Federal
Regulations and Agencies
There are
several agencies of the United States Government which enforce regulations
which apply to businesses.
The Internal
Revenue Service (IRS)
Assistance
and Information
The IRS is
the primary agency of the federal government responsible for raising
and regulating finances for the U.S. government through taxes. Individuals
as well as businesses are required to file tax forms and pay taxes.
Businesses
have a variety of tax forms which must be submitted to the IRS. To
help businesses to comply with IRS regulations, as well as learn more
about submitting information, the IRS has developed a business tax
kit. This business tax kit is customized for the various types of
businesses (such as individual proprietorship, partnership or corporation)
and industries (such as manufacturing or retail).
The business
tax kit includes:
- tax guide for small
business
- tax calendars
- business reporting
- starting a business
- an application for
Employer Identification Number
You can pick
a business tax kit from your nearest Internal Revenue Service Office.
North Dakota IRS addresses are found in in the resources section of
this folder. Or you can call a national office for IRS forms 1-800-829-3676.
The IRS has
other publications that guide you through the IRS regulatory maze.
For information on IRS publications for your business call 1-800-829-1040.
IRS Forms,
Reports and Documents
Below is a
list of the IRS forms, reports and documents you should be familiar
with.
Employer
Identification Number: The IRS makes sure businesses comply
with federal tax laws by monitoring payment of taxes using a number
system. The IRS assigns a taxpayer identification number to all
corporations, partnerships and some sole proprietors. Each business
is required to file for an Employer Identification Number (EIN).
This number is used throughout the life of the business on all tax
returns and reports. Unless there is a change in business ownership,
or a change in the form of business, such as a proprietorship to
a partnership, you will only file this form once.
Because
this number will identify your business to the IRS, always keep
this number available and handy for your use in completing forms
or asking the IRS questions about your business.
Employee's
Withholding Allowance Certificate: The IRS requires individual
taxpayers to pay their federal income taxes as they earn income
during the year. To do this the IRS requires businesses to withhold,
or take out this tax from employees' paychecks. Your business must
complete a Form W-4, Employee's Withholding Allowance Certificate,
for each employee to establish the amount of federal income tax
that will be withheld. The employer is responsible for providing
this form to all employees as soon as they are hired. The information
on this form, along with the Employer's Tax Guide from IRS, will
help you to determine the amount of tax to withhold from each employees
paycheck. If an employee wishes to change the amount of withholding
they must submit a new W-4 form to the employer.
Social
Security Tax: In addition to withholding employee income tax,
you must also withhold social security tax from each employee's
wages. The amount of social security tax you withhold from each
employee will be a percentage of the employee's wages. The amount
of social security tax withheld from each employee must be matched
by the business. Social security taxes are deducted at a rate set
by the law. To determine the rate contact your local Social Security
Administration Office or call 1-800-999-1215.
Federal
Tax Deposit Coupon: When you withhold income tax and social
security tax from employees' wages, employees are making tax payments
to the government through you. You must deposit these payments with
the Federal Reserve Bank for your district, or a commercial bank
that is authorized to accept tax deposits. Make your deposit with
a completed Federal Tax Deposit Coupon. These forms will be supplied
to you automatically when you apply for an Employer Identification
Number. You can also obtain them from your local IRS office or call
the IRS Forms order number. How often you must deposit withholding
depends on the amount of money withheld from employees.
Employer's
Quarterly Federal Tax Return: A report of the amount of federal
income tax and social security tax withheld from your employees
must be submitted to the IRS each quarter. The form used for filing
quarterly withholding is IRS Form 941, Employer's Quarterly Federal
Tax Return. The actual deposits of the withheld taxes, made with
the Federal Tax Deposit Coupon, may be required before the quarterly
tax returns are filed depending on the amount of taxes you are paying.
Form 941 must be filed within 30 days after the end of each quarter.
Wage
and Tax Statements: To monitor and cross-check the taxpayers
earnings and overall wages paid by a business, the IRS requires
wage and tax statements be completed by a business. Wages paid to
employees within the calendar year, even if they are no longer working
for the business at the end of the year, must receive a Wage and
Tax Statement, Form W-2, by January 31 of the following year.
The W-2
for each employee has four copies. Three copies of the W-2 are given
to each employee, one for himself/herself, one to file with his/her
federal income tax return and one to file with his/her state income
tax return. One copy is kept in your business files and one is sent
to IRS, along with Form W-3, Transmittal of Income and Tax Statements.
Form W-3,
Transmittal of Income and Tax Statements, is a summary of all the
W-2 forms your business issued to employees for the year. The W-3
must be filed by the end of February of the following year.
This may
sound complicated, but if you have kept good payroll records throughout
the year, the wage and tax reporting forms will be fairly easy to
complete.
Federal
Unemployment Insurance: The Federal Unemployment Tax Act (FUTA)
provides funds to workers who are currently unemployed. Most employers
are required to pay both a federal and a state unemployment tax
to supply this fund. The tax rate for FUTA is set by law. Depending
on the amount of your tax liability, your business may be required
to make deposits of FUTA tax periodically during the year.
A business
must file Form 940, Employer's Annual Federal Unemployment Tax Return
by January 31 of the following year.
Federal
Income Tax
A business
is taxed on its earnings or profit. How that tax liability affects
you the owner depends on the type of business organization you have
or its legal business structure (namely, partnership, corporation
or sole proprietorship).
As a proprietor,
you pay income tax just like any other taxpayer. Your income is from
the earnings of the business, instead of wages or salary. You will
have to file an additional form to report expenses and income for
the business.
As a partner
in a business, the amount of taxable earnings for your part of the
business will be added to your individual tax liability. The business
itself does not have a tax liability, but the individual partners
do.
If your business
is a "C" corporation, the business pays taxes on its profit and the
tax liability is not passed on to you the business owner. You do have
to pay individual tax on any salary and dividends that your corporation
pays you.
Tax rates
vary for different types of businesses. Here is where the advice of
a credible accountant or business advisor can be very useful. Determining
the type of business organization you should have is an important
strategy for managing your and your business's tax liability.
Corporations
and individuals must file a federal income tax return annually. Partnerships
must file a federal informational return annually.
Other Federal
Tax Information Returns
The IRS requires
other taxable items to be reported in addition to wages. Examples
include dividends received, interest earned, and distributions from
retirement plans. To determine whether or not your business will have
to report this information, consult your accountant or the IRS.
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