What Are Key Tax Deadlines for Startups?
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There’s never a bad time to prepare for tax season, unless you’re trying to do it at the last minute before a filing deadline.
Though individuals and corporations alike know that they must file their federal or state income tax returns in April, it’s important for startups to keep track of several other key tax deadlines in the months leading up to Tax Day.
Knowing all of the relevant tax filing deadlines for your business can help you avoid last-minute scrambles and potential errors, as well as the various consequences that come with missing key cutoff dates, such as penalties, fines, or even jail time in more serious cases.
Choosing a startup tax provider well before tax season and proactively working with them throughout the year can ensure that your taxes are filed correctly and on time. Regardless of whether you’re a little late to the game or marking your calendar for next year, we’ll break down the key tax deadlines that may apply to your startup.
Due date: January 31
You must file 1099 forms for vendors, contractors, and freelancers in the United States who were hired by your company and paid at least $600 throughout the year.
Vendors, contractors, and freelancers must also receive a copy of their 1099-NEC form by the filing deadline.
Specific types of vendors covered by this requirement include individuals, sole proprietors, partnerships, and limited liability companies (LLCs).
This form, as well as other information returns, are due at the beginning of tax season because they are designed to help the IRS reduce fraud by verifying income that individual taxpayers report on their tax returns.
Although the IRS doesn’t provide an automatic 30-day extension to file 1099-NEC forms, your business can obtain one if you experienced certain hardships. Since a 1099-NEC extension request form can’t be filed electronically, you must fill it out, sign it, and mail it to the IRS.
The good news is that you don’t need to file 1099-NEC forms for vendors, contractors, and freelancers who don’t live and work in the United States. If you use a credit card, debit card, gift card, or third-party payment network, such as PayPal, to pay vendors, contractors and freelancers, the card issuer or payment processor will report those transactions for you, so there’s no need to do so on your end.
As long as they were used to pay all of your vendors or contractors, reimbursement processors, such as Expensify, and payroll providers, such as Gusto, Zenefits, Rippling, and Justworks, will often file 1099-NEC forms for you, but it’s best to confirm this with them.
U.S. vendors, contractors, and freelancers should fill out a W-9 form as soon as they start working with your company, since it allows you to obtain their taxpayer identification number. You need the taxpayer identification number for all applicable vendors, contractors, and freelancers to properly file a 1099-NEC form with the IRS.
Non-employee compensation can be subject to backup withholding if you submit an incorrect taxpayer identification number to the IRS or don’t receive one from a vendor, contractor, or freelancer.
San Francisco Business Taxes
Due date: February 28
Any company that conducts business in San Francisco, except for lessors of residential real estate, must file an annual business tax return with the City and County of San Francisco unless they qualify for certain exemptions or have combined taxable gross receipts that don’t exceed $2 million.
An annual business tax return for a San Francisco-based business consists of several different taxes that apply to certain businesses:
- Gross receipts tax: Anyone other than lessors of residential real estate who conducted business in San Francisco and had more than $2 million in combined taxable gross receipts, including income from sales, rent, interest, royalties, dividends, and licensing fees. Certain businesses, such as nonprofit organizations and small businesses, can get an exemption from the San Francisco gross receipts tax.
- Administrative office tax: Registered businesses with an administrative office in San Francisco must pay a 1.4 percent tax on the payroll expense of an employee or combined group of employees who work there. The administrative office tax specifically applies if more than 50 percent of the total combined payroll expenses for an employee or group of employees was tied to providing administrative or management services for their business and any related entities. The administrative office tax also applies to businesses that had more than 1,000 employees and total combined gross receipts of more $1 billion during the preceding tax year. This tax doesn’t apply to employees working in sales, marketing, direct customer service, product support services, and research and development.
- Homelessness gross receipts tax: San Francisco businesses must pay an additional 0.175 to 0.69 percent tax on combined taxable gross receipts that exceed $50 million. Businesses or combined groups that pay the administrative office tax will pay an additional 1.5 percent on their payroll expense in San Francisco.
- Early care and education commercial rents tax: San Francisco businesses that lease commercial space in the city must pay a 1 percent tax on the gross amount received from renting warehouse space. For all other commercial spaces, businesses must pay 3.5 percent of the gross amount that they receive from rent. This tax generally doesn’t apply to businesses that are exempt from the city’s gross receipts tax.
Delaware Franchise Tax
Due date: March 1
All companies that were incorporated in the state of Delaware must file an annual report and pay a franchise tax every year, regardless of whether you generate any revenue or profit.
Limited partnerships, limited liability companies, and general partnerships formed in Delaware don’t need to file an annual report, but they must pay an annual $300 tax.
The amount of taxes that your business will pay is based on your company’s authorized shares.
There are generally two ways to calculate the amount of taxes that your business owes, and you can choose whichever one is lower. The maximum tax amount for companies is $200,000 for either calculation method.
- Authorized shares: This bases your taxes on the total number of shares authorized in your company charter, regardless of how many have been issued and are actively held by stockholders. The minimum tax rate using this calculation method is $175.
- Assumed par value: This bases your taxes on all of your issued shares, including treasury shares, and total gross assets. The tax rate for this calculation method is $400 per $1 million, with the minimum tax being $400.
Not filing your Delaware franchise tax on time can result in a $200 penalty, plus 1.5 percent interest on the unpaid tax balance.
Federal & State Income Taxes (Partnerships & S Corporations)
Due date: March 15
Extension due date: September 15
For all intents and purposes, a partnership is a relationship between two or more people, who conduct business together and contribute money, property, labor, and skills to it. These designated partners also share responsibility for any profits made or losses incurred by their business.
To that end, partnerships don’t pay federal income taxes. Instead, tax obligations for any profits or losses are passed down to all of the individual partners.
Partners, in turn, must disclose information about the partnership on their tax or information returns to the IRS.
Generally speaking, there are two common types of partnerships:
- General partnership: At least two general partners share rights and responsibilities in managing a business.
- Limited partnerships: This type of partnership includes at least one general partner, who owns and manages a business, and at least one limited partner, who is only an investor.
Certain states may require certain types of partnerships to pay certain taxes. For instance, general partnerships in California don’t pay annual tax, but limited partnerships must pay an $800 annual tax.
Regardless of which partnership you have, these tax documents must be filed with the IRS by March 15:
- Form 1065: This form is used to list your partnership’s total income or loss, along with any applicable deductions, such as salaries, guaranteed payments to partners, rent, taxes, and repairs. Schedules attached to this form will ask you about your partnership, any changes that occurred during the last tax year, how much income was brought in, and how much money was spent during that same time.
- Schedule K-1: This form is used to report each partner’s share of the income, losses, deductions, credit, and more throughout the tax year. General and limited partners alike need this form to report their proportional share of the partnership’s income or loss on a federal income tax return.
You can, however, request an automatic 6-month extension of time to file Form 1065 and provide Schedule K-1 to your business partners.
S corporations, which pass corporate income, losses, deductions, losses, and credits to shareholders for federal tax purposes, must also file their income tax returns by March 15.
Like partnerships, S corporations don’t need to pay corporate income taxes, since any income or losses are divided among shareholders, who report it on their individual income tax returns.
Federal & State Income Taxes (All Other Corporations)
Due date: April 15 (April 18 in 2022 for most due to state holidays)
Extension due date: October 15
Much like individual taxpayers, most U.S. corporations — except for S corporations — must file their income tax returns by Tax Day on April 15. This deadline is occasionally extended due to state holidays.
If you need a little extra time, file Form 7004 and pay the estimated amount that you owe in taxes to obtain an automatic 6-month extension from the IRS.
Filing and preparing taxes can be a stressful process, but but it doesn’t have to be that way.
By planning ahead and getting in touch with a tax provider who can help you navigate startup taxes, you won’t need to panic during that four-month period between January and April when tax preparers and other businesses are working to get everything filed in time.
Interested in more or still have questions? Check out Guide to Navigating Tax Deadlines.