a year, take this as a deduction also because it is considered a business expense.

Hotels and Meals

We never know where work will take us, but we do know that covering these expenses can get costly. That is why saving all your receipts for both meals and hotels is important. Most of these things, as long as they are a business expense, are also deductible. 

Tax Extensions!

April 15 is fast approaching and some might not be ready to file yet.  Fear not, anyone can apply for an extension. Yes, even you.  There are a three things to know first before filing for an extension. 

1.  Form 4868 is what you need to file in lieu of your Federal Income Tax Return.  You can file it by mail or electronically, as long as it’s in by April 15 you will have an automatic 6-month extension to file.

2.  Remember that this form is just an extension to file, not pay taxes due.  You must have an estimate of the amount you owe and send it when filing for an extension to avoid any late fees or penalties.  Any underpayment of taxes not paid by April 15 is subject to late fees and interest.

3.  The purpose of this form isn’t just to procrastinate until October.  The time is meant to allow for complete and accurate filing without assessing a late filing penalty.  The extra time granted is usually used to seek professional advice about your financial situation.

There are many benefits to requesting an extension to file your income taxes.  It’s a great way to avoid the busy rush of tax season and your tax professional will more likely have time after mid-April.  The most important thing to remember is that it’s an extension of time to file your return, not to pay taxes due.