How are we nearing mid-year already? If you’re like me, the current business climate has been a whirlwind of trying to keep up on new information, planning for post COVID-19 recovery, and still maintaining running our business operations. Now that we’re approaching the mid-way point of 2020, we think it’s a good time to remind you there are some deadlines you need to keep an eye on and important decisions yet to make.
The tax deadline has been pushed to July 15, 2020 which gives individual and business taxpayers more time to prepare to get their acts together. You may have already been in the process of preparing documents for tax filing, but things may have changed, and it is important to take advantage of the CARES Act tax credits if you can.
If you meant to file for S Corporation status for 2020 tax year but missed the March 15 deadline because of COVID-19, you don’t have to worry as the deadline to file has been extended to Sept. 15, 2020. Simply file IRS Form 1120-S with the IRS if you’re on a calendar year and elect S Corporation status for this and future tax years.
If you’re on a fiscal year, the deadline for S corp and partnership returns is the 15th day of the third month following the end of the fiscal year.
Your S Corp will need to report all financial activities on Form 1120S and attach a Schedule K-1 for each shareholder. Schedule K-1s shows each shareholder’s portion of the business’s taxable income. The shareholder then reports the income on their individual returns. Wages paid to employees are reported on IRS Form 941 each quarter. Under the CARES Act, employers can choose to defer payment of the business’s share of Social Security tax on wages during the period of March 27 through December 31,
If you started your business as a sole proprietorship or a partnership, you may be considering incorporating your business or forming an LLC to shield your personal assets from some financial risk in case of debts or legal actions. Make sure you know the pros and cons of each legal structure, what’s involved to stay in compliance, and discuss the different legal entities with your professional advisors to determine the right entity for your business and if now is the right time to convert. As always, CorpNet is here to help you make an informed decision, help you convert, and meet your filing deadlines. Our team of business filing specialists makes it easy to manage your paperwork and stay in compliance.
Expanding to Another State
Even though your plans for expanding your business into another state or states, may have been temporarily put on hold, you should still know what’s involved and what steps you will need to take to make it happen legally.
The process of registering to do business in another state is called foreign qualification. In general, you need to apply for foreign qualification if your business:
- Will have a physical presence such as office space, a warehouse or a retail store in the state
- Will conduct in-person meetings with clients or customers in the state
- Will have any employees living/working in the state
You do not need to register for foreign qualification if your business:
- Mostly conducts business online
- Only uses independent contractors in another state
- Only has board member meetings in the state
Most states require your business to file a foreign qualification with the Secretary of State’s office in the state you want to conduct business. You’ll submit a Certificate of Authority application form and pay the appropriate fees. You’ll also need to register your business’s name in the state and once you have been approved, appoint a registered agent. A registered agent is a person (or company) located in the state with the authority to handle processes and documents on behalf of the business.
If your business is lucky enough to add employees this year, remember you need to follow specific payroll regulations required by the federal and state governments. To start with, obtain an EIN (Employer Identification Number) if you don’t already have one. Also known as a Federal Tax ID Number, an EIN is a nine-digit number that identifies a business and is used to set up various tax and bank accounts. You can apply for them directly through the IRS or consider asking CorpNet to obtain one on your behalf.
To establish payroll, issue the employee IRS Form W-4, which determines how much federal income tax the employer should withhold from an employee’s pay. Also, some states use their own W-4 forms to collect state income tax. Employers must also have new hires complete USCIS Form I-9 to verify an employee’s identity and that the employee has legal authorization to work in the United States.
California’s new AB5 law has made it more complicated on which workers you can classify as independent contractors and other states are looking at the issue, as well. Make sure you’re fully aware of which workers you don’t have to have on payroll and collect and pay payroll taxes. If some of your hired workers work in another state and are not considered independent contractors, you’ll need to register with that employee’s state tax agency and pay the required payroll taxes in that state. A payroll service can handle the details for you.
Learn More: Registering for Payroll Taxes
Does your business have sales tax nexus in another state? Having nexus in a state means your business has some kind of “connection” to that state. Whether it’s a physical location, employees who are residents of that state, owning property, or even having a salesperson selling there could mean you’ve established nexus which means you must abide by the state’s sales tax collection requirements. You are required to collect sales tax for all taxable transactions and will pay sales tax to the state’s Department of Revenue. Sales tax return forms declaring all transactions also need to be filed.
We’re Here to Help
We’ve just touched on some of the items on your midyear business checklist CorpNet can help you accomplish. At CorpNet everything is available in one place, so you don’t have to spend hours upon hours trying to navigate those complicated and frustrating government websites. We want to help free up your time so you can focus on serving your customers and building your business.