Written by Allison Kierman and Jeff Chirico
For most entrepreneurs, handling business taxes is a daunting but necessary task. The complexities of tax preparation often lead business owners to procrastinate or neglect proper record keeping and tax deadlines. Nevertheless, following these basic steps can simplify the process and guide you as you prepare to file your business tax return.
- Pay attention to important deadlines. As a business owner, it is very important that you keep the various tax deadlines in mind as you go about your daily tasks. Failure to adhere to the Internal Revenue Service’s (IRS) deadlines can result in interest and penalties that accumulate over time. The most well-known tax deadline is April 15, but businesses may have additional tax deadlines depending on their legal entity type. In general, keep the following dates in mind:
- January 31, 2020: Deadline to send out W-2, W-3, and 1099-Misc Forms to employees and to the IRS
- February 28, 2020: If filing by paper, deadline for filing 2019 information returns such as Forms 1097, 1098, 1099, and W-2G (if filing electronically, other dates apply)
- March 16, 2020: Filing deadline for partnerships and S corporations
- March 31, 2020: Deadline for electronically filing 2019 information returns such as Forms 1097, 1098, 1099, and W-2G
- April 15, 2020: Deadline for first-quarter estimated tax payments and 2019 tax returns for sole proprietorships and corporations
- June 15, 2020: Deadline for second-quarter estimated tax payments
- September 15, 2020: Deadline for third-quarter estimated tax payments; extension deadline for partnerships and S corporations
- October 15, 2020: Final deadline for filing the 2019 tax return extension for individuals, sole proprietorships, and corporations
- December 15, 2020: Deadline for fourth-quarter estimated tax payments for corporations
- January 15, 2021: Deadline for fourth-quarter estimated tax payments for individuals
- Choose the appropriate accounting method. The IRS allows a business to choose its method of accounting. The two primary options are the cash method and the accrual method. The cash method allows a business to account for income and expenses when the money is actually paid and spent, whereas the accrual method accounts for money when it is earned or billed.
- Pay your employment taxes. Employment taxes refer to the taxes a company must pay for the individuals employed by the company. This includes Self-Employment Contributions Act (SECA) taxes for individuals who work for themselves and Federal Insurance Contribution Act (FICA) taxes for employees, both of which cover Medicare and social security taxes. Employment taxes are not paid for independent contractors because no tax withholding occurs for independent contractors. Contractors are responsible for paying their own self-employment taxes. In such instances, employers provide contractors with 1099-MISC Forms instead of W-2s.
- Review documents for mistakes. Finally, it is not uncommon for tax returns to be filed with minor mistakes like the wrong Social Security number or address. Carefully review your tax documents before submitting them to ensure that they are accurate.
Small business owners should carefully consider their business taxes and consult with a professional for assistance reviewing records and making important tax decisions.
Allison L. Kierman is the Managing Partner of Kierman Law, PLC, an Arizona estate planning and probate law firm based in Scottsdale, Arizona. Allison is also the Vice President of the Board of Directors for Congregation Beth Israel and Vice President, Legal Affairs for the National Council of Jewish Women of Arizona.
Jeff Chirico is the Co-Managing Partner of CK CPA Services, LLC, an Arizona tax and accounting firm.