Surprise! It’s Tax Time!!
Now that it’s officially January it’s time to do your taxes. And no, you can’t click your ruby slippers, and wake up over the rainbow.
What? You thought I was kidding? No, this is not a super early April Fools joke. As a small business owner, there are certain tax reporting deadlines you should be aware of that are coming in up in the next few weeks. If you’re already on top of your quarterly estimated tax payments, any W-2 reporting, and your 1099s, fantastic! Stop now and go enjoy a piece of chocolate or a walk in the sun.
If not, keep reading.
Quarterly Tax Payments
If you’re making any kind of money in your business, you should be paying quarterly estimated tax payments to the IRS. Due in mid-April, June, September and January of the following year, these prepayments count against your actual business tax bill for that fiscal year. If you expect to owe at least $1,000 in federal taxes (based on your net business income), this should be something you’re doing regularly in your business. The 4th quarter of 2016 payment is due by January 17, 2017.
Hopefully, this is preaching to the choir and you’re completely on top of this concept already, but many new business owners miss the boat on quarterlies in the first year and end up paying penalties. You don’t want to have to pay your taxes and then some, I know, so keep an eye on this tax schedule. It’s a good idea to set a reminder a few weeks before your payments are due for 2017, too. If you work with an accountant, chances are good they will have provided you the forms, amount and even addressed envelopes for your quarterlies for the year.
You can find out more about the self-employment nitty-gritty straight from the horse’s mouth by clicking this link. If your business is incorporated, the same concept of prepayment of taxes applies, although the filing forms are different. Check them out here if you need a refresher; the due dates are the same.
This may not apply to many solo-preneurs or individual consultants out there, but if you have employees, it’s also time to get your W-2s and W-3 filed. Remember, the W-2 is the form that gives your income and tax breakdown for the year that you use to file your individual taxes if you work for someone else. As the employer, it’s your job to get these reports to your staff and filed with the IRS by January 31, 2017. There are a series of copies that need to be printed and sent. You can pick up blank forms at your local Staples store or order them from the IRS for free, although if you don’t have them in hand yet, that may be a better idea for next year. The red copies go to the IRS, two versions of the black and white copies go to your staff and there’s a version for your records (although you can copy or scan them for yourself, too).
What are W-3s? That is the cover report that goes along with the red W-2s to the IRS. It summarizes your total gross wages and tax payments on behalf of your staff for the year. You’ll want to check (and double check) that the numbers are accurate. (Hint: most accounting programs make this easy). Fill out your forms and pop them in an envelope in the next two weeks and you’ll be done with that accounting activity for the year! If you’re not sure if this applies to you, check out the details here.
Okay, what is this 1099 thing? If you have every worked as a consultant for someone, and they’ve paid you more than $600 in a fiscal year (January – December), you should have received a 1099 from them. This is the government’s way of tracking income for self-employed individuals and sole proprietors, since we don’t receive regular paychecks from an employer (which is reported via the W-2). If you are a sole proprietor or LLC, you should be receiving 1099s from your clients. This is the basis for calculating your business’s income taxes owed to the IRS.
As a business owner, it is also your responsibility to generate and send out 1099s to anyone you’ve paid $600 or more who qualifies for a 1099. Typically that means anyone who files taxes using their own social security number (SSN) or as a limited liability company (LLC). It’s a good rule of thumb to get a W-9 from all new vendors (anyone you pay money to for goods or services), even if they don’t need a 1099. Your records will be clean and you will have backup if you are ever audited.
So, gather your financial information and determine who should get a 1099 from you. Grab a set of forms or find a e-file service. Fill out them out and send them to your vendors by January 31st. Complete the red copies of the 1099 with the accompanying 1096 form (a summary report), and send that to the IRS before the end of the month, as well. Not sure if you need to do this? Check the IRS requirements here.
Again, if you use an accounting program like QuickBooks Online or some other platform, this should be fairly easy to accomplish.
There’s no time like the present!
It may seem like it’s too soon to be thinking about taxes, but one good thing about taking care of your quarterlies, your W-2s and 1099s now is that it gets you in a financial mindset. With this piece of business taken care of, you’ll be one step closer to having your ducks in a row for tax season. It’s never too early to start reviewing last year’s numbers and gathering your information for the accountant.
Looking for help getting started?
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Wondering What To Do And When?
Wish you knew exactly what you should be doing with your books on a daily, weekly, monthly and yearly basis? Grab this handy Bookkeeping Checklist to stay on track with your accounting tasks!
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