| The tax liability of a business is affected not only by its legal form, but by numerous other management decisions as well. The business owner should have an accountant or tax attorney explain how various methods of accounting, depreciation schedules for property, and the timing of business transactions affect tax figures. The IRS publishes numerous guides to taxes for business. Contact the IRS office for more information.
Small Business workshops, presented by the district taxpayer education coordinator, are available by contacting your local IRS office.
Federal Income Tax
Sole proprietors pay their income and self-employment tax by filing quarterly estimates using form 1040-ES. When they file their annual individual 1040 tax return, they list those payments. The SE tax (form SE) is the Social Security and Medicare tax for the self-employed.
Partnerships do not have tax requirements, as they are a pass-through activity. General partners are responsible for the same estimated tax payments, as are sole proprietors. Partners receive form K-1 annually telling them exactly where to list their estimated tax payments on their individual tax returns (i.e., schedule B, E, SE, etc.). Remember that partners are never employees.
Income and deductions of a corporation are computed at the corporate level and taxes are paid on the corporations taxable income. Most corporations file their tax returns on form 1120. Additionally, all officers of the corporation are considered to be employees of the corporation. This requires the following forms: W-4, 940, and 941.
State Income Taxes
Basic information and forms needed to pay state, personal, business and corporation income taxes are provided by:
State of California Franchise Tax Board …….800-852-5711
5353 Mission Center Rd., San Diego, CA 92108
In general, California corporations are subject to an annual franchise tax. The tax is imposed in advance for the privilege of exercising the corporate franchise. The Franchise Tax Board will provide reference material to new corporations upon request.
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San Diego Regional Chamber of Commerce.