How do I file taxes for a small business I started this year?
Monday, March 15th, 2010 at
2:12 am
I have a small business set up as a general partnership and we have 2 employees. We are not using any kind of 3rd party administrator for payroll or tax reporting services. We are just keeping tight records of our income, business expenses and payroll. Can we file taxes for this busines at the end of the year along with our personal filings or should we be doing something different? Also, we have not been withholding any taxes from our employees payroll as we plan to issue them a 1099 at year end. Does this sound ok?
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This does not sound OK. I suggest you consult a business CPA ASAP.
If I were to address your circumstances in medical terms I would strongly suggest that you shut down your computer and immediately go to an emergency room. You need to seek the advise of a tax professional before the end of the year. You are one phone call (by one of your "employees) away from financial disaster if not jail. Your only defense at the moment is stupidity which you should embrace. The good news is that you may have a good record keeping system from which a tax professional can recover what should have been done when you started.
It sounds not OK.
My canned explanation to clueless independent contractors seems to get posted every day: You sound like a clueless employer who will be at the wrong end of a payroll tax audit the first time one of you "employees" files an unemployment insurance claim. The IRS 20 factors test determine if the person is an employee or not, The fact they agreed to be treated as independent contractors is irrelevant.
Some employers try to get around paying employment taxes (social security and unemployment) and other employee benefits like workers compensation insurance by improperly classifying employees as independent contractors. If the employee is required to show up for work–personally–at a particular time, punch the clock, use the employers equipment and are paid an hourly rate, hes are an employee. If you didn’t understand the difference when you posed your question, I would be even more convinced that they are employees. What is your preference, Slotted or Phillips?
Complete an IRS Form SS-8 to get an official ruling on your status. This will help determine their status before it gets out of hand and you have to pay both sides of their withholding and an allowance for withheld income tax.
In addition to wartz’s answer, you will also need to file form 1065 to report the income and expenses of the partnership.
Use the link below to get the information to get started.
http://www.irs.gov/businesses/small/article/0,,id=136524,00.html