Be familiar with your business's tax obligations by Jimmie Wilkins
Tax Obligations
Jimmie Wilkins
All businesses have a tax obligation to the federal government and the state of Oregon. You can find federal information at www.irs.gov and Oregon information at www.dor.state.or.us. I strongly suggest you get a copy of the forms you will file next year and become familiar with the process. Do not ignore this critical area, leaving all tax matters entirely in the hands of your CPA. They do great work – this is your business. Here is a quick primer, compliments of the Office of the Secretary of State, Corporate Division.
Sole Proprietors: You must file federal tax Form 1040 with a Schedule C (or C-EZ) to you’re your federal tax obligations. You would probably be liable for self-employment Social Security Tax (Schedule SE). State obligations are filed on Form 40 with an attached copy of the federal 1040. A sole proprietor may be required to make estimated tax payments.
Partnerships (both general and limited): The partnership must file federal tax Form 1065 and state obligations filed on Form 65 with an attached copy of the federal 1040. Individual partners file tax Form 1040 and may also be liable for self-employment Social Security Taxes filed on Schedule SE. For state income taxes, the individual partners file Form 40 with an attached copy of their federal 1040. Partners may be required to make estimated tax payments.
Limited Liability Companies (LLC): Generally the LLC files the same tax forms as a partnership.
Corporations (Oregon): Corporations file federal taxes using Forms 1120 or 1120A. Corporations doing or authorized to do business in Oregon, pay excise tax and file state tax Form 20 with an attached copy of their federal tax forms. Corporations not doing or authorized to do business, but having income from an Oregon source, pay income tax and file Form 20-I with a copy of their federal tax forms.
A Corporation that expects it tax obligation to be $500 or more at the federal level is required to make estimated tax payments to the IRS. Similarly, a corporation expecting it’s state tax obligation to exceed $500 must pay estimated tax payments to the Oregon Department of Revenue.
S-Corporations: An S corporation files its federal tax return on Form 1120S. The state return is filed on Form 20S with a copy of the federal 1120S attached. Shareholders of the S-corp should seek specific instructions form the IRS and Oregon Department of Revenue for reporting requirements.
Estimated Income Tax Payments: A sole proprietor, partner, limited liability company member, or shareholder may be required to make estimated tax payments. In most cases, if you expect to owe $1000 or more in the “tax-to-pay” line, you must file federal Form 1040-ES and state Form 40ES quarterly. Penalties are assessed if payments are not made when they are due.
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