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Tax Day 2011 Extension

Normally, all previous years’ taxes are to be postmarked no later than midnight on April 15th of the following year of any given year. Meaning, that your taxes due for 2010 must be paid and filed by April 15th 2011, correct? Well, normally, yes; but not this year. The only time that this normally fluctuates is if and when April 15th falls on a weekend. April 15, 2011 will be on a Friday – so what gives? For the millions of American, like me, who wait until the last possible minute (my mantra – procrastinate later) this is welcome, but puzzling news. While we procrastinators and last minute filers rarely reason long enough to ask why, it is important to know the correct date, and to realize how it may or may not have an effect on other dates relevant to Tax Day 2011 such as automatic extension dates.

Extension to Pay NOT an Option

It is imperative to state and remind that although the IRS grants “automatic” extensions allowing taxpayers to file their final forms sixty days later, the extension and any estimated owed taxes are still due on tax day, which for 2011 means that your forms and payment (normally done on a Form 1040 V) must be postmarked at or before midnight, Monday April 18, 2011. Tax Day 2011 Extended Due to Emancipation Day Recognition What holiday? So by now, most of us Americans are racking our brains and scratching our heads trying to figure out what holiday in April is nationally celebrated. Tax Day 2011 has been extended due to remembrance, recognition and celebration of Emancipation Day, a Washington D.C. holiday, not a nationally recognized holiday.

Emancipation Day had been recognized previously by (Washington D.C.) mayoral proclamation and now by being officially designated as an officially recognized public holiday of the District of Columbia. The holiday commemorates the “first freed” by the U.S. federal government when President Lincoln signed the Compensated Emancipated Act nine months prior to his issuance of the infamous Emancipation Proclamation.

As a result of the public holiday in Washington D.C. the Department of Treasury, the governing body overseeing the Internal Revenue Service, has extended Tax Day 2011 until Monday, April 18, 2011. Careful Calendar Markings Required Emancipation Day does not equate to Tax Amnesty Day. Just because Tax Day 2011 is not April 18th versus the 15th does not automatically adjust other dates by 3 days. Keep these dates in mind:

Overseas Exception Due Date: June 15, 2011, the 15th falls on a regularly scheduled business day and hence the deadline will not be extended without approval.

Automatic Approval Extensions Due Date: June 15, 2011 (remember – estimated payments must still be sent in via IRS Form 1040V with the request for extension; it is better to over estimate as you may still be held liable for penalties for underpayment.)

Approved Filing 1040 Extensions Due Date: October 15, 2011

The extension of Tax Day 2011 will give some the necessary additional weekend and time to prepare and file the required forms and payments, but hopefully it will allow all to reflect on the reason – Emancipation Day, commemorating the freeing of those held in servitude in the federal capitol.

This article will guide you through the small business tax maze and describe in details the various tax types your small business may be expose to. Use the article to learn which federal and state taxes you, as the owner of a sole proprietorship, general member in an LLC or officer of an S. Corporation is responsible for.

Federal Income Tax

The Internal Revenue Code (the IRC) is the source for imposing income tax on small businesses. The tax code treats each entity type a little different but in the end the income tax on the business taxable profits is payable by the small business owner. Sole Proprietor has to file schedule C to report business income and expenses and then report the taxable income on form 1040 where he discloses all of his income sources. Member of a partnership or an LLC reports his/her share from the business taxable income on form 1040 and Owner of an S. Corporation does the same. The rates of the federal income tax that a small business owner will pay depend on his/her filing status and residency status. For current tax rates please refer to IRS Publication 17 To register with the IRS you must fill out IRS form SS4 to obtain Employer ID Number (EIN).

State Income Tax

If your business is operating in a state that imposes income tax on business income, you will be liable for that tax in addition and regardless of the federal tax due on the same income. Very few States (Seven to be exact) do not impose income tax and among them are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two others, New Hampshire and Tennessee, tax only dividend and interest income. In general state income tax rates range from the lowest rate of 3% in Illinois to the highest rate of 11% in Hawaii. To register with each State’s Department of Revenue, you must complete the applicable registration forms to obtain State Tax ID Number.

Payroll taxAs soon as your business start hiring part or full time employees, it will be subject to Federal & State tax withholding from the employees’ gross wages (For current Federal Withholding rates please refer to IRS Publication 17 and for the Stare withholding rate, please refer to the State’s Revenue or Finance department), Social Security, also known as FICA (currently at 6.2% of gross wages is the employer’s responsibility and the same amount is the employee’s contributions with cap of $106,800 on gross wages) and Medicare (currently at 1.45% of gross wages is the employer’s part and the same amount is the employee’s contributions), Federal & State income tax withholding (at the rates publishes by the IRS and each State’s department of Revenue), Federal Unemployment, also known as FUTA (currently at a rate of 0.008 of gross wages up to $7,000 per year) and State Unemployment, also known as SUTA, at rates assessed by each State Unemployment Insurance Department. To register with each State, you should complete an employer application with the Department of Revenue and open an account with the State’s Unemployment Insurance Department.

Sales Tax

Sales tax is tax imposed on gross sales made to end users (as appose to resellers who purchase the product for inventory) and has many names: transaction privilege tax, gross receipts tax, general excise tax and more. The tax is imposed by each State, and in many cases includes Base Rates for all States residents and then additional rates that vary by county and city. Rates of sales tax vary by States with few States that impose zero percent tax (such as Delaware, Montana & Oregon) and others that impose rates in excess of 10% (such as Chicago Illinois)

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Taxes of any type and form always burden you. Your income, off and on, is half eaten by the taxes you pay. These taxes can be federal taxes, state taxes, local income taxes, payroll taxes, which include Social Security and Medicare, sales tax, excise taxes and property taxes. However, if you are intelligent enough, you can apply tax-planning tricks that would eventually enhance your income. Given below are the effective steps for reducing your tax burden:

1. Understand your tax situation – By understanding how much tax you will pay, or what part of your income is taxable, you would smoothen your tax burden. In addition, you should keep a fair account of your daily and miscellaneous spending on various items. These include housing, medical care, food, transportation, recreation, clothing and other luxury items. If you calculate, you would come to know that you spend approximately double the amount of above items on the taxes you pay on your income.

2. How much did you pay as taxes – You can estimate how much you paid as taxes the previous year, and how much extra or less will you be paying this year. You can do this by getting the details of the previous year’s personal income tax returns and comparing it with your present income tax. All information in this regard is found in form 1040, line 62, which also gives detailed information on your total tax liability for the year.

3. Plan your investment – If you know the facts, you will be better in generating your wealth. This means, that you can choose available and effective tax-saving investment plans. You can choose NSC, infrastructure bonds, flexibonds (Anshu – Pls check the research, I don’t think there are NSC bonds etc in America) and the like. Thus, you will save a major portion of your taxes and you can invest this money to earn extra profits. It is this money that you used to waste away paying taxes and adding to Uncle Sam’s kitty. What is more, if you reduce your taxes, the government will give you extra benefits on retirement.

4. Tax Saving Strategies – This is the most important step that will make your income grow. You can download some real tax information from the net on various tax saving strategies. In addition, you can consult a local tax professional.

Thus, by following these simple and effective steps, you will certainly improve upon your income by reducing your tax burden.