Tax season is never fun but necessary. Many small business professionals that are Sub Chapter S Corporations of LLCs need to be particularly aware of the yearly changes. The 2019 season is quickly approaching and here are a few tips to avoid missing some important details! As we are not tax experts, please check with your accountant or tax preparer to be sure these tips fit your personal situation.
Quarterly Payments – Make sure that your quarterly payments are high enough to cover your income for the year. Not paying in enough quarterly may cause a nasty surprise and often a penalty!
The IRS recommends checking possible tax liability by using the IRS Tax Withholding Estimator. The online Estimator allows taxpayers to see if they are withholding the right amount of tax and see if they need to make estimated tax payments. Form 1040-ES available on IRS.gov, includes a worksheet for figuring the right amount to pay as well.
Alternative Minimum Tax – Alternative Minimum Tax recalculates an individual’s tax liability. Alternative tax is compared to the taxpayer’s regular tax and the higher of the two amounts should be reported as the tax due on the individual’s return. Check with your accountant or tax preparer to make sure that the ATM is being calculated correctly.
Hiring Family Members – If you have a family business and are including family members within business operations, employment tax rules apply. For example, children under the age of 18 may not be subject to Social Security and Medicare taxes on their wages if the business is a sole proprietorship or a partnership in which each partner(S) is a parent of the child.
Businesses jointly owned by a married couple are generally considered partnerships for Federal tax purposes. However, couples may elect not to be treated as a partnership. Under this election, they may each file a Schedule C as sole proprietors and avoid that costs of filing a partnership return. In addition, both spouses may receive credit for Social Security and Medicare Coverage purposes.
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