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Employee Tax Question - Small Business

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nemgan

Junior Member
IRS Question: CO

I have a small business and hired my first employee in mid November. Paid him around $900 total in 2017. I deducted 6.2% for SS and 1.45% for Medicare. TurboTax is assisting with the W2. I'm just unclear about if I have to send an additional for to the IRS (like a 944) and how to pay the SS/MC tax I withheld along with the half I am required to pay. Can anyone respond about what someone in my situation is required to do?


For 2018, I began using an online payroll service that will take care of all taxes, forms and tax payments required by all parties.

Thanks!!
 


LdiJ

Senior Member
IRS Question: CO

I have a small business and hired my first employee in mid November. Paid him around $900 total in 2017. I deducted 6.2% for SS and 1.45% for Medicare. TurboTax is assisting with the W2. I'm just unclear about if I have to send an additional for to the IRS (like a 944) and how to pay the SS/MC tax I withheld along with the half I am required to pay. Can anyone respond about what someone in my situation is required to do?


For 2018, I began using an online payroll service that will take care of all taxes, forms and tax payments required by all parties.

Thanks!!
You will need to file a 4th quarter 941. You should have already sent in deposits for the SS and Medicare you withheld from the employees pay as well as the employer matching share. (and any regular federal withholding you might have withheld) You would also need to submit a 940 for federal unemployment taxes and pay that. You would also need to remit whatever forms your state taxing authority requires.
 

nemgan

Junior Member
Thank you for the reply. I assume the payment is submitted with the voucher at the bottom of this form at https://www.irs.gov/pub/irs-pdf/f941.pdf ?
 

LdiJ

Senior Member
Thank you for the reply. I assume the payment is submitted with the voucher at the bottom of this form at https://www.irs.gov/pub/irs-pdf/f941.pdf ?
If you did not previous remit any payment, yes. However, please note that on an ongoing basis you will be required to electronically submit tax deposits at least monthly. However, since you are using a payroll service, on an ongoing basis, they will handle all of that for you.
 

nemgan

Junior Member
New Tax Law & Small Business

So, I'm trying to get a grip on the new tax law and how it affects small business. I have been operating as an LLC and file my taxes on a Schedule C. My business is service based and basic. I have a top-line revenue, subtract business expenses and the net is what I pay FICA and taxes on. I use Turbo Tax home and office to assist with filling.

Just curious if it will be beneficial to become an S-Corp or stay as-is to obtain the best tax rate I can under the new plan.

Thanks.
 

Taxing Matters

Overtaxed Member
So, I'm trying to get a grip on the new tax law and how it affects small business. I have been operating as an LLC and file my taxes on a Schedule C. My business is service based and basic. I have a top-line revenue, subtract business expenses and the net is what I pay FICA and taxes on. I use Turbo Tax home and office to assist with filling.

Just curious if it will be beneficial to become an S-Corp or stay as-is to obtain the best tax rate I can under the new plan.

Thanks.
As for income tax, it won’t make any real difference. Bear in mind that with an S-corporation the income, deductions, and credits of the S-corporation flow through to the shareholders much like it does with sole proprietorship (your single member LLC is taxed like a sole proprietorship by default). That means that either way your income lands on your personal return and ends up taxed at the same rates.

In some situations you might save some FICA tax (Social Security/Medicare tax) by having the LLC treated a S-corporation. A lot depends on exactly what you do and how much you are earning from it. You might want to see a tax professional for advice on whether it would benefit you in your circumstances.
 

nemgan

Junior Member
Thanks for the advice, very helpful, and yes, I will likely discuss with a tax professional soon.

I've been hearing a lot about a 20% tax discount for small business. Does it matter how I am incorporated for that tax benefit? Where is that discount reflected on the 1040 tax form? For my situation, is it part of the schedule C and thus reducing my AGI? Or is it reflected only as a deduction on the tax part on the second page of the 1040?
 

Taxing Matters

Overtaxed Member
Thanks for the advice, very helpful, and yes, I will likely discuss with a tax professional soon.

I've been hearing a lot about a 20% tax discount for small business. Does it matter how I am incorporated for that tax benefit? Where is that discount reflected on the 1040 tax form? For my situation, is it part of the schedule C and thus reducing my AGI? Or is it reflected only as a deduction on the tax part on the second page of the 1040?
It's a deduction for taxpayers other than corporations of up to 20% for income passed through from partnerships and s-corporations, and from income from a sole proprietorship (which includes by default a single member LLC created or organized in the U.S.). For the most part it should not matter whether your LLC is treated as a S-corporation or sole proprietorship for this deduction. The idea is to try to make the tax rate the same for unincorporated businesses and S-corporations as the new 21% rate for C-corporations. (Technically speaking, only corporations are incorporated entities.) There are some limitations and special rules for the deduction, and it is too early yet to know how the IRS will implement this with regard to forms, etc. But it is an itemized business deduction like other business expenses.
 

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