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 https://services.georgia.gov/dor/olbr/TaxRegistrationGateway. Applications for a Federal number alone can be done online at www.irs.gov/businesses , 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 $ 106,800 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 you decide 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.  For this purpose, a new corporation's taxable year begins when it has shareholders, acquires assets, or begins doing business, whichever happens first.  The election remains effective unless the Company no longer meets Sub-Chapter S eligibility require­ments, or the election is voluntarily terminated.  In the event Sub-Chapter S status is selected.  Form 1120‑S should be filed annual­ly, in lieu of Form 1120.

 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  the online Electronic Federal Tax Payment System (EFTPS).  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 depository tax liabilities.  However, any business or individual can use EFTPS regardless of their liability amount.  If you are required to make deposits by electronic funds transfer and fail to do so, you may be subject to a 10% penalty.  To enroll in EFTPS, call 1-800-555-4477 or go online to www.EFTPS.gov.     

         

                 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.  If you would like to receive a Federal Tax Deposit (FTD) coupon booklet, call -800-829-4933.  Allow 6 weeks for delivery.    Georgia has started an electronic payment system for withholding taxes.  Go to  http://gataxinfo.org/ for detailed information. To enroll in the system call (404)-417-4488 outside Atlanta (888)-604-9875

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 https://etax.dor.ga.gov and click on Forms – Registration.  

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 (Corporations and Partnerships)  

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.

 Annual reports are thereafter to be filed in each succeeding year between January 1 and April 1.  The simplest way of renew your registration is to do so online at www.sos.ga.gov .  

                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         

A new business which began on or after January 1 must contact the appropriate Tax Commissioner's office for information on whether a business license is required.  If the business is located within the incorporated boundaries of a City, the City should be contacted; if within an unincorporated area, the County should be contacted.

 

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