Preparing Quarterly Tax Payments for Your New Colorado Small Business

Preparing Quarterly Tax Payments for Your New Colorado Small Business

by | Mar 29, 2017 | Business News

Preparing Quarterly Tax Payments for Your New Colorado Small Business

If you are a relatively new Colorado small business, and the January deadline to pay estimated taxes just snuck up on you, this post is for you.

You or your bookkeeper are probably using software to keep track of your sales and income – but knowing what you brought in is not the same as knowing what you owe in taxes. Plus, for small business owners, paying taxes is not an affair you sweat out every year in April – your estimated taxes are due four times every year, so you want the process of estimating what you owe, plus having the funds on hand to meet your obligations to be as simple as possible. Tax planning is always an important part of your overall business plan for the coming year, so take some time now, before the year gets away from you, to make sure you are ready for what lies ahead.

Making Your Small Business Estimated Tax Payments

If you already have a year of business ownership in your rear view mirror, then the process of making your small business estimated tax payments can be a bit more simple for you, but you can still get caught owing much more than you thought you did when the final calculations are made in April of next year. What’s the best way to stay on top of what you will owe? If you have ever had trouble meeting your tax obligations, or failed to run certain calculations correctly, you already know this: hire a qualified tax professional to help you stay on top of what you will owe. Estimated taxes are actually designed to keep you out of trouble, so having someone help you make those estimations correctly is a smart thing for any small business owner to do. Plus, you can write of the expense of having help!

If on the other hand, your small business has only been around for a couple of months, trying to figure out what taxes you might owe on this year’s income based on last year’s income is going to be difficult. It’s true that owing less than $1000 in taxes at the end of the year will mean that you don’t need to file quarterly taxes, but what if you do so well that your start up expenses and other allowed expenses during the course of the year don’t reduce your taxable income as much as you expect?

Try Calculating Estimated Payments Yourself

Here’s a litmus test for you: try calculating estimated payments yourself. If you can do it, put them on your calendar each quarter, and do them yourself (but consider having a tax professional review and submit them for you). If they are confusing, or just take more time than you have to give, use the list of questions provided at the end of this blog to find and hire someone to help you. Here are the relevant forms:

  • Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES (PDF), to figure estimated tax.
  • Corporations generally use Form 1120-W (PDF), to figure estimated tax.

Questions to Ask a Prospective Tax Preparer

    When you hire a tax professional for your small business, take the time to find someone who is qualified – the IRS offers the following list of questions to ask prospective tax preparer.

  1. Has the preparer worked with businesses similar to yours in size and type?
  2. Is the preparer familiar with your particular line of business?
  3. Does the tax preparer offer electronic filing?
  4. [Will he or she] deposit your tax payments electronically?
  5. [Ask] what services are included in the preparers’ fees.
  6. If the IRS examines your return, what is their policy on assisting you?
  7. You may want to ask for references, just as you would for any professional service.
  8. Consider checking with the Better Business Bureau, your State Board of Accountancy for CPAs, the State Bar Association for attorneys, or the IRS Office of Professional Responsibility for enrolled agents.
  9. Avoid any paid preparer who refuses to sign a return they prepared.

If you need a highly qualified tax advisor, or just want a referral to a good tax accountant to help you calculate quarterly tax payments for your new Colorado small business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Real Estate Services for Business Owners

Elizabeth Lewis provides the following real estate law services to small and medium sized business owners in Denver and throughout Colorado:

  • Commercial real estate purchases
  • Legal review of commercial real estate leases
  • Protecting your assets

Business Tax Planning and Important 2017 Due Dates

by | Mar 1, 2017 | Misc. Legal Tidbits, Random Thoughts

Business Tax Planning and Important 2017 Due Dates

Do you really want to make tax time a lot less stressful? Add your tax filing deadlines to your calendar right now, with lots of digital reminders to get it done! If it has been a challenge in the past, consider making a list of all the steps you need to take to be prepared, and breaking those steps down on your calendar with lots of digital reminders. Here is a typical list you might make, giving yourself time each day or week to work on the individual items:

  • appointment with tax accountant (these fill up fast, so today is a good day to arrange this!)
  • review last years taxes to see what forms will likely be due
  • add due dates for various filings to my calendar
  • make sure books are current
  • meet with tax accountant
  • confirm filings are ready to mail (a week before the deadline is nice!)

As a Colorado small business attorney, I know how stressful preparing for tax time is, so I am sharing some dates I hope will be helpful to you in planning and preparing for your tax payment deadlines. While it is easy enough to Google due dates, you may want to read over this list to make sure you have not forgotten anything. As always, be sure to check with the IRS or your accountant to make sure you are up to date on all the requirements.

Partnership Tax Returns

Partnership tax returns are due March 15, not April 15 as used to be the case. This change occurred in 2016. If your partnership isn’t on a calendar year, it is due on the 15th day of the third month following the close of your tax year.

Partnerships: Form 1065. This form is due on the 15th day of the 3rd month after the end of the partnership’s tax year. Provide each partner with a copy of their Schedule K-1 (Form 1065) or substitute Schedule K-1 (Form 1065) by the 15th day of the 3rd month after the end of the partnership’s tax year. Form 7004 is used to request an automatic 6-month extension of time to file Form 1065. ~IRS.gov

Corporations and S Corporations Tax Returns

Corps and S corp tax returns are due April 15th, not March 15 (if your tax year ends in December). The language is a little confusing, so ask your small business attorney or tax accountant for help if you are not sure what the IRS is trying to say. Here is the official wording:

Corporations and S Corporations Tax Returns: Form 1120 (or Form 7004). This form is due on the 15th day of the 4th month after the end of the corporation’s tax year. However, a corporation with a fiscal tax year ending June 30 must file by the 15th day of the 3rd month after the end of its tax year. A corporation with a short tax year ending anytime in June will be treated as if the short year ended on June 30, and must file by the 15th day of the 3rd month after the end of its tax year. ~IRS.gov

If you need more time to complete your 2016 business tax return, you can request an extension. Keep in mind, even if you file the extension, you are required to calculate how much you owe and send in the estimate by the due date – which means you will still need your accountant’s help prior to the deadline. Make that appointment now, to insure he or she can fit you in. If you do not include the estimated taxes, the IRS can invalidate your extension and you will be stuck with penalties.

Review these additional dates to make sure you are not forgetting something:

Individual Tax Returns – Tuesday, April 18

Because April 15th falls on the weekend again this year, individual tax returns (or request for extension) are due on Tuesday, April 18th. Normally, they would be due on Monday, April 17th, but a holiday impacts the due date this year:

The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation. ~IRS.gov

Estimated Taxes

Before you worry about paying estimated taxes, make sure you need to.

Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed. ~IRS.gov

The IRS provides good guidelines for who does and does not need to pay estimated taxes. If you are not certain, check with your tax accountant sooner than later. If you do need to pay estimated taxes, be familiar with the following quarterly estimated tax due dates:

First Quarter Estimated Taxes
First quarter estimated taxes are due on the same day as your individual tax returns

Second Quarter Estimated Taxes – June 15th
No holidays or weekends will alter the June 15th second quarter estimated taxes due date.

Third Quarter Estimated Taxes – September 15th
Third quarter estimated taxes are due.

Fourth Quarter Estimated Taxes – January 15th, 2017
Fourth quarter estimated taxes are due.

Other Tax Due Dates and Deadlines

  • Last day to contribute to IRAs, HSAs, or 401Ks : Tuesday April 18th for 2017
  • Last day for Americans living abroad to file individual taxes: June 15th for 2017
  • FBAR aka FinCEN Form 114: The due date for foreign account FBAR forms, also known as FinCEN Form 114, goes from June 30 to April 15 (you can get a six-month extension, just like tax returns.) FBARs are important if you had foreign accounts that topped $10,000 at any time during the year.

If you need help figuring out your tax year, or need a good referral to a trustworthy and capable tax accountant, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Real Estate Services for Business Owners

Elizabeth Lewis provides the following real estate law services to small and medium sized business owners in Denver and throughout Colorado:

  • Commercial real estate purchases
  • Legal review of commercial real estate leases
  • Protecting your assets

Tax Advice from Your Small Business Attorney

by | Feb 22, 2017 | Business News

Tax Advice from Your Small Business Attorney

I recently heard a story about how someone’s husband’s early experience as a business owner, and some very serious tax issues he found himself in the middle of after purchasing a company from his parents. The most difficult part of the story is knowing, as a small business attorney, that the entire problem could have been avoided had the family sought legal advice either before the business changed hands, or once the family knew there were problems with the tax obligations the company owed.

Small Business Law and Tax Law

Unfortunately, this scenario is not uncommon; a mom and pop shop grows faster than their knowledge of small business law and tax law and they continue to operate on incorrect assumptions about the rules their small business should follow with regard to state, local, and federal taxes. By the time they realize they have made a mistake, rectifying the problem looks impossible. The worst choice is often the first choice; feeling overwhelmed and afraid, a small business owner may decide to look the other way and hope the problem goes away. In the case of the story I was told, the husband, his parents did just that, and as a result, they accrued a very large debt to the IRS which their son inherited as soon as he became the owner of the business.

New and Established Businesses

Whether your business is a one-person show or you have many employees, both your interactions with the Internal Revenue Service and the Colorado Department of Revenue can have consequences for your business. Failure to pay your taxes on time, withhold the correct amount for employment wages, or tax preparation done wrong can be devastating for both new and established businesses. This was the case for the husband in the story.

Tax Issues

After the husband had moved his family to a new community and taken over his parent’s business, his mother mentioned in passing that the IRS had been calling her and she was not sure what they wanted. His heart was in his throat before he even picked up the phone, but the phone call made it that much worse. His parents had failed to pay their business taxes on time, and had failed to withhold and pay employee taxes properly. Their son had unwittingly taken on all of their tax issues when he became the owner of the business without having sought any business formation advice, or legal review, or business planning advice from a small business attorney here in Colorado, where the business was owned.

Tax Advice

For this family, one meeting with a small business attorney who could provide tax advice regarding the best business structure before the business changed hands could have protected the son and helped the parents find a way to meet their tax obligations without the type of stress and worry approaching the IRS on their own created for them. Going back further in time, his parents would have been wise to get tips for paying the right taxes, and paying them on time as soon as the business started to grow and acquire employees and profits. They may not have thought about asking an attorney for tax help, but it would have been a wise choice. Even for businesses that do everything right, a letter stating the business returns are being audited can make a business owner worry, but facing the IRS on your own, as this family did, is a recipe for disaster. Make sure you have spoken to an attorney for tax planning before you ever get a phone call or a letter from the IRS.

If your small business encounters tax problems, or better yet, if you own a small business and haven’t met with an attorney to talk about tax planning, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Real Estate Services for Business Owners

Elizabeth Lewis provides the following real estate law services to small and medium sized business owners in Denver and throughout Colorado:

  • Commercial real estate purchases
  • Legal review of commercial real estate leases
  • Protecting your assets

Time, Money, and Talent: Three Keys to Inclusive Small Business Giving

by | Dec 6, 2016 | Business News, Random Thoughts

Time, Money, and Talent: Three Keys to Inclusive Small Business Giving

As we approach the end of the year, many Colorado small business owners are thinking about philanthropic giving. In addition to the need to vet a chosen charity, finding a variety of ways that allow you and your team to offer time, money, or talent can insure all employees have an opportunity to give and no one feels left out.

Small Business Owners Value Time

If you are a small business owner, you know how valuable your time can be. It probably comes as no surprise that some of your employees are in the same boat – they might clock out after a forty-hour week, but they go home to lives that are busy. Asking them to give up a Saturday to plant trees, or volunteer at a shelter might be asking for much more than they can give. Does that mean you should not offer volunteer opportunities to your team? Absolutely not; but you should make sure that any philanthropic activity you engage in is inclusive and allows your team members to donate time, money, or talent as they are able. Here’s how:

Create Tiers of Time

If you offer an opportunity to volunteer time, make sure you create tiers of time; try to break up the activities associated with volunteering time into two or three levels of giving. In the same way that we are often invited to give what money we can, we can offer employees the chance to give what time they can, rather than asking everyone to give up an entire Saturday for a good cause. By offering a variety of activities with different time requirements which each support the core giving activity, we can find good ways to accommodate someone whose weekends are filled with family members who rely heavily on them, or are unavailable for other reasons.

Money Can Be the Preferred Way to Give

For some of your employees, money can be the preferred way to give. The key to tying that gift to a team effort is connecting the giving that comes from your organization to the people that it benefits. Go beyond the typical thermometer measure of how much was given and make sure those who gave money can see the impact it had. Find some way to connect the gift to actual people, not just to the numbers benefited, or the amount given. When a connection is made, and the impact of the gift is felt, giving cash can be as rewarding an experience as volunteering.

Talent Takes Time and Money

Some organizations need your abilities and those of your employees more than your cash or volunteer hours. A third way to consider giving is to offer the services of your employees as part of their work day. A precaution here: when an employer directs an employee to volunteer, that time is compensable. The regulations state:

Time spent in work for public or charitable purposes at the employer’s request, or under his direction or control, or while the employee is required to be on the premises, is working time.

In many ways, giving talent is the most costly way for you to give to charity; but you may be able to get real bang for your buck from a philanthropic perspective. Look for opportunities where you and your employees can offer to serve in ways the general public cannot. In the same way a legal firm can offer pro bono work, your team may have desperately needed specialized skills or talent. If your team can truly experience or see the impact of their gift, it can have great value to your organization as well as to the charity.

Still not sure how to get started? Kim Jensen of the Denver Business Journal gives six excellent tips on where to start, including tips to broaden inclusion, and even involve your customers and clients! As always, If you need help vetting a charity, or understanding the rules associated with charitable giving, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Real Estate Services for Business Owners

Elizabeth Lewis provides the following real estate law services to small and medium sized business owners in Denver and throughout Colorado:

  • Commercial real estate purchases
  • Legal review of commercial real estate leases
  • Protecting your assets

Deconstructing Payroll Taxes for Your Small Business

by | Mar 16, 2016 | Business News

Deconstructing Payroll Taxes for Your Small Business

If your small business employs people, no matter how few, you’re required to withhold payroll taxes from their paychecks and pay federal, state, and local taxes (this is one of the reasons small and especially micro businesses may opt to use independent contractors, to whom they don’t pay benefits and who pay their own taxes).

Usually, withheld taxes are comprised of FICA (Medicare and Social Security taxes) plus federal, state, and local income taxes where applicable. Additional withholding obligations are the Federal Unemployment Tax (FUTA) and in some states you must withhold disability insurance tax — check your state’s tax laws to make sure your bases are covered.

Before you launch your small business, make sure your accounting system is solidly in place. If you don’t pay your taxes or if you miss a payment you could end up with unwanted fines or penalties, so understanding your obligations is critical.

In order to calculate payroll taxes, you need to figure out three things:

Who are my taxable workers?
What are their taxable wages?
How much do I need to withhold?

Taxable workers can be employees or independent contractors, the difference being that employees are subject to payroll taxes. Since sometimes the lines between employees and contractors can be a bit blurry, the IRS has behavioral, financial, and relationship tests to determine who’s who.

The IRS considers a taxable worker to be someone whose work an employer has the right to direct and control, not just the results of that work. A taxable worker doesn’t have control over the supplies used for the work being done, and is tied to one company, unlike an independent contractor who can advertise and work for several companies at the same time. In terms of the relationship, if there’s no timeline for employment, like the completion of a project, then the person is a taxable worker.

Taxable wages are payments for services and could include bonuses or gifts, as well as salaried wages. Generally speaking, reimbursed expenses for travel or meals do not fall into this bucket, but need to be verified by saved receipts that are reflected on expense reports.

Now that you know how many taxable employees you have and which wages are taxable, you now have to figure out how much to withhold for federal, state, and local taxes, as well as FICA and FUTA.

By law you must withhold federal income taxes from each paycheck issued for the applicable period. To calculate the amounts, use the wage bracket and percentage tables provided by the IRS. Remember you don’t need to withhold state taxes if there is no state tax on income, like in Alaska and Florida.

The Federal Insurance Contributions Act (FICA) requires employers to withhold Social Security and Medicare taxes from wages paid to employees. In this case, the employer and employee each pay half of the tax. Unemployment taxes, or FUTA, are paid only by the employer.

Calculating payroll taxes can be complex, so give yourself plenty of time to understand the particulars of your obligation, make deadlines, and ensure you have the resources you need at hand.

If you need legal help, don’t hesitate to contact me at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com.

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney

LICENSED IN COLORADO AND NORTH CAROLINA

Mailing Address:

501 S. Cherry Street, Suite 1100
Denver, CO 80246
720-258-6647
Elizabeth.Lewis@eclewis.com

Online at:

Real Estate Services for Business Owners

Elizabeth Lewis provides the following real estate law services to small and medium sized business owners in Denver and throughout Colorado:

  • Commercial real estate purchases
  • Legal review of commercial real estate leases
  • Protecting your assets