Whether you became a new business owner in 2021 or you are a seasoned professional, when tax time comes around everyone takes pause to make sure that they are prepared for tax season and know exactly what their business tax deadlines are. We’ll take you through the tax dates you should be aware of in 2022, and how they differ based on the type of business you own.
If you are self-employed, Forbes recently published a great article with a simple infographic that shows tax forms by type of tax, due date, and who those taxes apply to.
If you know what form you file under, skip ahead to that section to see the 2022 tax deadlines. Otherwise, read each section carefully and check with your tax person to see what forms and deadlines apply to your small business. Tax rates vary, and you will either be required to file on an annual or quarterly basis. You will also be required to provide tax paperwork for each employee.
Employment Taxes
If you have an employee or employees who you pay an hourly rate, tips, or any other wages or compensation, then you as the employer are responsible for filing and paying employment taxes.
W2s and W3s
If you have employees who are receiving wages or compensation of any kind, you’ll provide them with W-2s or W-3s, due by February 1.
Form 940
Similarly, if you pay wages of more than $1500 in a quarter, or you have an employee or employees for more than 20 weeks out of the calendar year, Form 940 is also due by February 1.
Forms 941 and 944
If you pay your employee or employees wages subject to federal income tax withholdings, Medicare and Social Security taxes, Form 941 is due quarterly by January 31, April 30, July 31, and October 31. But if all of the above is true and you also expect to owe less than $1000, then you would file Form 944 just once by January 31.
Miscellaneous and Nonemployment Taxes
If you work with contractors, freelancers, or pay for other services to someone who is not your employee, then there are some miscellaneous tax forms that you’ll need to use. These miscellaneous services can include freelancers and accountants that provide you with legal, administrative, advertising, and other professional services.
Form 1099-MISC and 1099-NEC
If you make payments for services or work from contractors or other non-employees, you’ll file Form 1099-NEC by Feb. 1. If you need to report other income, such as rents, royalties, prizes, or awards paid to third parties, you will need to file form 1099-MISC by March 1.
Self-employment Taxes
For self-employed individuals and sole proprietors with no employees, you’ll file self-employment taxes.
Form 1040
If you have an income or a loss from your self-employment in 2021, or you choose to file as a sole proprietor, you’ll file form 1040 by April 15 for your self-employment income tax.
Form 1040-ES
However, if you expect to owe more than $1000 at tax time, be prepared to file quarterly with the 1040-ES form for estimated tax payments. Making estimated payments protects you from taking a big hit at the end of the year. Your quarterly payments will be due by January 15, April 15, June 15, and September 15. It is important to stay on this schedule because you may be charged a penalty by the IRS if you do not pay enough in taxes or fail to pay on time.
S Corporation & C Corporation
There are unique benefits accompanying both S and C corporations and each requires different tax filing procedures to stay current and avoid penalties.
C Corporations are subject to double taxation. Any profits earned by the C corporation are taxed at federal corporate income tax rates which start at 15 percent. Also, several states apply a corporate income tax. When owners are paid a salary or receive dividends, these payments are also taxed at their personal income tax rates without any adjustments being made for the corporate taxes which have already been paid.
S Corporations don’t pay federal corporate income taxes. Every single shareholder reports their share of the annual profits or losses on their own tax return. This figure is taxed at the shareholder’s personal income tax level.
Filing with an S Corporation or C Corporation
Both C and S corporations are required to file a federal income tax return. C corporations will use Form 1120 to calculate their taxes due. S corporations use Form 1120S as an information return. Additionally, S corporations must prepare a form 10 K-1 for each shareholder to include with their own individual return.
Payroll Taxes for C & S Corporations
While both S corporations and C corporations are responsible for income tax withholding and payroll taxes for salaried employees, S corporations have some additional requirements to take care of during tax time.
To assure that you prevent tax avoidance schemes, distributions to S corporation shareholders “must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.” In essence, S corporation shareholders cannot take dividends instead of a salary to avoid payroll taxes. This is an area where S corporations are heavily audited to assure legal compliance.
For the most part, C corporations escape scrutiny with regard to how owners are paid. Salaries are deductible and dividends are not, so any gain shareholders receive by taking dividends in place of a salary is mostly canceled out by double taxation.
Several, but not all, states will exempt S corporations from state corporate income taxes. They pass these profits or losses on to the shareholder to be taxed on their personal income tax returns. All appropriate tax forms must be filed by March 31.
Tax Penalties
We mentioned tax penalties earlier, that you could incur by not filing on time. It is important to know that those penalties increase the later you are filing your taxes. It’s not a single time late fee, it is a fee that gets exponentially higher the later you are with filing. Protect your small business assets by making careful note of these dates and giving yourself plenty of time to gather the information needed to file on time.
Quarterly Penalties
When you are paying quarterly taxes, the first one of the year is due on April 30. If you wait until May 3, you’ll incur a 9% penalty. Delay until June 1, and that penalty increases to 19%. File by October 1, and you’ll be paying a whopping 29% penalty to the federal government.
Those penalty rates are the same for each quarter. If you miss the first deadline, you’ll pay 9%. The second missed deadline means you’ll owe 19%, and the third deadline missed will get you a 29% fee. So it’s better not to be late at all, but here are the deadlines for each of those penalties for the remaining three quarters.
Taxes in the second quarter are due July 31, with the first penalty fee beginning on August 2, the second penalty on November 1, and the third penalty on October 31. For the third quarter, taxes are due on October 31, with increased penalty dates on November 1, December 1, and January 4. In the fourth quarter, taxes must be filed by January 31, with penalty dates on February 1, March 1, and April 1.
Annual Penalties
Even if you are just filing your taxes annually, you can still owe fees to the federal government if your taxes are not submitted by April 15. The 9% penalty begins on April 18, the 19% penalty on June 1, and the 29% penalty on July 1.
The lesson here is that even being just a few days late on your taxes can result in a significant portion of your earnings being lost to late fees.
FAQ’s
When are the 2022 tax due dates?
If you are filing annually, your taxes are due on April 15. When filing quarterly, they are due April 30, July 31, October 31, and January 31.
What happens if I am late on paying my taxes?
If you are late on filing your taxes, you will incur a fine or fee from the IRS.
How much are the late fees?
The fees increase based on how late you filed your taxes. The first missed tax deadline will incur a 9% fee. The second and third missed tax deadlines will incur 19% and 29% fees respectively.
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