Entities, Tax Types, Payroll, and More

Quick reference

• 00:04 Entity types and taxes.
• 00:06 In introduction to business taxes,
• 00:09 I'm going to begin by walking you through federal taxes.
• 00:13 Federal taxes are the taxes paid to the IRS.
• 00:17 They include personal taxes, corporate taxes, and payroll taxes.
• 00:24 I want to take a moment and go over tax forms.
• 00:28 The first tax form is the 1040.
• 00:30 This is the individual tax return.
• 00:33 The second one is the Schedule C.
• 00:36 The Schedule C gets attached to the individual tax return if there's
• 00:41 an individual with a business that is a sole proprietor.
• 00:45 The sole proprietor business doesn't have its own stand-alone tax return.
• 00:50 It just gets bundled with the human's tax return.
• 00:53 Then there's the Schedule 1120.
• 00:55 This is the tax return for a corporation.
• 00:59 This tax return is filed separately from the 1040.
• 01:03 There are of course many, many more tax returns than this.
• 01:07 What I'm really hoping to do is to keep things simple so that I can explain
• 01:11 the flow of what's happening so that you can get a foundation of understanding.
• 01:17 Let's talk about different types of businesses.
• 01:20 I'm going to discuss sole proprietors, LLCs and corporations.
• 01:26 I'm going to begin with the business type of sole proprietorship.
• 01:30 This type of business files their taxes on a Schedule C,
• 01:34 which is then attached to the 1040.
• 01:37 The 1040 being the tax return for the human.
• 01:40 The sole proprietor does not owe any taxes.
• 01:43 The business revenue is reported on the individual's tax return, and
• 01:47 the tax is calculated there.
• 01:50 If there's tax owed,
• 01:51 it's the responsibility of the human who owes the business.
• 01:55 It is not an expense to the business.
• 01:57 There is a business type of an LLC.
• 02:00 This could be a limited liability corporation or
• 02:03 a limited liability company.
• 02:05 This is not an IRS designation, there is no tax form for LLC.
• 02:11 An LLC can be taxed as a sole proprietor or taxed as a corporation.
• 02:16 The method of taxation determines which form is filled out and
• 02:20 how the taxes are paid.
• 02:22 The next business type I want to go over is the S-Corp.
• 02:26 This type of business will file their taxes on a Form 1120-S.
• 02:30 The revenue is reported on the individual's tax return, and
• 02:34 any tax owed is calculated as a part of the individual's tax return.
• 02:39 Any tax owed is the responsibility of the individual or the human, but
• 02:43 not the business.
• 02:44 Last but not least is the C-Corp.
• 02:47 This type of business files their taxes on a Form 1120.
• 02:51 The C-Corp may owe taxes to the IRS.
• 02:54 If it does owe taxes to the IRS, it is an expense to the business.
• 02:58 Speaking of taxes, I want to pivot and talk about which agencies
• 03:02 collect tax revenue, and then of course, what that tax revenue could be.
• 03:07 There's the IRS, we talked about that.
• 03:10 There's also the state, and then there could be local taxes.
• 03:15 So what kind of tax revenue?
• 03:17 Well, there's income tax, there's payroll tax, and there's sales tax.
• 03:22 When evaluating how to file your taxes, you really have two approaches.
• 03:28 The first approach is to do it yourself and the second is to outsource.
• 03:33 If you're going to choose to do it yourself,
• 03:35 you can use the irs.gov website to navigate and find solutions.
• 03:40 Or you can use a third party software such as TurboTax or H&R Block.
• 03:45 I'm not recommending or endorsing, I'm just letting you know what's out there.
• 03:49 If you choose to outsource to a professional,
• 03:52 I have two web links for you.
• 03:54 The first is the IRS guide on how to choose a tax professional.
• 03:59 And the second is the IRS guide to explain what an enrolled agent is.
• 04:04 If you're not familiar with what an enrolled agent is,
• 04:07 it's a person who's passed a series of exams allowing them to represent
• 04:12 clients from all 50 states in front of the IRS.
• 04:16 People who choose to be enrolled agents are passionate about tax and
• 04:20 making sure they're always current on the latest and greatest in tax.
• 04:25 Let's pivot into payroll taxes.
• 04:27 The federal payroll taxes are federal unemployment,
• 04:31 Medicare and Social Security.
• 04:33 I have federal withholding on the list even though it's not a payroll tax.
• 04:38 I have it on the list because it is money withheld from people's paychecks,
• 04:42 it's money that needs to be remitted to the IRS.
• 04:45 It is reported on the same form as the other payroll taxes.
• 04:49 Let's start with federal unemployment.
• 04:52 Federal unemployment is reported annually on the 940 and
• 04:55 it's paid 100% by the employer.
• 04:58 Federal withholding, this is the one I mentioned earlier.
• 05:02 It's reported quarterly on the Form 941, it is not a tax.
• 05:07 It's a prepayment of the taxes the individual will owe when filing their
• 05:11 federal tax return.
• 05:13 So it's a withholding that just gets applied towards whatever might be owed
• 05:18 on their 1040.
• 05:20 Then there's Social Security.
• 05:23 Social Security is reported quarterly on the 941.
• 05:27 It's paid by the employee and the employer.
• 05:29 Medicare, same thing as Social Security.
• 05:34 It's reported on the 941, it's paid by the employee and the employer.
• 05:39 I have examples of state and local payroll taxes.
• 05:44 The taxes that apply are going to vary from location to location,
• 05:47 they'll be based on where the employee is working.
• 05:52 The taxes might include Unemployment Insurance,
• 05:55 Workers Comp, Family Medical Leave, Personal Income Tax,
• 06:00 State Disability Insurance, Employment Training Tax.
• 06:05 One way to file and pay the IRS forms is to contact the IRS directly and
• 06:10 follow the instructions.
• 06:13 I have links for them here.
• 06:15 Another way to file and
• 06:17 pay all of your payroll forms is to use a payroll processing company.
• 06:22 A payroll processing company will ensure your employees get paid,
• 06:26 that you're compliant both federally and on the state level.
• 06:29 I have a couple examples of solutions for you.
• 06:32 There's Gusto, OnPay, ADP, and Paychex.
• 06:38 I'm not endorsing any particular provider.
• 06:41 What I am doing is giving you resources or
• 06:43 a starting place if you're just not sure where to go to find a payroll company.
• 06:48 Next I'm going to go over other local taxes that you may or may not encounter.
• 06:54 There's business and occupation, which is like an income tax for the business.
• 06:58 There's personal property tax, which is a tax on the equipment the business owns.
• 07:04 There's a real estate, or
• 07:05 property tax based on the real estate the business owns.
• 07:09 And then there's sales tax, which is often collected at the time of the sale, and
• 07:14 then held in reserves until it's time to remit it.

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