Simply Junior » State Income Tax

Small Business Taxes – Know Your Enemy

admin — Fri, 17 Sep 2010 00:33:46 +0000

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)

About TaxDreams.com

The leading source of information for small business taxes. Access free guides, articles, tips and tools that help you to stay in compliance and browse products & services that will make your business more efficient and keep more money in your pockets.

Using Free Software to File State Income Tax

admin — Wed, 02 Jun 2010 07:40:22 +0000

Every year, millions of Americans have to file income tax. There is a separate version for the federal government and there is another one that is for the state. Normally, this task is done by hand and since the documents are quite similar, it is like doing the same task twice.

The individual does not have to do that anymore because companies together with the help of the IRS or Internal Revenue Service have designed a program to cut the time it takes to file this documents in less amount of time.

There are various programs to choose from and some of the best state income tax software are free to download to be able to finish this task. Here are a few examples.

1. One of these programs is called TaxAct. There are different version for this but those who are just using it to file personal state income tax don’t have to bring out a dime to be able to use it.

2. A similar program that can also be used is called Turbo Tax. There is a CD version that can be purchased in stores but the individual can also download this for free to save the trouble of looking for it in the mall.

3. Tax Cut is also an effective state income tax program. The person can use this to file for the federal version since the documents are very similar in nature. It has a step-by-step guide throughout the entire process making the user understand what to do from beginning to end.

4. Another program worth trying is called Tax Slayer. Users have been using this program for the past 8 years and the company believes that the number of people who will this or similar programs will continue to grow.

The examples mentioned are just a few of those that can be used to make filing state income tax faster than before. These are all user-friendly and have a built in help function as well as a 24-hour customer service toll free number should the person need assistance.

Filing state tax is something every one has to whether the person likes to do it or not. It is advisable to get one early to be familiar with how it works so there won’t be any problems later on.

The individual can choose to use a paid software program or use something for free to be able to achieve the same result.

How To Estimate Your Irs Tax Refund In Advance, For Free

admin — Tue, 13 Apr 2010 10:59:21 +0000

Wouldn’t it be nice to know how much your income tax refund check will be. It’s like having money in the bank. Yes, there is a simple way to estimate your tax refund in advance and it won’t cost you a dime.

I’m about to show you how you can estimate your Federal IRS income tax refund or return in advance, for free!

How to estimate your income tax refund

Forget about using pen, paper and a calculator, we’re going to estimate your taxes with the help of the Internet. Using an online tax refund estimator, we can get this done in about 10-15 minutes. The tax refund estimator will need to gather information about you, to make an estimate. All you have to do is make simple entries.

Here is how and what you’ll be asked:

Screen 1. Your filing status, age, your children and other dependents.

Screen 2. Earnings, gross wages and self employment income.

Screen 3. Any investment income such as interest, dividends and capital gains.

Screen 4. Any other income such as rental, royalty , partnerships, trusts, tax refunds, alimony, unemployment, social security and any other income.

Screen 5. Ira and education expenses such as Ira contributions, student loan interest, college tuition and expenses.

Screen 6. Expenses, business and work related, self employed health insurance, moving, Keogh and other.

Screen 7. Deductions and personal expenses such as medical, real estate, mortgage interest, home equity loan, charitable contributions, alimony you paid, child care, gambling losses, theft and other.

Screen 8. Miscellaneous tax items. These tax items apply to relatively few people. AMT and other misc.

Screen 9. Withholding, Federal income tax withheld, State income tax withheld and future withholding if before end of tax year.

Screen 10. Tax payments you have made or will make for this year.

And now what you’ve been waiting for.

The Results! That’s it, you’ll know how much your tax refund will be, so you can make important financial decisions.

Free Tax Deduction Maximizer Turbo Charges Tax Deductions Online

admin — Fri, 19 Mar 2010 14:00:14 +0000

Learn how to claim more Federal and State income tax deductions and credits.

Claiming more tax deductions is the key to paying less taxes and getting a larger tax refund. Unfortunately, too many people are not aware of the over 350 tax deductions and credits the Federal and State Governments allows us.

Most people just don’t have the time to search the long list of overlooked tax deductions, but there is a new tool that will do that for you. The 2006 tax deduction maximizer searches for tax deductions and credits, then determines if you can claim them.

Here are a few tax deductions and credits you may be missing out on:

1. The Bush Federal Energy Tax Credit. If you’ve made energy saving home improvements to your home, then you may qualify for the new energy tax credits. From new insulation to new windows, doors, water heaters, electric heat pumps, solar equipment, circulating fans, air conditioners and more, you may take a credit of up to $500 on your 2006 Federal tax return.

2. A $1000 Child Tax Credit. The IRS recognizes that having and raising children can create an additional financial burden. You may qualify to get a tax credit of $1,000 per child. The amount of child tax credit you can claim is adjusted based on your income.

3. Child Care Tax Credit Or Dependent Care Credit. If you have children or a dependent that you pay someone else to care for while you look for work or while you work, you probably qualify for this tax relief. This child and dependent care tax credit may result in a bigger tax refund!

4. Earned Income Credit. If you were married and earned less than $37,263 ($35,263 for single or head of household) in 2006, you may qualify for this tax credit, or even a refund check.

State Taxes

admin — Thu, 25 Feb 2010 21:58:14 +0000

Small businesses owners are dependent upon each state for their liability when it comes to payroll taxes for their state of operation. Each state varies, and there are even some states that do not withhold state tax and require no state income tax filing. Each state requires that an employer deduct and withhold unemployment tax, just the same as at the federal level.

Generally, however tax rates for the state level on unemployment tax will vary depending upon the employment history of the business. Once in business long enough, a tax rate can be established based upon the employer’s experience with benefit charges and taxable payroll.

Taxes are deducted in the same manner as federal taxes, each pay period and filed with the applicable state on a monthly basis. Most states will also require a quarterly information report comparable to the 941 federal forms. Withholding rates on the state level are much lower than the federal rates. Also, there are limits of liability. Once a particular level is reached in income, the tax rate may be reduced, or sometimes eliminated.

Small businesses operating in one more than one state may find themselves liable for payroll tax in each state. If you operate in multiple states, you should contact each state of operation to determine your liability and setup the necessary accounts for deductions. Quite often accountants that handle state taxes in your area will be aware of each state’s filing requirements and be able to assist you.

The greatest concern as a small business that you will have on the state level will be the unemployment tax that you are assessed. Unemployment compensation is administered on the state level, and can therefore greatly affect your tax liability. Your tax rating determines your tax liability, and new businesses are given a standard rating until enough time has passed with operations to assess an individual rating based on employee benefit charges and gross taxable payroll.

Helpful Tax Tips For Federal And State Tax Returns

admin — Tue, 08 Dec 2009 14:03:56 +0000

Each year there are millions of Americans who prepare their own federal and state tax returns and even more individuals have their taxes professionally prepared. Whatever choice a taxpayer makes there are a number of important tax tips that everyone should know.

A W-2 or 1099MISC is needed to accurately prepare a federal or state income tax return. There is always a chance that a taxpayer may misplace these forms or for one reason or another the forms may not have reached them. For federal tax returns and most state tax returns a W-2 or a 1099MISC is required. Individuals who do not attach these items are likely to prevent their tax returns from being processed or cause a refund delay. The Internal Revenue Service (IRS) states that all taxpayer should receive their W-2 or 1099MISC forms before February 15th. Individuals who did not receive these items are encourage to contact their employer to determine why the forms have not arrived. Taxpayers who misplaced their W-2 or 1099MISC forms are encouraged to contact their employer right away to receive a copy. Taxpayers must do so because even if a wage or income form is missing a tax return is due on the traditional April 15th deadline or else late fees and penalties may be assessed.

Another one of the popular tax tips that taxpayers should know about is tax deductions. It is estimated that each year the American public loses millions of dollars from tax deductions that they were entitled to, but failed to claim. A professional tax preparer and a tax software program may prompt an individual to claim tax deductions that they qualify for. Individuals preparing their own paper taxes are more likely to miss tax deductions that they may claim. To prevent this from happening taxpayers are encouraged to research the most frequently overlooked tax deductions to determine which deductions they may qualify for.

Another one of the most common tax tips that taxpayers need to be aware of is what to do if they can’t pay the amount of taxes owed on federal or state tax returns. The biggest mistake that taxpayers make when realizing that they cannot pay the amount due on their taxes is to not file a tax return. Some people think that not filing a return will prevent a refund from being owed on time when in reality it can make the situation a lot worse. Taxpayers can file an extension deadline; however, the estimated amount of taxes owed is still due on the traditional tax deadline. The Internal Revenue Service (IRS) will impose a number of late fees and penalties on tax payments that were not received in time. Just ignoring the Internal Revenue Service (IRS) may increase the number of or the amount of penalties.

One of the most important tax tips that a taxpayer needs to keep in mind is that the Internal Revenue Service (IRS) and many state governments change or update their tax laws each year. For this is reason taxpayers are encouraged to check out the website of the Internal Revenue Service (IRS) or the website of their state tax department to determine if any of the tax law changes need to be applied to their federal or state tax returns.

These helpful tax tips are just a few of the many tax tips that can help tax preparation flow more smoothly. The above mentioned tax tips will also help to reduce the amount of money that an individual owes on federal or state taxes or even potentially increase the amount of their refund. Why pay late fees or lose money on tax deductions that you deserve? Let these and other helpful tax tips assist you this tax season.

http://www.taxhelpdirectory.com/irs/irstaxlaw/

State Tax Refunds

admin — Wed, 04 Nov 2009 05:36:31 +0000

Nearly 67 percent of all taxpayers around the country are entitled to state tax refunds, and the amount of these refunds is worth lining up for. In the state of California, for example, refunds averaged around $760. The average for most other states was about $550 in 2005.

Guidelines vary from state to state, so it is best to consult an accountant. As a general rule, though, low-income individuals and families could claim property-tax refunds or rent credits if they filed income tax returns. And in many cases, you can still get tax refunds even if you do not meet the tax filing threshold, because you may have money withheld from your paychecks, or because you may be eligible for the federal earned-income tax credit. This applies if you earn less than $33,000 and have more than one child, or earn less than $29,000 and have one child, or earn less than $11,000 and do not have a child.

Are state tax refunds taxable? Yes and no. State tax refunds are typically taxable the year you receive them. If you overpaid your state income tax last year and your state returned your money this year, for example, you must pay taxes on it this year. Expect to receive (if you haven’t yet) a form 1099 from your state, reminding you about that returned money. Your state also sent a copy to the IRS, binding you to pay the appropriate taxes. But there are exceptions.

The state tax refund is fully taxable if you detailed the deductions on your federal tax returns. Check with your accountant, though, because there’s still a chance that part of it is tax-free (even if you did itemize). If you owed the alternative minimum tax during the year of the refund, for example, there’s a chance that your refund may not be taxable.

But if you are among the 70 percent of taxpayers who did not itemize deductions on your return, then you don’t have to worry about a thing. You do not have to pay taxes on the state refund you received.

IRS Offers Free State Sales Tax Deduction Calculator

admin — Fri, 16 Oct 2009 09:05:01 +0000

If you itemize your deductions, you may be in for a windfall on this years tax. Yep, Congress has renewed the optional sales tax deduction. Of course, you have to figure it out.

If you itemize your tax deductions, you already know that you can claim a deduction for the total state income taxes you paid during the year. Depending on your state, that can be a very large tax deduction. But what if you live in a state that doesn’t collect income taxes? For the last couple of years, you could claim a deduction for the total state and local sales tax you paid on your purchases. In fact, you can do this regardless of whether you live in a state that collects income tax or not.

The state sales tax deduction was set to expire at the end of the fiscal 2005 year. At the last minute, Congress renewed it. All and all, this is great news. One problem does exist, however. You need to figure out which deduction is going to be bigger, you state income tax or sales tax deduction. Well, the IRS is here to offer a bit of help.

The IRS has an excellent website. Yes, I am shocked to. Regardless, the agency is offering a free sales tax deduction calculator on the site. The beauty of the calculator is it already has the state and local sales tax rates built into the database. As a result, you don’t have to go hunt and peck for them.

People are often leery whenever the IRS offers anything free. In truth, the IRS has become much friendlier the last few years, just don’t ask someone being audited. Regardless, you can use the sales tax calculator without fear. All information is anonymous. The IRS records nothing regarding your personal information. They don’t even ask for it. In short, using it will not come back to haunt you!

If you itemize, it is in your best interest to determine whether the sales or income tax deduction will save you more money. Now you can use the free calculator provided by the IRS to make the determination quicker.

Maximize Federal Income Tax Deductions

admin — Fri, 07 Aug 2009 04:32:48 +0000

Have you ever wondered if you should file an itemized income tax return? Are you taking the standard tax deductions, but looking for more deductions, you may be missing out on?

If you’ve never checked-out whether itemizing would benefit you, then you may be paying more taxes than you should. You may be settling for fewer tax deductions than you are legally entitled to.

To decide whether itemizing your tax return would help to reduce your tax burden, you can try running the numbers for these common tax deductions.

You may be able to maximize your deductions with mortgage interest, state and local taxes, donations, education, medical expenses, and investments.

Many taxpayers can save a lot of money by itemizing when it comes to mortgages or home equity loans. You can see whether your tax deduction is larger by itemizing or by taking the standard deductions, with the aid of an online tax preparation program.

An online tax software program will help you decide whether you should take the standard deduction or itemize. All you do is type in the numbers and the tax program will automatically do all the calculations for you. It will even supply you with the right forms and information for each deduction.

Just run the numbers! The best way to maximize your Federal and State income tax deductions is to run the numbers. Navigate to a tax filing website, create a user account, then just run the numbers to see how you can maximize your Federal and State Tax Deductions.

How To Check Your Tax Return Filing Status In Easy Steps

admin — Sun, 02 Aug 2009 04:09:41 +0000

Taxpayers have two options when filing a national or state income tax return. Taxpayers can have their tax returns professionally prepared or they can prepare their own taxes. Whatever tax preparation option an individual chooses, it is likely they will have a number of tax questions. To find the answer to a tax question many taxpayers research and review general tax information.

Since each state has different tax laws and tax forms, taxpayers looking for tax information are encouraged to contact their local or state government. Many local county officials may be able to answer common tax questions or point taxpayers in the right direction if they are unable to help. The majority of state tax officials can be contacted by obtaining a phone number from the Internet. In addition to using the Internet as a way to obtain contact information, many taxpayers may also be able to find valuable state tax information on the Internet. The majority of states have a website that is related to state taxes. It is not uncommon for a number of these tax websites to offer tax tips and other valuable state tax information.

From Where to Get Started:

We all work so hard for our money that the thought of parting ways often makes us restless, yet everyone knows that our government was designed to function with our tax paying dollars. Many of us out there feel as though the only thing you can count on is death and taxes. Often times we ask ourselves, ‘Would the government know if I didn’t pay my taxes?’ Yes, the Internal Revenue Department is adamant that we all do our part to keep the country economically viable. Ever heard of Al Capone? The FBI tried for years to convict him of his many heinous crimes. Who finally got him and trotted him off to jail where he died? Yes, the IRS tried him for income tax evasion and put him in prison. Finally, one of the most notorious criminals of the Twentieth Century went to jail because he didn’t pay his taxes.

According to federal and most state laws, if you made some sort of an income last year, than you must file an income tax return. Income tax returns are required regardless if you had income tax withheld or not; while all businesses except partnerships must file an annual tax return. For the individual, when determining whether you must file or not, the IRS takes into account your income, filing status, and age.

To Sum up with:

There is assistance from commercial tax filing services for low income tax payers. One service provider, VITA, provides free basic income tax return preparation to individuals with income of $34000 and below. The IRS stresses that it does not provide free electronic filing or tax return preparation services, which is why it formed this public-private alliance. Are you planning on filing your taxes yourself? You should consider avoiding filing manually and file electronically. Filing electronically is less cumbersome and less stressful. Make sure that you are using the appropriate tax rate for your filing status.