The Tax Cuts and Jobs Act passed in 2017 led to many changes for businesses, including a new requirement of filing quarterly. Businesses will still file their annual income tax return. It simply means that most of these businesses must report estimated taxes and employment taxes quarterly.
Reporting Estimated Taxes
Corporations expecting a tax liability of more than $500 should be filing quarterly with estimated tax payments. Estimated taxes are computed using Form 1120-W, Estimated Tax for Corporations. If a corporation owes taxes from last year, they will pay those estimated taxes the following year. Applying the new law, if a corporation’s taxable income for 2018 is $2,400 or more, the corporation should pay quarterly estimated taxes.
Estimated tax payments are due on April 15, June 15, September 15 and December 15 of each tax year. Failure to make estimated payments when due results in an underpayment penalty. Business owners can make estimated tax payments via electronic transfer. Taxpayers can use Electronic Federal Tax Payments System (EFTPS) or third parties such as payroll, tax preparer and financial institutions. Before using EFTPS, taxpayers should enroll first.
Reporting Employment Taxes
Filing quarterly also mandates companies to report payroll taxes throughout the year. Employers report wages paid to employees by filing form 941. This reports total wages paid to employees in each quarter, federal income tax withheld from those wages and Social Security and Medicare paid by both employee and employer. Form 940 is an annual report used to disclose Federal Unemployment tax paid by the employer.
Generally, the due dates for quarterly Form 941 are 30 days after the end of each quarter. New employers make monthly federal tax deposits for Form 941. They pay on the 15th day after the last month of paid wages. Employers with prior payroll should determine their deposit schedule by using a lookback period.
Form 940 with Federal Unemployment tax is due every January 31st. If the corporation expects Federal Unemployment Tax for the current year to be more than $500, they should make at least one quarterly tax deposit.
Employers have the option to paper file or e-file both Form 940 and 941. Failure to file reports and make federal tax deposits may result in penalties and interest charges.