Most of us, whether we are individuals, sole proprietorships or LLCs, are thinking about tax deadlines that we need to meet in the coming months. Below is a summary of important tax obligations and related deadlines that all small business owners need to know:
W-2 Filings. You are required to send Form W-2s to all employees by January 31. Form W-3 which summarizes the information on the individual employee Form W-2s and all copies of form W-2s need to be sent to the IRS by January 31 as well.
1099 Filings. You are required to submit a Form 1099 to any independent contractor/service provider you paid a total of $600 or more during calendar year 2015. Typical vendors and contractors that fall under this category include law firms, accounting firms, marketing agencies, and independent consultants. Corporations and suppliers of merchandise, telecoms, freight, storage and similar items are exempt from receiving a 1099.
You will need the contractor’s name, address, tax id# and amount paid to file a 1099. Typically a contractor would complete a W-9 with their personal information. It is important that you maintain copies of all W-9s received from contractors and the 1099s issued as part of your accounting files. The IRS requires that all 1099s to your independent contractors be sent to them by January 31. Copies to the IRS need to be submitted by February 29.
Resources available to help file W-2 forms and 1099 forms include:
· Your Payroll Service Provider
· Your Tax Accountant
Income Tax Return. Most small businesses will elect to file taxes as a sole proprietorship or single member LLC. You will file your business return on Schedule C as part of your individual Form 1040 return. I recommend that any small businesses filing as an LLC or a Corporation solicit the help of a tax professional to determine which form to file. Income tax filings for the 2015 calendar year are due April 18, 2016. If you need more time, you can file an extension (Form 4868) by April 18 extending your income tax return filing deadline to October 15. However, if you owe taxes for calendar year 2015, you must pay them by April 18 in order to prevent interest and penalties.
If you did not file and pay quarterly income taxes for your business in 2015, I strongly encourage that you implement this process in 2016 if your business is generating taxable income. The quarterly filings allow you to spread your payments over the course of a year rather than have a large tax obligation due when you file. The IRS can also penalize you if you owe taxes and wait until April 15 to pay them for the prior calendar year.
The quarterly filings also keep you informed on how your business is doing on a regular basis. The first quarterly filing for 2016 is due April 18 for estimated taxes due for the January 1 – March 31 tax period.