Business Tax
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
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 tax debt. 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 debts.
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.
Here are some key considerations to stay compliant with your sales tax:
Nexus |
State-specific tax codes |
Timely reporting |
| It is very crucial that you understand when your business has a tax presence in a state (nexus). After all, failing to collect & remit sales tax can cause many issues. For example, penalties, interest & tax liability against your business. | Because each state has its own rates and sales tax laws, staying updated with state-specific tax codes is essential. Moreover, you should accurately calculate your sales tax to avoid underpaying taxes. | If you want to avoid penalties, always meet the deadlines for reporting and remitting sales tax. Moreover, know that most of the sales tax returns are due monthly. |
State Payroll/ Withholding Taxes
Even though payroll taxes are not filed and collected at the federal level, you – as a business – need to file and pay the withholding tax return for the state. Moreover, you must ensure that you comply with the state requirements while you file and pay the withholding tax return. After all, each state has its own forms and deadlines. If you want to stay compliant with your state withholding tax, here are some key considerations for you:
State withholding forms | Employee residency | Quarterly filings |
Stay updated with the state withholding forms because different states have unique withholding forms. Besides, if you fail to complete them correctly, it can lead to a balance due. | It can be very complex to determine the correct state in which to withhold taxes – for remote or multi-state employees. Failing to report the employee residency can result in back taxes | As aforementioned, it can lead to penalties, interest and tax liability if you miss deadlines or make miscalculations. Moreover, you should know that many states require quarterly filing of withholding tax returns. |
Undoubtedly, it can be overwhelming to navigate the intricate world of business taxes. Still, if you want your business’s financial stability and compliance, it is very crucial. Moreover, the tax codes we have shared above are just the tip of the iceberg. So, if you are overwhelmed by the complexities of business taxes, let us help you out. At LifeBack Tax Relief, we do our best to help you find relief from sales tax liability.
You can trust our certified team members to professionally and politely guide you. At every step, we keep you aware of the situation. Moreover, we ensure that your taxes are paid on time. Feel free to connect with us right away. We offer a FREE consultation to all our clients.
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