January tax checklist for small business

The start of the year is always a busy time for entrepreneurs and small business owners. There are new laws and regulations to comply with, such as changes in minimum wage rates in your location.

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And taxwise, January is a very hectic month. Here are some tax matters to be sure you have checked off as we close out the first month of the year.

Adjust to sales tax changes

You may have to collect sales tax on the goods and services you sell and remit the tax to the state. As of January 1, here are some changes to note:

New sales tax rates. There are about 10,000 sales tax jurisdictions in the U.S., taking into account not only state sales tax rates, but also the rates from counties and municipalities. Rates have increased in some localities, but there have also been some decreases.

New exemptions. What you sell may or may not be subject to sales tax. There have been some changes in exemptions. For example, in Nevada, effective January 1, 2019, feminine hygiene products are no longer subject to sales tax.

Obligations on your remote sales. If you sell to residents in another state, you may be required to collect and remit the tax to that state, thanks to a U.S. Supreme Court case decided last year. But states may offer a "small seller" exemption. The Supreme Court case concerned South Dakota, where the exemption applied to sellers with no more than $100,000 in revenue or 200 transactions within the state.

What to do. Check with your state revenue department to determine if there are any sales tax changes that affect your business. If you use a point of sale (POS) system, be sure it's been adjusted to reflect any changes. And determine whether you must collect sales tax on remote sales or if you meet the small seller exemption.

Provide W-2s

January 31 is the deadline for furnishing employees with their Form W-2, Wage and Tax Statement, which reports their compensation, tax withholding and certain employee benefits for 2018.

Your W-2s, plus a transmittal form -- Form W-3 -- must be filed with the Social Security Administration by the same deadline. This is so, whether you use paper forms or file electronically.

Note: You cannot get an automatic extension of time to file, but can ask for a 30-day extension on Form 8809 if you have special circumstances requiring more time to file.

What to do. You cannot download W-2 forms from the IRS website because these forms must be completed in triplicate (or more), with one copy or more to the employee, one to the Social Security Administration (SSA), and one for your records. You can order them from the IRS or purchase forms from an office supply store and prepare them yourself, have your payroll provider do it, or use an outside filing service or preparer. If you want to file electronically with the SSA, you must register to use its online service.

Prepare and file Form 1099-MISC

If you engage independent contractors, then January 31 is the deadline for furnishing them with Form 1099-MISC, Miscellaneous Income to report payments you made in 2018. The form must be given to any contractor who earned $600 or more from your company in 2018. And they must be filed with the IRS by January 31.

File employer returns

January 31 is also the deadline for filing certain employer returns with the IRS:

Form 940 to report your annual federal unemployment (FUTA) tax.

Form 941 to report your quarterly withholding on employees and your employer payments of Social Security and Medicare taxes (FICA). If you are a small employer permitted to file annually, then your Form 944 is due on January 31.


Final thought

If you fail to file on time, you'll be penalized, and penalty amounts on small businesses have increased for forms required to be filed after December 31, 2018. So address your filing obligations now.

Barbara Weltman is the founder of Big Ideas for Small Business, Inc., which publishes Idea of the Day®. She is the author of J.K. Lasser’s Small Business Taxes 2019 and other books that inform the small business community of tax, financial and legal information they should know about. For more information, visit https://bigideasforsmallbusiness.com/.