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GUIDE
FOR NEW BUSINESSES
A newly organized Company conducting
business in Georgia
is subject to a variety of government reporting and filing requirements. The
most common of these requirements are outlined in
the following pages.
This package is not all
inclusive. There may be forms, returns, applications and/or reports
other than those listed herein, which should be filed
by your Company in certain situations. Also, in the
interest of brevity, complete information regarding the listed items has been
avoided. Some forms, returns, etc., must be submitted
regularly, while others need only be submitted a single time. In all cases,
applicable forms, applications, returns, and instructions can
be obtained from the appropriate regulatory agency.
Your attorney or accountant can help you
to comply with all the various taxes and licenses which
you are required to file. However, we believe it is in your best interest to
be familiar with the requirements and due dates.
Smith & Hinckley, P.C.
A. FEDERAL
1) Application for Employer
Identification Number
Every person who has not previously
secured an identification number and who, (1) pays
wages to one or more employees or, (2) is required to have an identification
number for inclusion in any return, even though not an employer, must file
Form SS-4 with the Internal Revenue Service. You can apply for both a
Federal Identification Number (EIN) and a Georgia Identification
Number online at www.georgia.gov. When you
reach the Georgia
page look under “Services” on the left side and click on “Business
Registration”. Applications for a Federal number alone can be done
online at www.irs.gov, by phone at 800-829-4933, or by completing a SS-4
and mailing it to the IRS.
2) Withholding of Social
Security, Medicare and Federal Income Tax
An employer is required to withhold Social
Security, Medicare and Federal income taxes from an employee's paycheck. The
current Social Security and Medicare tax consists of a 12.4% social security
tax on the first $97,500 (2006 $94,200) of an employee's wages and 2.90% on
the total of the employee's wages (no ceiling). The tax is
divided in half with one half being withheld from the employee's pay
and the other half being a direct tax on you, the employer. The amount of
Federal income tax withheld is determined from charts issued by the IRS, and
is based on the number of exemptions claimed by the employee. The total
amount of employee withholdings for Social Security, Medicare and Federal
income tax plus the employers portion of Social Security and Medicare tax
must be remitted to the IRS within the period specified in IRS Circular E
"Employers' Tax Guide."
By the last day of the month following
each calendar quarter, the Company must file Form 941 with the IRS. This
return summarizes all Federal payroll taxes accrued, withheld and paid for
the quarter. Providing all required deposits have been made,
no additional monies are due with this return.
3) Annual Summary of Wages Paid
By the last day of
February, the employer must file Copy A of all Forms W-2 issued for the prior
year, together with Form W-3 "Transmittal of Income and Tax
Statements," with the Social Security Administration. Incidentally, the
employee's copies of the Form W-2 must be delivered
to the employee on or before the last day of January.
4) Federal Unemployment Tax Act
(FUTA)
This Act imposes, on most employers, an
excise tax on wages paid to employees. The current effective FUTA tax rate is
.8% (.008) of the first $7,000 in wages paid to an individual employee. If
your quarterly liability exceeds $100, you are required to remit the tax
during the month following the end of the quarter.
By January 31 of each year, Form 940 must be submitted to the IRS. This form recaps the prior
year's wages, State Unemployment taxes paid, any
FUTA deposits made, and calculates the annual obligation. If all deposits have been made on a timely basis, the submission with this
return should usually be under $100.
5) Federal Income Tax Returns
Corporations and partnerships, must file an
annual Federal Income Tax Return regardless of the amount of its income.
Forms 1120 and 1120S are the common returns for a corporation and Form 1065
for a Partnership. The tax return must be filed by
the 15 day of the third month following a fiscal year-end for corporations
and April 15 for most partnerships.
The Company must make estimated tax
payments during each taxable year if its estimated tax for such year, income
tax less credits and an estimated tax exemption, can
reasonably be expected to equal or exceed $40. If you are required to
make a deposit they are due on, the fifteenth day of the fourth, sixth,
ninth, and twelfth months of the taxable year.
6) Annual Information Returns
All income payments (rent, royalties,
interest, awards and contract labor) to individuals that equal or exceed $600
are required to be reported annually on Form 1099.
Failure to comply can result in penalties of at least $50 per payee and can
run substantially higher under certain circumstances.
7) Sub-Chapter S Election
A Sub-Chapter S election allows the
taxable income of the Company, to be taxed to, and
the losses incurred by the Company to be deducted by its shareholders rather
than the Company. Your eligibility and the advisability of such an election
is a complex tax matter, and management should consult with their accountant
before making such an election. If it is decided that the Company would
benefit by such an election you must
file Form 2553 during the first 75 days of the corporation's tax year
In addition, Sub-Chapter S corporation
shareholders who are nonresident of Georgia
must file Georgia tax Form
600S-GA, whereby they consent to pay Georgia
income tax on their proportionate part of the corporation's Georgia
taxable income.
8) How to Send Money to the IRS
There are two methods for depositing
employment taxes.
1. The easiest method is to use
your PC to electronically transfer funds from your
bank account to the IRS by using either PC software or the online
EFTPS-Direct. If your total deposits of social security, Medicare, railroad
retirement and withheld income taxes exceed $200,000 during the year, you
must make electronic deposits for all
2. The IRS uses your bank to collect its
payroll, corporate income and excise taxes. To remit money to the IRS you fill
in a Federal Tax Deposit Coupon (Form 8109) indicating the type of tax you
are paying and the tax period that the payment should be applied to. Take the
coupon and your check, payable to your bank, to your bank and they will
credit the IRS's account with your payment. Normally, the IRS will send you
an initial booklet of coupons when you apply for your identification number.
If you need to remit money to the IRS prior to receiving your coupons, you
should send your check directly to the IRS Service Atlanta, Georgia 39901.
Put your employer identification number, and indicate the type and period of
tax that you are paying. In addition, we recommend that you make a photocopy
of your check prior to mailing.
3. Georgia
has started an electronic payment system for withholding
taxes. To enroll in the system go to www.dor.ga.gov
or call 1-800-602-8477.
9) Employment Eligibility
Verification Form I-9
The Immigration and Naturalization Service
requires that employers verify an employee's eligibility to work in the United States.
This is accomplished by completing Form I-9 and requiring that your employees
provide proof of identity such as a state drivers
license and proof of employment eligibility such as a Social Security card
and a birth certificate issued by a political subdivision within the United States.
Copies of all documents submitted,
together with the completed I-9, should be retained
for a period of at least one year after the termination of an employee's
service. Copies of publication M-274 "Handbook for Employers" and
blank I-9's may be obtained from any Immigration & Naturalization Office
or be writing to: Superintendent of Documents, US Government Printing Office,
Washington, D.C. 20402. Employers who fail to properly complete and retain
Forms I-9 may face civil penalties of not less than $100 and not more the
$1,000 for each employee for whom the Form I-9 was not
properly completed.
10) Request for Taxpayer
Identification Number and Certification Form W-9
All employers are required to report to
the IRS at the end of each calendar year on Form 1099 payments made to
unincorporated businesses of $600 or more. If you make payments to
subcontractors, vendors or suppliers that will exceed this threshold, make
sure you request the payee fill out a Form W-9 and retain it for your
records. Failure to do so can result in penalties ranging from $15 to $100
per Form 1099, with maximum penalties that can reach $100,000 for small
businesses.
B. STATE
1) Application for State Identification
Numbers
Georgia income tax withholding and sales tax
identification numbers can be obtained by completing
Form CRF-002. You can get this form by calling the Georgia Department of
Revenue at (404) 417-4490. It can also get this form of the internet at www.etax.dor.ga.gov/forms.shtml
.
2) State Withholding Taxes
The employer is required to withhold State
income taxes on employees paychecks in accordance
with the charts issued by the State. The amount is
determined by the number of exemptions the employee claims on Form G-4.
The Company sends the money collected to the State with an accompanying Form
G-V on or before the 15th day of the following month. Monthly deposits are
required during your first year in business. Note: If your cumulative liability
is less than $200 per quarter the state may have you
file quarterly coupons rather than monthly your second year in business. The
state determines the payment method on a yearly basis.
3) Annual Summary of Wages Paid
Annually you are required to send the
State a copy of all Form W-2's together with a Form G-1001 transmittal. This
information should be filed on or before February 28 for
wages paid during the previous year.
4) State Unemployment Tax
All employers with one or more employees
in the State of Georgia
are required to pay State unemployment taxes. Prior to the first payroll
period, the Company should complete and submit application Form DOL-1 to the
Employment Security Agency. The Agency will assign you a reporting number and
tax rate. Generally, the rate for new businesses is 2.70% of the first $8,500
in wages paid to each employee. Annually, the Agency will evaluate your
performance record and notify you of any rate changes.
On or before the last day of the month
following each calendar quarter, a Form DOL-4 must be completed and filed.
The amount due and payable with the return will be the rate assigned times
the amount of gross payroll of $8,500 or under (on an annual basis) paid to
each employee.
5) Georgia Corporate
Income Tax
As with the Federal tax
return, all corporations doing business within the State of Georgia must
file a Georgia Corporate Income Tax Return on an annual basis, whether or not
the Company had any income. The
Corporate tax return is submitted on Form 600 (Form
600-S for Sub-Chapter S Corporations). Currently, the tax rate is 6% of the
Company's taxable income. The State return is due on the 15th day of the
third month following the close of the fiscal year (same as Federal) and a
copy of the Federal return must be attached to it.
If, however, an extension is filed for the Federal
return, the State return is automatically extended.
If the net income of the Company can reasonably be expected to exceed $25,000 for a taxable
year, an estimated tax return and a ratable portion of the estimated tax
payment must be submitted to the Georgia Income Tax Unit. The declaration of
estimated income tax is made on Form 602-ES, and
must be filed on or before the 15th day of the fourth month of the taxable year.
Specific later filing dates are permitted, however,
when the reasonable expectation of $25,000 of income occurs after the last
day of the third month of the taxable year.
6) Georgia Annual License or
Occupational Tax
The tax is incorporated
into your State Corporate Tax Return (Form 600 or 600-S). The amount of tax is determined by the amount of the Company's net worth.
7) Georgia Sales and Use
Tax
A tax equal to 4% (5%, 6% or7% for
transactions in Cobb, Fulton, Dekalb and various
other counties) of the sales price of any tangible property sold or rented is
imposed upon the respective purchaser and collected by the seller. The tax is
not applicable to professional, insurance or personal service transactions which involve sales as inconsequential elements.
A word of caution, the Georgia Sales and
Use tax law is not always logical and it is important to determine exactly
which of your company's transactions is subject to either the sales or use
provisions of the law and what type of records need to be maintained to
support your monthly reports.
To comply with the provisions of the
Georgia Sales and Use Tax laws, the Company must register with the Georgia
Department of Revenue (See #1 above) for each place of business, prior to
engaging in or conducting business as a seller, user, distributor,
manufacturer, or processor of tangible personal property in Georgia.
After receiving the Company's application, the State will issue a Certificate
of Registration (Form ST-2), which should be conspicuously
displayed at the place of business for which it was issued. The amount
of tax collected each month should be reported on or
before the 20 day of the following month on Form ST-3, unless permission is
received to make such returns on a quarterly basis. (The State makes this
allowance when the average liability over six consecutive months does not
exceed $50 per month.)
8) Certified Statement for
Annual Report
The first Certified Statement for Annual
Report of a Corporation (Form F-38) must be filed
within 90 days after the Company's date of incorporation, unless such date of
incorporation is after October 1; then the Company has until April 1 to file.
The filing fee for each annual report is $30. Generally, the incorporating
attorney files the initial report on the Company's behalf.
Subsequent annual registration can be done
online at www.sos.state.ga.us
which is the official website for the Georgia Secretary of State.
Annual reports are thereafter to be filed in each succeeding year between January 1 and
April 1. In the event the form is not received by
mid-January, the Company should contact its registered agent or the Secretary
of State's office for a copy of the form.
9) Workmen's Compensation
If the Company has three or more employees
regularly in its service in the same business within the State, it is bound by the terms of the Worker's Compensation Act. If
you employ contract labor or uninsured contractors, you are required to
include them in your workmen's compensation policy. Also,
if the Company has less than three employees it may elect voluntarily to be
covered by the Act. (This is especially recommended
when dangerous machinery is in operation.) This Act covers on-the-job
injuries.
Once it is determined
that the Company falls either under the provisions of the Act by law or on a
voluntary basis, management must contact its insurance company to arrange for
coverage. Once the insurance coverage is obtained, a
list of at least three physicians who are reasonably accessible to employees
must be posted in a conspicuous place. The insurance company will provide the
Company with various claim and reporting forms.
Further information may
be obtained from the Workers' Compensation Board, 254 Washington Street, Atlanta,
GA 30334,
or from the Company's insurance carrier.
C. COUNTY/CITY
If a business license is required, it is
normal for the license to have to be renewed on an
annual basis. The appropriate Tax Commissioner's office (City or County) will
send you a Renewal application around December of each year. If this form is not received, you will need to contact the Tax
Commissioner's office so they can send you another one.
D. OTHER CONSIDERATIONS FOR
SELF EMPLOYED INDIVIDUALS WHO ARE NOT INCORPORATED
Self-employed individuals and partners in
non-incorporated business are subject to the Federal self-employment tax to
cover Social Security and Medicare. The Social Security portion, is assessed
on the first $97,500 (2005 $94,200) of self-employment income at a rate of
12.4%, and the Medicare tax is assessed on all of the self-employment income
at a rate of 2.90%.
Self-employed individuals are required to
estimate their tax liability for the year (including self-employment taxes)
and pay quarterly estimate payments to the IRS and the State of Georgia.
Failure to pay the required estimates can result in substantial penalties and
economic hardship.
E. INEXPENSIVE HELP
There are many resources available to the
small business person. For instance, the Internal
Revenue Service offers an extensive education program including educational
CD's, local workshops, and internet streaming video. Go the IRS website,
listed below, and click on businesses on the home page and then click on
Small Bus/Self-Employed in the Contents listing.
Other sources of inexpensive help include the Small Business Development
Center at Kennesaw State College (770-423-6450), Small Business
Administration, County Chamber of Commerce and night adult courses offered by
most counties in the Metro Atlanta area.
F. USEFUL WEB
SITES
Internal Revenue Service
Web site for ordering forms and publications.
www.irs.gov
(The
IRS Digital Daily)
State of Georgia Web site that
links to all the state agencies and departments including the Department of
Revenue. You can also link to
the IRS through this site.
www.ga.gov (State of Georgia)
G. DISCLAIMER
Every reasonable effort has
been made to insure the timeliness and accuracy of the information
contained in this Guide. However, tax laws frequently change and SMITH &
HINCKLEY, P.C. assumes no responsibility due to such changes or any other
items contained in this Guide. We urge you to seek the advice of a qualified
tax advisor and attorney before starting a new business.
©Copyright Smith & Hinckley,
CPA's PC
