Federal taxes: 9 crucial things EVERY business needs to know

November 1, 2023

Learn these rules-of-thumb and important deadline dates and relieve your federal tax headache

Federal taxes: 9 crucial things EVERY business needs to know

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We don’t need to tell you how much of a headache federal taxes are for your DTC or Shopify brand.

You finally think you have gotten the hang of it, but then every year you're hit with even more complex regulations you have to follow.

So, here are 9 rules-of-thumb and important dates EVERY business needs to know.

Federal Income Taxes

1. SMLLC, partnerships, and S corps pay 0% tax


Instead, owners pay up to 37% tax on their personal return (1040) for income generated by the business. 


2. C corps pay a flat rate of 21% tax on income 


Additionally, shareholders pay 20% tax on dividends received from the business. 


Quarterly Taxes 

3. How to calculate quarterly payments?


Take the tax you paid last year and multiply it by 1.1. 

If your adjusted gross income is >$150k, then you need to divide it by 4. 


4. It’s best to pay from a personal account, not a business account.


As it only applies to pass-through entities, the tax obligation falls on the shareholders and not on the business.

Social Security & Medicare 

5. What if your business has employees (including the founders?


You will need to pay FICA (Federal Insurance Contributions Act), which is 15.3% of gross wages — 12.4% for Social Security and 2.9% for Medicare. 


6. You’ll need to withhold


50% of FICA taxes from employees’ paychecks & pay 50% out of pocket.


7. What if your business is a partnership or SMLLC?


You will have to pay self-employment taxes of 15.3% 


Unemployment

 8. You’ll need to pay a 6% unemployment tax out-of-pocket on the first $7k paid to each employee per year.


Form 1099-NECs 

9. If you paid a contractor more than $600 


You'll need to issue a 1099-NEC unless you paid via credit card, Paypal, or another third-party payment entity.


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Important Filing Dates

Annual taxes 

S corps & partnerships 
  • Deadline: March 15

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  • Deadline with extension: Sept. 16 

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C corps & individuals 
  • Deadline: April 15

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  • Deadline with extension: Oct. 15

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Quarterly taxes

  • Q1 Deadline: April 15

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  • Q2 Deadline - June 17  

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  • Q3 Deadline - Sept 16 

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  • Q4 Deadline - Jan 15 

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Remember, even if you file for extensions, taxes must be paid by the original due date.

To make tax season easier for your ecommerce business, consider using AI accounting and AI bookkeeping software like Finaloop.


About Finaloop

We are a technology company providing automated end-to-end accounting service to ecommerce businesses. Our system connects to your apps, syncs all your data and reconciles your books in real-time, replacing your bookkeeper, your accounting software, and your ecomm integrations. We offer reconciled books available 24/7, tax-saving insights, and a single place for all your financial data.

 

*The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns.*

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