Table of Contents
- Useful Items - You may want to see:
- Identification Numbers
- Income Tax
- Self-Employment (SE) Tax
- Employment Taxes
- Excise Taxes
- Information Returns
This chapter explains the business taxes you may have to pay and the forms you may have to file. It also discusses taxpayer identification numbers.
Table 1-1 lists the benefits of filing electronically.
Table 1-2 lists the federal taxes you may have to pay, their due dates, and the forms you use to report them.
Table 1-3 provides checklists that highlight the typical forms and schedules you may need to file if you ever go out of business.
505 Tax Withholding and Estimated Tax
535 Business Expenses
583 Starting a Business and Keeping Records
Form (and Instructions)
1040 U.S. Individual Income Tax Return
1040-ES Estimated Tax for Individuals
Sch C (Form 1040) Profit or Loss From Business
Sch C-EZ (Form 1040) Net Profit From Business
Sch SE (Form 1040) Self-Employment Tax
See chapter 12 for information about getting publications and forms.
This section explains three types of taxpayer identification numbers, who needs them, when to use them, and how to get them.
Pay wages to one or more employees.
File pension or excise tax returns.
Online by clicking on the Employer ID Numbers (EINs) link at IRS.gov/businesses/small as long as the
principal business location is in the United States or U.S. territories. The EIN is issued immediately once the application information is validated.
By telephone at 267-941-1099 (not a toll-free number) only if the principal business is located outside the United States or U.S. Territories.
By mailing or faxing Form SS-4, Application for Employer Identification Number.
This part explains whether you have to file an income tax return and when you file it. It also explains how you pay the tax.
You have to file an income tax return for 2016 if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Instructions for Form 1040.
File your income tax return on Form 1040 and attach Schedule C or Schedule C-EZ. Enter the net profit or loss from Schedule C or Schedule C-EZ on page 1 of Form 1040. Use Schedule C to figure your net profit or loss from your business. If you operated more than one business as a sole proprietorship, you must attach a separate Schedule C for each business. You can use the simpler Schedule C-EZ if you operated only one business as a sole proprietorship, you did not have a net loss, and you meet the other requirements listed in Part I of the schedule.
You may be able to file your tax returns electronically using an IRS e-file option. Table 1-1 lists the benefits of IRS e-file. IRS e-file uses automation to replace most of the manual steps needed to process paper returns. As a result, the processing of e-file returns is faster and more accurate than the processing of paper returns. As with a paper return, you are responsible for making sure your return contains accurate information and is filed on time.
Using e-file does not affect your chances of an IRS examination of your return.
You can file most commonly used business forms using IRS e-file. For more information, visit IRS.gov.
Go to IRS.gov/refunds.
Download the free IRS2Go app to your smart phone and use it to check your refund status.
Call 1-800-829-1954 for automated refund information, and follow the recorded instructions.
Many tax professionals can electronically file paperless returns for their clients. You have two options.
You can prepare your return, take it to an authorized IRS e-file provider, and have the provider transmit it electronically to the IRS.
You can have an authorized IRS e-file provider prepare your return and transmit it for you electronically.
Depending on the provider and the specific services requested, a fee may be charged. To find an authorized IRS e-file provider near you, go to IRS.gov/efile.
A computer with Internet access is all you need to file your tax return using IRS e-file. When you use your personal computer, you can e-file your return from your home any time of the day or night. Sign your return electronically using a self-selected PIN to complete the process. There is no signature form to submit or Forms W-2 to send in.
Some businesses offer free e-file to their employees, members, or customers. Others offer it for a fee. Ask your employer or financial institution if they offer IRS e-file as an employee, member, or customer benefit.
Free help in preparing your return is available nationwide from IRS-trained volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers, and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 or older with their tax returns. Some locations offer free electronic filing.
|Accuracy||•||Your chance of getting an error notice from the IRS is significantly reduced.|
|Security||•||Your privacy and security are assured.|
|Electronic signatures||•||Create your own personal identification number (PIN) and file a completely paperless return through your tax preparation software or tax professional. There is nothing to mail.|
|Proof of acceptance||•||You receive an electronic acknowledgment within 48 hours that the IRS has accepted your return for processing.|
|Fast refunds||•||You get your refund faster with Direct Deposit.|
|Free Internet filing options||•||Use IRS.gov to access commercial tax preparation and e-file services available at no cost to eligible taxpayers.|
|Electronic payment options||•||Convenient, safe, and secure electronic payment options are available. E-file and pay your taxes in a single step. Schedule direct payment from your checking or savings account (up to and including April 18, 2017) or pay by debit or credit card.|
|Federal/State filing||•||Prepare and file your federal and state tax returns together and double the benefits you get from e-file.|
Form 1040 for calendar year 2016 is due by April 18, 2017. If you use a fiscal year (explained in chapter 2), your return is due by the 15th day of the 4th month after the end of your fiscal year. If you file late, you may have to pay penalties and interest.
If you cannot file your return on time, use Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to request an automatic 6-month extension. For calendar year taxpayers, this will extend the tax filing due date until October 15. Filing an extension does not extend the time to pay your taxes, only the time to file the tax return.
Federal income tax is a pay-as-you-go tax. You must pay it as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. You generally have to make estimated tax payments if you expect to owe taxes, including self-employment tax (discussed later), of $1,000 or more when you file your return. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. If you do not have to make estimated tax payments, you can pay any tax due when you file your return. For more information on estimated tax, see Pub. 505.
Paying electronically through the Electronic Federal Tax Payment System (EFTPS).
Paying with Direct Pay by authorizing an electronic funds withdrawal when you file Form 1040 electronically.
Paying by credit or debit card over the phone or by Internet.
To enroll in EFTPS, go to www.eftps.gov or call 1-800-555-4477.
When you request a new EIN you may be automatically enrolled in EFTPS.
Benefits of EFTPS:
The chance of an error in making your payments is reduced.
You receive immediate confirmation of every transaction.
Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.
Your net earnings from self-employment (excluding church employee income) were $400 or more.
You had church employee income of $108.28 or more.
Married filing jointly - $250,000
Married filing separately - $125,000
Single, Head of Household, or Qualifying Widow(er) - $200,000
|IF you are liable for:||THEN use Form:||DUE by:1|
|Income tax||1040 and Schedule C or C-EZ2||15th day of 4th month after end of
|Self-employment tax||Schedule SE||File with Form 1040.|
|Estimated tax||1040-ES||15th day of 4th, 6th, and 9th months of tax year, and 15th day of 1st month after the end of tax year.|
|Social security and Medicare taxes and income tax withholding||941 or 944||April 30, July 31, October 31, and January 313.|
|See Pub. 15.|
|Providing information on social security and Medicare taxes and income tax withholding||W-2 (to employee)
W-2 and W-3 (to the Social Security Administration)
|Federal unemployment (FUTA) tax||940||January 313.|
|April 30, July 31, October 31, and January 31, but only if the liability for unpaid tax is more than $500.|
|Filing information returns for payments to nonemployees and transactions with other persons||See Information Returns||Forms 1099 – to the recipient by January 31 and to the IRS by February 28 (March 31 if filing electronically).|
|Other forms – see the General Instructions for Certain Information Returns.|
|Excise tax||See Excise Taxes||See the instructions to the forms.|
|1 If a due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday. For more information, see Pub. 509, Tax Calendars.|
|2 File a separate schedule for each business.|
|3 See the form instructions if you go out of business, change the form of your business, or stop paying wages.|
If you have employees, you will need to file forms to report employment taxes. Employment taxes include the following items.
Social security and Medicare taxes.
Federal income tax withholding.
Federal unemployment (FUTA) tax.
For more information, see Pub. 15 (Circular E), Employer's Tax Guide. That publication explains your tax responsibilities as an employer.
To help you determine whether the people working for you are your employees, see Pub. 15-A, Employer's Supplemental Tax Guide. That publication has information to help you determine whether an individual is an independent contractor or an employee.
This section identifies some of the excise taxes you may have to pay and the forms you have to file if you do any of the following.
Manufacture or sell certain products.
Operate certain kinds of businesses.
Use various kinds of equipment, facilities, or products.
Receive payment for certain services.
For more information on excise taxes, see Pub. 510.
Environmental taxes on the sale or use of ozone-depleting chemicals and imported products containing or manufactured with these chemicals.
Communications and air transportation taxes.
Tax on the first retail sale of heavy trucks, trailers, and tractors.
Manufacturers taxes on the sale or use of a variety of different articles.
Tax on indoor tanning services.
If you make or receive payments in your business, you may have to report them to the IRS on information returns. The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. You must give a copy of each information return you are required to file to the recipient or payer. In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns.
Payments of $600 or more for services performed for your business by people not treated as your employees, such as fees to subcontractors, attorneys, accountants, or directors.
Rent payments of $600 or more, other than rents paid to real estate agents.
Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows.
Royalty payments of $10 or more.
Payments to certain crew members by operators of fishing boats.
Failure to file information returns. This penalty applies if you do not file information returns by the due date, do not include all required information, or report incorrect information.
Failure to furnish correct payee statements. This penalty applies if you do not furnish a required statement to a payee by the required date, do not include all required information, or report incorrect information.
(Note. The following checklists highlight the typical final forms and schedules you may need to file if you ever go out of business. For more information, see the instructions for the listed forms.)
|IF you are liable for:||THEN you may need to:|
|Income tax||□||File Schedule C or C-EZ with your Form 1040 for the year in which you go out of business.|
|□||File Form 4797 with your Form 1040 for each year in which you sell or exchange property used in your business or in which the business use of certain section 179 or listed property drops to 50% or less.|
|□||File Form 8594 with your Form 1040 if you sold your business.|
|Self-employment tax||□||File Schedule SE with your Form 1040 for the year in which you go out of business.|
|Employment taxes||□||File Form 941 (or Form 944) for the calendar quarter in which you make final wage payments. Note. Do not forget to check the box and enter the date final wages were paid on line 15 of Form 941 or line 14 of Form 944.|
|□||File Form 940 for the calendar year in which final wages were paid. Note. Do not forget to check box d, Final: Business closed or stopped paying wages, under Type of Return.|
|Information returns||□||Provide Forms W-2 to your employees for the calendar year in which you make final wage payments.|
|□||File Form W-3 to file Forms W-2.|
|□||Provide Forms 1099-MISC to each person to whom you have paid at least $600 for services (including parts and materials) during the calendar year in which you go out of business.|
|□||File Form 1096 to file Forms 1099-MISC.|
|More Online Publications|