941 & Business Taxes

What’s New if you Haven’t Filed Taxes in Several Years?

Deceased - Haven't Filed Taxes. Form 56 will be needed

If you are responsible for a family member who is deceased and they didn't file taxes, you want to bring them into a basic compliance by having their last three to six years of tax returns filed. To get their transcripts, you'll need to get their 1. death certificate 2. their "will" and 3. have the IRS form 56 filled out. (previously the IRS demanded that you provide "Letter of testamentary" but that requirement has been waived). Lastly - you can sign/date the IRS Power of Attorney form 2848 so your professional can handle the research and monitoring of their case.

Haven't Filed Taxes, Keep Owing Money!?

If you have multiple years of taxes owed and not filed, the end of the year is a good time to make a simple judgement call: stop trying to pay your current year's taxes and focus on paying next years! For some self employed individuals, plans can be made to become a S corp and to get on payroll so you have a mechanism to force yourself to withhold taxes. The old taxes and the current year taxes that are unpaid can be combined and an installment agreement or a settlement can be pursued.

S corp, C Corp, LLC, sole prop - what's the best entity for your business?

Being compliant on your taxes for your businesses is also a matter of choosing the right entity for your business.

Let's look at how $100,000 in profits is taxed by a C corp, S Corp and a sole proprietorship to you the individual: (remember that a LLC can be a sole proprietorship, partnership (if two members) or elect to be a S corp.)

Sole prop: profit $100,000 - your tax bill is $28000 roughly (this includes $15,000 roughly to fund your Social Security Medicare.)

S corp: profit $100,000 - your tax bill is $15384. No Social Security/Medicare required on dividends. Although you should get on payroll! (probably for 50k in this situation and pay $7500 to soc/security medicare).

C corp: company level profit $100,000 x 21% = $21000. Let's say you choose to pay yourself in dividends, you will then owe an additional $15,284 in taxes.

Partnership, multi member LLC - limited partners: $100,000 profit distributed to one partners has $15,284 taxes due. (If you are a General Partner you would pay Social security/medicare taxes on this income at 15.35% rate).

All of the above entities have their merits. But clearly the C corp is the worst model for your average small business. You pay the most taxes with the fewest benefits. To make matters worse: C corps don’t even get the 20% QBI deduction like the other entities! Even sole props get the benefits of higher Social Security and medicare coverage for their high tax rate! S corp might just be the sweetest spot. You pay some Social Security taxes on your wages but not on your dividends.

Is 2024 the year to solve your tax issue? WATAX is ready to assist you now. Please call us at 1-888-282-4697 or email us a description of your tax issue and we'll contact you promptly.

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