We understand that business taxes can be complex and owing money to the government as a result can be stressful. Lifeback Tax relief will explain how payroll taxes, sales taxes, and withholding taxes with states can impact your business to owe taxes if not filed and paid on time.
Payroll taxes are a significant aspect of running a business as they directly impact your company’s and employees’ well-being. Employees are the backbone of any business hence their well-being is crucial to company success.
The Internal Revenue Code (IRS section 3402) governs the withholding of federal income taxes from employee’s wages. Error in its calculations or noncompliance can result in back taxes owed to the IRS. Unpaid payroll taxes can also lead to taxpayers being assessed personally often known as Trust Fund Recovery Penalty.
Form 941: Employer’s Quarterly Federal Tax Return
This form is used to report income taxes, social security tax, and Medicare tax withheld from employee’s wages. Failure to file or inaccuracies in reporting can lead to back taxed owed. FICA comprises social security and Medicare taxes both of which are withheld from your employees’ paychecks. Misclassifying employees or failing to withhold these taxes correctly can lead to tax liabilities.
Business challenges and unforeseen circumstances can lead some businesses to miss making timely Federal Tax Deposit (FTD) payments. Thus, when Form 941 is not filed quarterly, it can result in a balance due. As a business owner, you must make timely FTD deposits, and file and pay the balance due with your quarterly Form 941 tax return.
Form 940: Employer’s Annual Federal Unemployment Tax Return
This form is used to report Unemployment Tax (FUTA) every year. This form is due on January 31st following the end of each calendar year. Most employers pay both a federal and a state unemployment tax and only employers pay FUTA tax.
Sales tax with states
Many businesses face back taxes due to non-compliance with sales tax with states. Tax rates and laws vary from state to state and it is important to have complete knowledge of the sales tax charged in your area to ensure compliance and avoid miscalculation. A business failure to pay sales tax with the state can lead to being personally assessed for the unpaid balance. The sales tax collected from customers didn’t belong to the business thus when a business fails to pay a sales tax return, it is also almost considered theft.
Some key considerations to stay compliant with your sales tax:
Understanding when your business has a tax presence in a state (nexus) is crucial. Failing to collect and remit sales tax when required can lead to penalties and debt against the business.
State-specific tax codes
Each state has its own sales tax laws and rates. It’s essential to stay up to date and accurately calculate sales tax for your transactions to avoid underpaying taxes.
State Payroll/ Withholding Taxes
Payroll taxes are not filed and collected at the federal level but the business must file and pay their withholding tax return for the state as well. Each state has its forms and deadlines, so please make sure that as a business you are also complying with the state requirements.
Some key considerations to stay compliant with your state withholding tax:
State withholding forms
Different states may have unique withholding forms and failing to complete them correctly can lead to a balance due.
Determining the correct state in which to withhold taxes for remote or multi-state employees can be complex. Many businesses fail to report this due to confusion or lack of knowledge and face back taxes.
Many states require quarterly filing of withholding tax returns. Missing deadlines or miscalculations can lead to penalties and tax liability.
Navigating the intricate world of business taxes can be overwhelming but it’s crucial to the business’s financial stability and compliance. The tax codes mentioned are just the tip of the iceberg. At Lifeback Tax Relief, we understand the complexities of business taxes and can help you find relief from back taxes.
Our certified team members will guide you at every step and make sure all your taxes are paid on time. Contact us right away to book a FREE consultation with us!
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