Tax Issue Basics for Business Start-Ups

Income Taxes: All businesses are required to pay state and federal income taxes.

Specific requirements vary based on the legal form of the business:

Sole Proprietorships report revenue and expenses from business activities on the Schedule C and include them with the Form 1040 individual tax return.

Partnerships require an information return on Form 1065; since partnerships are not taxable entities, the business’s income is reported on the partners’ individual returns and taxed at their individual rates.

Corporations must file a separate return. “C” Corporations use Form 1120 or 1120-A and “S” Corporations use Form 1120-S. The “S” Corporation does not pay taxes; income of the corporation is reported on the individual returns of the shareholders in proportion to their ownership share and taxed at their individual rates.

Employment taxes: Businesses with employees must withhold state and federal employee taxes and pay employer taxes. Both must be deposited (usually monthly or quarterly) in a federal reserve bank. Use pre-printed coupons bearing the employer name and EIN. Quarterly 941 returns must also be filed. An approximate total of employer tax cost is 11.15 percent of gross payroll, which includes a 7.65 percent Social Security cost as well as a 2.7 percent SUTA and a .008 FUTA.

Wages and withholdings should be reported on Form W-2. Businesses who utilize independent contractors earning over $600 a year must report the earnings on Form 1099.

For more information you should contact the Georgia Department of Revenue, Income Tax Division, 404-417-2311.

Sales Tax: Business that sell or rent tangible items must comply with Georgia sales and use tax regulations. Contact the Georgia Department of Revenue Taxpayer Services Division at 404-417-2400.

Property Tax: Property taxes are a significant planning consideration for businesses that will require a lot of investment into inventory, property, or equipment. Businesses operating in Georgia are subject to an ad valorem property tax on real property, equipment and inventory owned by the taxpayer on January 1 of each year. Local county or city officials determine the value of the property and the millage rate used to determine tax value.

 

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