<p>Etsy is an essential platform for many small businesses in today's e-commerce era. But with that unique challenges and advantages. While offering increased customer reach and a streamlined sales process, Etsy also demands an understanding and compliance with the sales tax regulations associated with the platform. This is critical for small business owners to navigate in their day-to-day operations.</p>
<iframe width="560" height="315" src="https://www.youtube.com/embed/83P5WVgoKPE?si=iHC_MeAyjD61sM5P" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen></iframe>
<p>By owning a shop on Etsy, you can avoid the complexities of <a class="link" href="https://1800accountant.com/blog/start-online-store">setting up your own online store</a>. However, it's important to remember that Etsy takes a percentage of your sales to cover hosting fees. You will need to submit your business tax information for <a class="link" href="https://1800accountant.com/blog/report-etsy-income">Etsy with form 1099K</a>, and it's crucial to handle Etsy seller fees and sales tax obligations correctly. Especially given the dynamic that online sales tax continuously changes and often affects platforms like Etsy.</p>
<p>As Etsy works to streamline this process, small business owners should remain vigilant to ensure compliance with evolving laws. Continue reading as we dive into everything you need to know about Etsy sales tax.</p>
<h2 class="wp-block-heading" id="h-is-etsy-sales-tax-added-automatically">Does Etsy Collect Sales Tax Automatically?</h2>
<p>Etsy has been adjusting its process to comply with the law and support its users.&nbsp;<a class="link" target="_blank" href="https://www.etsy.com/seller-handbook/article/marketplace-sales-tax-where-etsy/321914904041" rel="noreferrer noopener">Etsy automatically collects and remits state sales tax</a>&nbsp;for many but not all orders.&nbsp;</p>
<p>So far, Etsy has started collecting sales tax for 45 states and the District of Columbia. The only states that don't currently levy a sales tax are:</p>
<ul>
  <li>Alaska</li>
  <li>Delaware</li>
  <li>Montana</li>
  <li>New Hampshire</li>
  <li>Oregon</li>
</ul>
<p>The platform determines the sales tax required based on the buyer's shipping address. If the shipping address for a purchase is in one of these states, Etsy adds the tax according to the state's sales tax rate and remits the tax paid directly to the state authority.&nbsp;</p>
<p>You may be required to file a sales tax return for some of these states, especially in any states where your business has a physical presence. However, you should not need to pay any additional sales tax if that state is one of the states covered by Etsy's policy.&nbsp;&nbsp;</p>
<h2 class="wp-block-heading" id="h-determining-where-to-charge-etsy-sales-tax">Where Do I Charge Etsy Sales Tax</h2>
<p>The standard&nbsp;<a class="link" href="https://1800accountant.com/blog/how-to-handle-sales-tax" target="_blank" rel="noreferrer noopener">procedure to handle sales tax</a>&nbsp;in the past required determining if your business had a sales tax nexus with a particular state. If your business was located in a state or had a significant amount of sales in that state, you would be required to pay sales tax.&nbsp;</p>
<p>Now the requirement has been broadened to a degree. States have been permitted to set their own policies. Requirements vary, but some states, like South Dakota, require sales tax to be paid on a purchase if a seller has made $100,000 or has had at least 200 transactions with customers of a given state.&nbsp;&nbsp;</p>
<p>You will definitely need to charge a sales tax in states your company has a presence, but taxes for other states may depend on the specific state requirements and how much business you have there.</p>
<p>Montana, New Hampshire, Oregon, Alaska, and Delaware do not collect any sales tax at the state level, although towns and cities within these states might collect their own.&nbsp;</p>
<p>This part can get a bit complicated. We recommend working with a <a class="link" href="https://1800accountant.com/services/industry/ecommerce">tax professional</a> who understands the ins and outs of Etsy sales tax in each state.</p>
<h2 class="wp-block-heading" id="h-destination-based-and-origin-based-sales-tax">Destination-Based and Origin-Based Sales Tax</h2>
<p>One of the reasons these taxes are so frustrating to online merchants is that states have competing methods for imposing sales taxes: destination-based or origin-based sales taxes.&nbsp;</p>
<p>Destination-based sales taxes impose taxes on online purchases based on the shipping address. Wherever the product is going, its destination receives the sales tax. Each state sets specific tax rates. Most states use this model to keep their consumers' money in their own locality.&nbsp;</p>
<p>Origin-based sales taxes use the Etsy shop owner's state of origin and the current tax rate set in that area. This means the tax rate depends entirely on where the seller is based.&nbsp;</p>
<p>These conflicting policies leave online merchants with a maze of tax obligations to find their way through, with individual tax rates varying from locality to locality. Some counties and municipalities add their own sales tax on local purchases, complicating things even further for small businesses.&nbsp;</p>
<h2 class="wp-block-heading" id="h-which-products-need-sales-tax-additions">Which Products Need Sales Tax Additions</h2>
<p>Sales tax requirements can also vary by specific types of sales. Some&nbsp;<a class="link" target="_blank" href="https://www.thebalancesmb.com/what-products-and-services-are-subject-to-sales-tax-398764" rel="noreferrer noopener">products and services are subject to sales tax</a>, and others are not. Tangible products are usually taxed, but many services are not. However, some states are starting to collect sales tax on more and more services.&nbsp;&nbsp;</p>
<p>Sales tax is a mostly state-driven tax, so it can vary confusingly by state. Digital products like music and videos are sometimes labeled and taxed differently by different states. In some states, they may count as tangible products, while in other states, their status may be closer to a service.</p>
<p>Most wholesale items or other products clearly intended to be resold are usually exempt from sales tax. The assumption is that sales tax will be charged when it is resold.&nbsp;</p>
<p>Many home-consumed items are exempt from sales tax as well. This exempts most grocery items in many states.&nbsp;</p>
<h2 class="wp-block-heading" id="h-register-to-collect-etsy-sales-tax">Register to Collect Etsy Sales Tax</h2>
<p>Where Etsy's automatic tax remittances are not enough, you can&nbsp;<a class="link" href="https://help.etsy.com/hc/en-us/articles/115015746068-Adding-Sales-Tax-to-Listings?segment=selling" target="_blank" rel="noreferrer noopener">add additional sales tax to your store listings</a>&nbsp;through your Etsy store settings. Once you know your obligations, you can set up custom sales tax rates and remit the extra tax collected to the states involved.&nbsp;</p>
<p>To collect and remit sales tax, you will need to register for a sales tax license or permit. Requirements vary based on the state, but the one thing you'll definitely need is your federal tax identification number for your business. You can register to&nbsp;<a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">get federal tax ID (EIN)</a> and <a class="link" href="https://1800accountant.com/blog/state-tax-id">state tax ID</a> numbers&nbsp;online, and you'll use them whenever you pay taxes at the federal or state level.&nbsp;</p>
<p>You should check with both your local and state taxing authorities to be clear about your requirements for dealing with sales tax in your company's area of origin.&nbsp;</p>
<h2 class="wp-block-heading" id="h-consult-with-a-professional">Consult with an Etsy Tax Professional</h2>
<p>Beyond the filing requirements in your state of origin, most of your countrywide sales tax obligations will be covered by the Etsy marketplace. However, the laws are changing quickly, and rules can vary depending on the type of products you sell and how much business you have with particular states.&nbsp;</p>
<p>Consult with an <a class="link" href="https://1800accountant.com/services/industry/ecommerce">ecommerce accountant</a> who has expertise in Etsy sales tax to make sure you’re complying with new obligations and taking care of your business. In such a complex and quickly changing legal environment, you need an expert who can help you adapt and protect your business.&nbsp;&nbsp;</p>

Etsy is an essential platform for many small businesses in today&#8217;s e-commerce era. But with that unique challenges and advantages. While offering increased customer reach and a streamlined sales process, Etsy also demands an understanding and compliance with the sales tax regulations associated with the platform. This is critical for small business owners to navigate [&hellip;]

A helpful guide to navigating Etsy sales tax.

etsy-sales-tax

A Helpful Guide to Navigating Etsy Sales Tax

<p>You might be paying far more in taxes than you need or are even supposed to. If you’re not reporting all your tax-deductible expenses on your tax return, you’re likely leaving money on the table. This is especially true in the medical field when there are so many overhead costs that should be deducted from your taxable income.&nbsp;</p><iframe width="560" height="315" src="https://www.youtube.com/embed/uwOhjHB7DYE?si=TfSNZWLP2Tna5TPT" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen=""></iframe><p>If you’re a self-employed physician or another medical professional, there are countless business-related <a class="link" href="https://1800accountant.com/blog/tax-deductions-work">tax deductions available for you to claim</a>. If you’re an employee of a hospital or a smaller practice, there are still some high costs you should be reporting, but there aren’t quite as many.&nbsp;</p><h2 class="wp-block-heading">Top 13 Tax Deductions for Doctors&nbsp;</h2><p>Here are a few of the biggest tax deductions available for doctors:&nbsp;</p><h3 class="wp-block-heading">1. Retirement Contributions</h3><p>The money you save for retirement with an IRA or a 401(k) is money you can deduct from your income and avoid higher taxes this year. The <a class="link" href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits" target="_blank" rel="noreferrer noopener">IRS sets IRA contribution limits</a> each year, and you should aim to put away the maximum amount possible if you can afford it.&nbsp;</p><p>Instead of deferring taxes with an IRA investment, you can pay the taxes upfront with a Roth IRA but use this to manage your tax burden in the future.&nbsp;</p><h3 class="wp-block-heading">2. Operating Expenses</h3><p>Tax deductions for self-employed physicians are virtually unlimited for business-driven expenses like office equipment, computers and mobile phones, office supplies, and more. Internet and phone line costs can be deducted, and so can the costs of whatever computer programs you use to do your work or record patient data.&nbsp;</p><p>Many costs go into running a business every day, so you should track and report all of those costs and ensure you claim every eligible expense. An accountant can help you be sure about what is deductible and what isn’t.&nbsp;</p><h3 class="wp-block-heading">3. Professional Dues and Licences</h3><p>As a medical professional, you can’t practice medicine at all unless you’ve paid all the necessary licensing fees and organizational dues. Most of all of these expenses will be tax-deductible as well.&nbsp;</p><p>This deduction includes board exam fees, medical license renewals, membership dues, and continuing education costs. Your ongoing work as a physician depends on staying informed and up-to-date on all the latest developments in your field. Therefore, any expense associated with professional development or education should be deductible.&nbsp;</p><p>That applies to all educational costs, whether you were required to spend it or not. You can also deduct subscription costs related to any professional or technical publications.&nbsp;&nbsp;</p><p></p><div type="entry" class="embedded-entry redactor-component block-entry" data-sys-entry-uid="blt3724229630b14ac9" data-sys-entry-locale="en-us" data-sys-content-type-uid="rte_ad" sys-style-type="block"></div><h3 class="wp-block-heading">4. Continuing Education</h3><p>Any costs related to maintaining or improving medical skills, such as seminars, courses, medical journals, or books, can be deducted from your tax liability as a doctor.</p><h3 class="wp-block-heading">5. Health Care Premiums</h3><p>If you’re self-employed and pay for your own health insurance, you can deduct your health care premiums as a business expense. That’s something your employer would likely pay for if you were self-employed, so it should be deducted from your personal income for tax purposes.&nbsp;&nbsp;</p><p>You can also deduct your contributions to an HSA from your taxable income. If you have an HSA, try to save the maximum amount possible to protect that contribution from being taxed.</p><h3 class="wp-block-heading">6. Work Space&nbsp;</h3><p>Do you rent an office or building solely for work use? If you do, all the building management and upkeep costs may be deductible. Keep track of your rent, utilities, and other office costs so that you can report them on your tax return.&nbsp;</p><h3 class="wp-block-heading">7. Home Office</h3><p>If you use a part of your home exclusively for work-related administrative tasks, you may qualify for the <a class="link" href="https://1800accountant.com/blog/home-office-deduction-risks">home office deduction</a>.</p><h3 class="wp-block-heading">8. Travel and Meals</h3><p>If you travel overnight for conferences, meetings, or patient care, you can deduct those expenses, including airfare, hotel, and 50% of meals.&nbsp;</p><p>If you drive your own vehicle for work purposes, whether you’re going out of town or not, you can report the business mileage on your return. You can deduct those miles from your income according to the <a class="link" href="https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2020" target="_blank" rel="noreferrer noopener">IRS standard mileage rates</a> for the year.</p><h3 class="wp-block-heading">9. Mortgage Interest</h3><p>Don’t forget to consider your own home mortgage costs when preparing your tax return. You can still <a class="link" href="https://www.irs.gov/publications/p936">claim home mortgage interest</a> as a tax deduction as well, and that can make a big difference.&nbsp;</p><p>The precise maximum amount deductible depends on when you signed your mortgage, but whenever you signed, you should be able to deduct most or all of the interest you’ve paid on your home mortgage this year.&nbsp;&nbsp;</p><h3 class="wp-block-heading">10. Medical Equipment and Supplies</h3><p>A doctor’s office requires much more expensive equipment and supplies than an average office. You often have to spend money on fresh medical supplies and state-of-the-art technology.&nbsp;</p><p>Any equipment or supplies that are necessary for the work and care you provide can be claimed as a tax deduction. This includes everything from stethoscopes to bandages.</p><h3 class="wp-block-heading">11. Staff Costs</h3><p>If you have any employees working for you, their <a class="link" href="https://www.thebalancesmb.com/salaries-and-wages-as-tax-deductible-expenses-393086" target="_blank" rel="noreferrer noopener">salaries and wages may be tax-deductible expenses</a> as well. Even if it’s just an assistant or a receptionist, you may have significant business expenses throughout the year related to their wages or other costs related to their employment.&nbsp;</p><h3 class="wp-block-heading">12. Charitable Donations</h3><p><a class="link" href="https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions" target="_blank" rel="noreferrer noopener">Charitable contribution deductions</a> can make a huge impact on your tax return. You can deduct qualifying contributions up to your total adjusted gross income for the year.&nbsp;</p><p>This is a great opportunity to reduce your tax burden, and it’s effectively a chance for you to decide for yourself where your tax dollars go. Instead of paying into the general government treasury, you can channel your money directly to most of the causes you care about.&nbsp;&nbsp;</p><h3 class="wp-block-heading">13. Insurance Premiums</h3><p>Malpractice insurance and other business-related insurance premiums are tax-deductible.</p><h2 class="wp-block-heading">Get Advice From a Professional</h2><p>Tax laws are complicated, and the rules for deductions seem to change every year. To really be sure you’re following the rules and maximizing your deductions, you can benefit from <a class="link" href="https://1800accountant.com/services/small-business-taxes">partnering with an accountant</a> who's knowledgeable in the medical field.&nbsp;</p><p>Our trusted tax professionals will review your finances and find every available deduction. We know how to maximize your after-tax income, properly report expenses, and keep your risk of an audit as low as possible.&nbsp;</p><p><a class="link" href="https://1800accountant.com/blog/prepare-file-small-business-tax-return">Preparing and filing your tax return</a> doesn’t have to be an ordeal. However, you must keep track of business expenses and other possible deductions throughout the year. <a class="link" href="https://1800accountant.com/services/bookkeeping">Effective bookkeeping</a> early on will make everything easier later. Learn the best practices now to keep your finances as healthy as your satisfied patients.&nbsp;</p>

You might be paying far more in taxes than you need or are even supposed to. If you’re not reporting all your tax-deductible expenses on your tax return, you’re likely leaving money on the table. This is especially true in the medical field when there are so many overhead costs that should be deducted from [&hellip;]

Healthcare professional at a desk with a laptop and coffee, reviewing documents, with text overlay about tax deductions for doctors.

13-doctor-tax-deductions

13 Tax Deductions Every Doctor Should Know About

There are many reasons why you may not be able to make your tax filing deadline. Despite your best attempts, circumstances beyond your control may have prevented you from doing so. And let’s face it: sometimes life just gets in the way. Fortunately, you can request an extension that gives you up to six extra months to file your return. There are a number of benefits you can gain for yourself or your business if you <a class="link" href="https://1800accountant.com/blog/file-for-an-extension">file for a tax extension</a>:<h2>You Can Get All Your Paperwork in Order</h2>Whether you’re filing personal taxes or business taxes, you may need more time to collect receipts or secure documentation. You may have lost your W-2 or another form you need for filing and have to request a replacement. You may also need to gather documents for deductions, like receipts for medical treatment or, in the case of home office deductions, utilities. If you have employees, you may need to pull together expense reports. Filing for an extension buys you the time you need to get all your paperwork in order.<h2>You Can Deal With a Personal Matter</h2>Sometimes life and taxes don’t cooperate. Maybe you’ve had an illness, or there was a death in the family. Maybe you’re going through a divorce – or, for that matter, getting married. Maybe a natural disaster impaired your home. Maybe your business partner isn’t working out the way you’d hoped. Any of these, and more, could be reasons why you’re unable to make your tax filing deadline. Filing for an extension allows you to delay the stress of filing your taxes and gives you the time you need to deal with personal matters in the meantime.<h2>You Can Complete a Business Transition</h2>If your business is transitioning, you may need more time to file. Perhaps you’re changing from a sole proprietorship to an LLC. Maybe you’re transitioning your business from an S corporation to a C corporation. Maybe you’re retiring and selling your business to a partner. Whatever the reason, filing for an extension delays your tax filing long enough for you to make the business transition before you worry about filing your return.<br />
<h2>You May Avoid Having to Amend Your Return</h2>Rushing to make a tax filing deadline can cause mistakes. When you realize an error has been made on a tax form you submitted, you must amend your return. Filing an amended return takes more time and if you hire a tax preparer, more money. By filing for an extension, you can ensure that your return is correct the first time, thus avoiding the cost of time and money of an amended return. We've outlined some common small business tax extensions for 2023 below:<p></p>
<ul class="_33E9q6" data-currency="List">
  <li class="_2vhrLT vMzlLC _30uTzW">
    <div class="OE0NEO fyWLSM">
      <p class="_2GMChG _3-to_p"><span class="_3Rmqs8 _2GMChG _3-to_p">Sole proprietorships:</span><span class="_2GMChG _3-to_p"> October 15, 2025</span></p>
    </div>
  </li>
  <li class="_2vhrLT vMzlLC _30uTzW">
    <div class="OE0NEO fyWLSM">
      <p class="_2GMChG _3-to_p"><span class="_3Rmqs8 _2GMChG _3-to_p">Partnerships:&nbsp;</span><span class="_2GMChG _3-to_p">September 17, 2025</span></p>
    </div>
  </li>
  <li class="_2vhrLT vMzlLC _30uTzW">
    <div class="OE0NEO fyWLSM">
      <p class="_2GMChG _3-to_p"><span class="_3Rmqs8 _2GMChG _3-to_p">Multimember LLCs: </span><span class="_2GMChG _3-to_p">September 17, 2025</span></p>
    </div>
  </li>
  <li class="_2vhrLT vMzlLC _30uTzW">
    <div class="OE0NEO fyWLSM">
      <p class="_2GMChG _3-to_p"><span class="_3Rmqs8 _2GMChG _3-to_p">S-corporations:</span><span class="_2GMChG _3-to_p"> September 17, 2025</span></p>
    </div>
  </li>
  <li class="_2vhrLT vMzlLC _30uTzW">
    <div class="OE0NEO fyWLSM">
      <p class="_2GMChG _3-to_p"><span class="_3Rmqs8 _2GMChG _3-to_p">C-corporations: </span><span class="_2GMChG _3-to_p">October 15, 2025</span></p>
    </div>
  </li>
</ul>
<p>In any case, to avoid penalties and interest, you should estimate any tax you owe and pay it by the above dates.</p>
<h2>Work with Tax Professionals</h2>Tax extensions can provide much-needed relief when life throws you a curveball that delays your tax filing process. These extensions offer additional time to compile documents and mitigate errors. Remember to pay attention to the <a class="link" href="https://1800accountant.com/blog/file-for-an-extension">extension deadlines</a> for your specific business type to help avoid penalties. These processes can be tricky and working with a <a class="link" href="https://1800accountant.com/services/small-business-taxes">tax professional</a> is highly recommended.

There are many reasons why you may not be able to make your tax filing deadline. Despite your best attempts, circumstances beyond your control may have prevented you from doing so. And let’s face it: sometimes life just gets in the way. Fortunately, you can request an extension that gives you up to six extra [&hellip;]

Woman looking stressed while reading documents at a desk, with text overlay "what is the benefit of filing a tax extension?" in an office setting.

filing-a-tax-extension

What Is the Benefit of Filing a Tax Extension

<p>Choosing between a member-managed and a manager-managed LLC is a pivotal decision in forming your business. In this blog post, we'll break down these structures, guiding you to make the choice that best aligns with your business's needs and objectives.</p>



<p>This read will highlight the benefits of a manager-managed LLC, the nuances of LLC taxation, and how your business size impacts your choice. You'll learn how expert assistance can ease these complexities, allowing you to focus on your core business. Continue reading to uncover insights that could transform your business's future.</p>



<h2>What is a Manager-Managed LLC?</h2>



<p>There are two management structures you can choose when forming an LLC: member-managed LLC or manager-managed LLC.</p>



<p>With a member-managed LLC, all members – or owners – equally participate in the daily operations of the company.</p>



<p>On the other hand, a manager-managed LLC enables only certain members or even third-party non-members to have the authority to operate the business. Unless your state has restrictions, a manager can be an entity such as a corporation or another LLC.</p>



<p>If you want your business to become a manager-managed LLC, you must explicitly state your selection in your <a class="link" href="https://1800accountant.com/blog/operating-agreement">operating agreement</a>. Otherwise, the state will classify your business as a member-managed LLC by default.</p>



<h2>Reasons for Choosing a Manager-Managed LLC.</h2>



<p>Among small businesses, a member-managed LLC is a more popular choice over a manager-managed LLC. There are situations, though, where a manager-managed LLC may be more suitable. Two main reasons for forming a manager-managed LLC are:</p>



<h3>Passive Members </h3>



<p>Passive Members who lack management experience or wish to solely be an investor are considered passive members because they do not engage in day-to-day business duties. Since passive members are not a part of the decision-making process, they have less liability than active members. Therefore, if your business includes passive members, then choosing a managing member or third-party non-member to run the entity might be the best option.</p>



<h3>Size of Your Business</h3>



<p>If your business is too large or complex, sharing management responsibilities among all members can be impractical. By selecting one or more members or non-members to perform day-to-day operations, you can allow your business to run more efficiently. Also, this lets all members focus on their specific areas of expertise and the responsibilities that matter to them.</p>



<h2>Manager-Managed LLC Taxes</h2>



<p>Taxation for your business depends on how many members you have in your LLC.</p>



<p>If you operate a single-member LLC, then you are not required to file a separate tax return for your LLC. Instead, you report your business’ profits and pay taxes on your personal tax return, which is <a class="link" href="https://1800accountant.com/blog/how-to-fill-out-form-1040">Form 1040</a> with <a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank" rel="noreferrer noopener">Schedule C</a> attached.</p>



<p>For a multi-member LLC, you must report your business’ income on&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1065.pdf" target="_blank" rel="noreferrer noopener">Form 1065</a>. Then, you and each member of your LLC need to fill out Schedule K-1, which reports each member’s share of income, losses, deductions, and credits. The amounts on&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf" target="_blank" rel="noreferrer noopener">Schedule K-1</a>&nbsp;are taxed and paid on each member’s personal tax return.</p>



<p>For both single-member and multi-member LLCs, you have the option to be taxed as a C corporation or S corporation. First, you must elect to be taxed as a corporation via&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f8832.pdf" target="_blank" rel="noreferrer noopener">Form 8832</a>. Once you complete that form, you must report your income on Form 1120 or Form 1120S.</p>



<p>Managing members of your LLC are required to pay self-employment tax. However, passive members are not subject to this tax. This law is a bit complicated, but if you are an active member, you can expect to pay self-employment tax.</p>



<p>If you hire a non-member to manage your business, that person is considered an employee. This means payroll taxes must be withheld from his or her wage.</p>



<h2>Work with the Experts</h2>



<p>Choosing the right LLC structure is critical to your business's success. Understanding the complexities of member-managed and manager-managed LLCs, and how each can impact your business operationally and tax-wise, can feel overwhelming. Our <a class="link" href="https://1800accountant.com/services/small-business-taxes">business tax</a> and <a class="link" href="https://1800accountant.com/services/entity-formation">entity formation services</a> at 1-800Accountant are here to help you navigate these decisions. This ensures your business starts on a path to success. Let us handle the complexities, so you can focus on growing your business.</p>

Choosing between a member-managed and a manager-managed LLC is a pivotal decision in forming your business. In this blog post, we&#8217;ll break down these structures, guiding you to make the choice that best aligns with your business&#8217;s needs and objectives. This read will highlight the benefits of a manager-managed LLC, the nuances of LLC taxation, [&hellip;]

Everything you need to know about Manager-Member LLCs.

manager-member-llc

Everything You Need to Know About Manager-Member LLC

<h2>What is a State Tax ID Number?</h2>



<p>A state tax ID number (also referred to as a state EIN, a state employer ID, or a state tax registration) is the unique number the state will assign to a business entity or organization. The state tax ID is associated with the state in which the business operates.&nbsp;</p>



<h2>What is the purpose of State Tax IDs?</h2>



<p><a class="link" href="https://www.sba.gov/business-guide/launch-your-business/get-federal-state-tax-id-numbers" target="_blank" rel="noreferrer noopener">State tax IDs </a>serve a couple of main purposes, mainly related to how they’re used to file business taxes and hire employees. State tax ID numbers are used by the state and local tax authorities to identify tax reporting entities and to facilitate accurate tax administration.&nbsp;</p>



<p>State tax ID numbers also allow businesses to apply for Resale Certificates (also referred to as Sales Tax Permits or Seller’s Permits), which allows for tax-exempt status. This tax exemption allows a business entity to purchase goods and products for the purpose of resale at retail. When those goods and products are sold to the final customer, the retailer collects the sales tax.</p>



<p>State tax ID numbers can also be useful for sole proprietors who wish to protect themselves against identity theft.</p>



<h2>How are State Tax ID Numbers different from EINs?</h2>



<p>State tax ID numbers are very similar to federal employer identification numbers (EINs) in that they are assigned to businesses by a government entity, and they allow businesses to employ workers.&nbsp;</p>



<p>However, federal EINs are used by the Internal Revenue Service (IRS). At the same time, state tax ID numbers are utilized by that specific state for tax administration purposes, typically by that state’s Department of Revenue or other similar agencies.&nbsp;</p>



<p>State tax ID numbers only serve their purpose in your specific state and are meaningless outside of the state. So, if you were to relocate your business to a new state, you would need to register for a state tax ID number with the new state, while your federal <a class="link" href="https://1800accountant.com/blog/ein">Employer Identification Number</a> (EIN) could remain the same. Agencies and reporting administrations outside of your state will rarely request your state tax ID number.&nbsp;</p>



<p>EINs can also be assigned even if the company has no workers. Unless your work involves processing business documents, such as business loans or license applications, in most cases, these identification numbers won’t mean much to you until you prepare your income tax return at the end of the year.&nbsp;</p>



<h2>What Kinds of Businesses Need State Tax IDs?</h2>



<p>If your business plans to hire employees or sell goods and services, you will likely need to register for a state tax identification number. It’s critical that you understand your state’s laws and requirements, so you remain in compliance with your local and state tax laws.&nbsp;</p>



<p>Similarly, any small business that hires employees as a partnership or corporation or sells goods will need an EIN. However, sole proprietors and single-member LLCs that do not have any employees can use their Social Security Numbers (they can choose to obtain an EIN if they want, but it is not required.)</p>



<h2>How To Apply For a State Tax ID?</h2>



<p>Check with your state government’s Department of Revenue website for more information on how to obtain a state tax identification number. Applications and processes may vary by state but should be a relatively simple process.&nbsp;</p>



<p>If you’re seeking more guidance and support in <a class="link" href="https://1800accountant.com/services/entity-formation">establishing your small business</a>, check out 1-800Accountant’s entity formation services. We help entrepreneurs and small business owners get started on the right foot. By taking care of the accounting and entity formation, you can focus on what matters—running and growing your business.&nbsp;</p>



<h2>FAQs About State Tax IDs</h2>



<h3>Is the employer's state id number the same as EIN?</h3>



<p>The Employer's State ID number and the Employer Identification Number (EIN) are not the same.</p>



<p>The <strong>Employer Identification Number (EIN)</strong> is a federal tax identification number for businesses. It is issued by the Internal Revenue Service (IRS).</p>



<p>The <strong>Employer's State ID number</strong>, also known as the state tax ID number, is a unique identifier assigned by a state to a business for tax purposes. This number is issued by the state where the business operates.</p>



<h3>Do all businesses need a state tax ID number?</h3>



<p>Not all businesses need a State Tax ID Number. It's typically required for companies with employees, that sell goods or services subject to sales tax, or owe excise taxes. You can check with your state tax department to see if your business needs one.</p>



<h3>What happens if I don't get a State Tax ID Number for my business?</h3>



<p>If your business is required to have a State Tax ID Number and doesn't obtain one, it could face penalties and fines from the state. Your business might not be able to legally operate within the state.</p>

What is a State Tax ID Number? A state tax ID number (also referred to as a state EIN, a state employer ID, or a state tax registration) is the unique number the state will assign to a business entity or organization. The state tax ID is associated with the state in which the business [&hellip;]

Person at a desk reviewing a document with the text "everything to know about state tax id numbers" displayed.

state-tax-id-numbers

Everything You Need to Know About State Tax ID Numbers

What is sole proprietorship accounting? Click to learn everything you need to know about sole proprietorship and Schedule C.

<h2>What is a Sole Proprietorship?</h2>
<p>A sole proprietorship is an unincorporated business entity that you own and control by yourself. What makes a sole proprietorship an appealing business structure is its simplicity, easy setup, and inexpensive cost. When starting a sole proprietorship, you do not have to fill out formal paperwork or register with your state. However, you must obtain licenses and permits just like any other business.</p>
<p>As a self-employed individual and small business owner, a sole proprietorship means there is no legal separation between your personal and business income. The business income, business expenses, and losses from your business entity are taxed on your personal tax return.</p>
<p>Also, as a sole proprietor, you are personally accountable for any of your business’s debts, losses, and liabilities. If your business is in legal trouble, you do not have liability protection, and your personal assets are unprotected and potentially jeopardized.</p>
<div class="rte-table-container">
  <table>
    <thead>
      <tr class="table-data-container">
        <td class="cell-0">Pros</td>
        <td class="cell-0">Cons</td>
      </tr>
    </thead>
    <tbody>
      <tr class="table-data-container">
        <td>Easy to start and establish because of the lack of government regulation</td>
        <td>No separation of business income and personal income</td>
      </tr>
      <tr class="table-data-container">
        <td>Inexpensive</td>
        <td>You still need to obtain licenses and permits like any business</td>
      </tr>
      <tr class="table-data-container">
        <td>Most small businesses start as a sole proprietorship but transition to LLCs or <a class="link" href="https://1800accountant.com/blog/form-c-corp">set up a C Corporation</a> as they grow</td>
        <td>No liability protection of personal assets</td>
      </tr>
      <tr class="table-data-container">
        <td>Easy to dissolve and dismantle</td>
        <td>You are personally accountable for business debts, liabilities, etc.</td>
      </tr>
    </tbody>
  </table>
</div>
<h2>How to File A Schedule C</h2>
<p>Along with&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040.pdf" target="_blank" rel="noreferrer noopener">Form 1040</a>, your main individual income tax return form, you must also complete and attach&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040sc.pdf" target="_blank" rel="noreferrer noopener">Schedule C</a>. The purpose of this form is to report how much money your business made or lost during the tax year.</p>
<p>Schedule C consists of the following five sections:</p>
<div class="rte-table-container">
  <table>
    <thead>
      <tr class="table-data-container">
        <td class="cell-0">Schedule C Sections</td>
        <td class="cell-0">Purpose</td>
      </tr>
    </thead>
    <tbody>
      <tr class="table-data-container">
        <td>Part 1: Income</td>
        <td>List all business income including gross receipts or sales, returns and allowances, and federal and state fuel tax credits. This calculates your gross profit and gross income.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 2: Expenses</td>
        <td>Report business expenses like costs for travel, utilities, insurance, and advertising. Subtract your total expenses from your gross income to find your net profit or loss. Report this result on Form 1040.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 3: Cost of Goods Sold</td>
        <td>For the costs of goods sold. If your business doesn't require you to purchase inventory or sell products, this section doesn't apply to you.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 4: Vehicle Expenses</td>
        <td>If claiming deductions for <a class="link" href="https://1800accountant.com/blog/small-business-tax-deductions-checklist">car or truck expenses</a>, complete this section. Keep detailed records of your mileage and vehicle expenses during the tax year.</td>
      </tr>
      <tr class="table-data-container">
        <td>Part 5: Other Expenses</td>
        <td>Report any expenses that weren't listed in Part 2. Some of these expenses might include education or costs specifically related to your industry.</td>
      </tr>
    </tbody>
  </table>
</div>
<h2>Schedule C-EZ and Self-Employment Tax</h2>
<p>Starting from the tax year 2019, the Schedule C-EZ will no longer be used. You will now need to file the Schedule C form instead.</p>
<p>If you operate more than one sole proprietorship, each one is considered a separate business. Therefore, you'll need to file a separate Schedule C for each of your businesses.</p>
<p>If your net earnings from self-employment were $400 or more during the tax year, you are responsible for paying self-employment tax and filling out Form <a class="link" href="https://www.irs.gov/pub/irs-pdf/f1040sse.pdf">Schedule SE</a>. However, if your net earnings are less than $400, you are typically not required to file Schedule SE or pay self-employment tax.</p>
<h2>Work with the Experts</h2>
<p>1-800Accountant is a virtual accounting firm merging the convenience of technology with live support from real professionals, making taxes easy and personable for individuals and small businesses. As a small business owner, you can focus on growing your bottom line while our team of accountants, certified public accountants, and enrolled agents perform the heavy lifting – tax advisory and preparation, payroll, bookkeeping, financial statements, and audit defense. For professional, year-round <a class="link" href="https://1800accountant.com/services/small-business-taxes">small business tax accounting</a> services at an affordable price,&nbsp;get in touch&nbsp;with our certified public accountant and schedule your consultation with America’s leading small business accounting firm.</p>

What is a Sole Proprietorship? A sole proprietorship is an unincorporated business entity that you own and control by yourself. What makes a sole proprietorship an appealing business structure is its simplicity, easy setup, and inexpensive cost. When starting a sole proprietorship, you do not have to fill out formal paperwork or register with your [&hellip;]

sole-props-schedule-c-min

Sole Proprietorships and Schedule C

<p>Being a commercial truck driver isn't just about the open road. It also involves handling tax responsibilities. Balancing the demands of the job, including tracking miles, logging hours, and meeting deadlines can get even further complicated by taxes.</p><iframe width="560" height="315" src="https://www.youtube.com/embed/LkS4i7Mp-6s?si=dJezhSdMvAKU2GXm" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen=""></iframe><p>Commercial truck taxes require an understanding of the various taxes that apply to you. This knowledge is critical for maintaining financial stability and avoiding penalties from the IRS. Despite its complexity, understanding these obligations can simplify your tax process and contribute to a more successful trucking career. Continue reading to determine the types of commercial truck taxes you are obligated to pay as a truck driver.</p><h2 class="wp-block-heading">What's Considered a Commercial Truck?</h2><p>Commercial trucks cover a wide range of <a class="link" href="https://www.thebalancesmb.com/commercial-motor-vehicle-classification-2221025" target="_blank" rel="noreferrer noopener">commercial vehicles</a>, arranged by their gross vehicle weight rating (GVWR). There are three categories of commercial trucks and they are organized into eight classes:&nbsp;</p><h3 class="wp-block-heading">Light-duty trucks</h3><p>Light-duty trucks include class 1, class 2, and class 3 commercial trucks:</p><ul><li>Class 1: Trucks in this class have a GVWR of 0-6,000 pounds.&nbsp;</li><li>Class 2: Trucks in this class have a GVWR of 6,001-10,000 pounds.</li><li>Class 3: Trucks in this class have a GVWR of 10,001-14,000 pounds.</li></ul><h3 class="wp-block-heading">Medium duty trucks</h3><p>Medium duty trucks include class 4, class 5, and class 6 commercial trucks:</p><ul><li>Class 4: Trucks in this class have a GVWR of 14,401-16,000 pounds.</li><li>Class 5: Trucks in this class have a GVWR of 16,001-19,500 pounds.</li><li>Class 6: Trucks in this class have a GVWR of 19,501-26,000 pounds.</li></ul><h3 class="wp-block-heading">Heavy-duty trucks</h3><p>Heavy-duty trucks include class 7 and class 8 commercial trucks:</p><ul><li>Class 7: Trucks in this class have a GVWR of 26,001 to 33,000 pounds.</li><li>Class 8: Trucks in this class have a GVWR of 33,001 pounds or more.</li></ul><h2 class="wp-block-heading">What Taxes Do Commercial Truckers Pay?</h2><p>Commercial truckers pay <a class="link" href="https://truckstop.com/blog/owner-operators-quick-guide-taxes/" target="_blank" rel="noreferrer noopener">several taxes</a> according to federal and state requirements. Some of the most common taxes for commercial truckers are:&nbsp;</p><ul><li><a class="link" href="https://1800accountant.com/blog/quarterly-estimated-taxes">Estimated tax</a></li><li><a class="link" href="https://1800accountant.com/blog/trucker-taxes-excise-tax">Excise tax&nbsp;</a></li><li>Federal income tax</li><li><a class="link" href="https://1800accountant.com/blog/form-2290">Heavy Vehicle Usage Tax</a></li><li>Self-employment tax</li><li>State income tax</li></ul><p>It's possible to use <a class="link" href="https://1800accountant.com/blog/truck-driver-tax-deductions">tax deductions</a> to decrease your tax liability and the amount you'll pay.</p><h2 class="wp-block-heading">Federal Excise Tax</h2><p>The <a class="link" href="https://1800accountant.com/blog/trucker-taxes-excise-tax">federal excise tax</a> is one that truckers may pay for their work. It is a tax that the <a class="link" href="https://www.irs.gov/newsroom/an-overview-of-excise-tax">government</a> can impose for:&nbsp;</p><ul><li>Import&nbsp;</li><li>Sale by the manufacturer</li><li>Sale by the retailer&nbsp;</li><li>Use by the consumer or manufacturer</li></ul><p>Federal excise taxes are always due on a quarterly basis.</p><h3 class="wp-block-heading"><strong>When Do You Pay?</strong></h3><p>If you file federal excise taxes, you'll pay quarterly, according to these deadlines:</p><div class="rte-table-container"><p></p></div><table><thead><tr><th><strong>Quarter</strong></th><th><strong>Dates</strong></th><th><strong>Deadline</strong></th></tr></thead><tbody><tr><td>Quarter 1</td><td>January - March</td><td>April 30</td></tr><tr><td>Quarter 2</td><td>April - June</td><td>July 31</td></tr><tr><td>Quarter 3</td><td>July - September</td><td>October 31</td></tr><tr><td>Quarter 4</td><td>October - December</td><td>January 31</td></tr></tbody></table><p></p><p>If your due date for federal excise tax falls on a Saturday, Sunday, or holiday, the due date will be the next business day.</p><h3 class="wp-block-heading"><strong>How Much Do You Pay?</strong></h3><p>To determine the amount of excise tax you'll pay, you'll use <a class="link" href="https://www.irs.gov/pub/irs-pdf/f720.pdf" target="_blank" rel="noreferrer noopener">Form 720.</a> It consists of three parts and various taxes for you to complete where applicable:</p><h3 class="wp-block-heading">Part 1&nbsp;</h3><ul><li>Communication and Air Transportation Taxes&nbsp;</li><li>Environmental Taxes&nbsp;</li><li>Foreign Fuel Taxes&nbsp;</li><li>Foreign Insurance Taxes</li><li>Manufacturers Taxes</li><li>Other Excise Tax</li><li>Retail Tax&nbsp;</li><li>Ship Passenger Tax</li></ul><h3 class="wp-block-heading">Part II</h3><ul><li>Patient-Centered Outcomes Research Fee&nbsp;</li><li>Floor Stocks Tax</li></ul><p>At the end of Part I and Part II, you'll total each at the last line of the section.&nbsp;</p><h3 class="wp-block-heading">Part III</h3><p>You'll determine the amount of excise tax you'll pay in Part III of Form 720 by:</p><ul><li>Totaling the tax from Part I and Part II, on line 3</li><li>Entering claims, from Schedule C, on line 4</li><li>Entering deposits made for the quarter, on line 5</li><li>Entering overpayment from previous quarters, on line 6</li><li>Entering the amount from line 6 of Form 720-X on line 7 (if any)</li><li>Adding lines 5 and 6; you'll write this on line 8</li><li>Adding lines 4 and 8; you'll write this on line 9</li></ul><p>Line 10 of Part III will provide the amount of the amount that's due. You'll pay the total amount with your Form 720.</p><p>Finally, if you overpaid, you'll choose whether you want the difference applied to your next return or refunded to you.</p><h2 class="wp-block-heading">Heavy Vehicle Use Tax</h2><p>A second tax you'll pay as a trucker is the Heavy Vehicle Use Tax. You'll use <a class="link" href="https://1800accountant.com/blog/form-2290">Form 2290</a> to file and pay the Heavy Vehicle Use Tax.&nbsp;&nbsp;</p><p>While the form to determine your excise tax amount doesn't have additional requirements, the heavy vehicle use tax form does. You must already have an <a class="link" href="https://1800accountant.com/blog/ein">employer identification number (EIN)</a> to file Form 2290. If you don't have one, don't worry we can help with <a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">filing for your EIN</a>.&nbsp;</p><h3 class="wp-block-heading"><strong>When Do You Pay?</strong></h3><p>The heavy vehicle use tax has a filing season from July 1 through June 30. If you used your truck during any of these months, you'd have until the end of the following month to file and make your payment.&nbsp;</p><p>Heavy Vehicle Use Taxes have an alternating deadline, depending on when you've used your vehicle. For example, if you've driven your truck in August, you'll have until September 30 to file Form 2290 and pay taxes.</p><h3 class="wp-block-heading"><strong>How Much Do You Pay?</strong></h3><p>To determine the amount of heavy vehicle use tax you'll pay, you'll use <a class="link" href="https://www.irs.gov/pub/irs-pdf/f2290.pdf" target="_blank" rel="noreferrer noopener">Form 2290</a>. You'll go to the second page, where there are four columns.&nbsp;</p><p>If you only used your truck in July, Column (1), Annual tax, is already completed. Columns (2) to (4) will require additional information.&nbsp;</p><p>For these columns, you'll provide:&nbsp;</p><ul><li>Partial-period tax (for vehicle use after July) in column 2: You'll provide information in section (2)(a), Vehicles except logging, and (2)(b), Logging Vehicles</li><li>Number of vehicles in column 3: You'll provide information in sections (3)(a), Vehicles except logging, and (3)(b), Logging Vehicles</li></ul><p>After you complete columns (2) and (3), you'll proceed to column (4). This is where you'll multiply the numbers from column (1) or column (2) by the numbers in column (3).</p><p>You'll enter the amount from the Totals section near the bottom of the page.&nbsp;</p><p>After figuring out the total, you'll return to the first page. On line 2 of Part 1. You'll enter the Total from column (4) on page 2. Then, you'll:&nbsp;</p><ul><li>Add any national tax from an increase in taxable gross weight on line 3.</li><li>Determine the total tax on line 4</li><li>Enter any credits, if applicable, on line 5</li></ul><p>Line 6 is where you'll determine the balance due. You'll subtract the total on line 5 from the total on line 4 to determine the amount.</p><h2 class="wp-block-heading">Commercial Truck Taxes Simplified</h2><p>Commercial truck taxes require quite a few details to figure out. The details may be overwhelming, but it doesn't have to be. As a trucker, you can focus on your day-to-day responsibilities and turn to the pros for a stress-free tax season. Work with <a class="link" href="https://1800accountant.com/services/industry/trucking">tax professionals for truck drivers</a> at 1-800Accountant for your commercial truck tax needs.</p>

Being a commercial truck driver isn&#8217;t just about the open road. It also involves handling tax responsibilities. Balancing the demands of the job, including tracking miles, logging hours, and meeting deadlines can get even further complicated by taxes. Commercial truck taxes require an understanding of the various taxes that apply to you. This knowledge is [&hellip;]

Everything you need to know about commercial truck taxes.

commercial-truck-taxes

Everything You Should Know About Commercial Truck Taxes

<p>Understanding Form 1023 is a crucial for non-profits seeking tax-exempt status. It can be tricky to fill out accurately and ontime. When successfully filed and accepted, Form 1023 grants exemption from federal income tax, which is crucial for <a class="link" href="https://1800accountant.com/blog/4-types-of-non-profit-organizations">nonprofit organizations</a> success. This blog simplifies Form 1023, clarifying eligibility and the filing process with step-by-step guidance. Continue reading to learn everything you need to know about Form 1023 for non-profits.</p>



<h2>What Is Form 1023?</h2>



<p><a class="link" href="https://www.irs.gov/uac/about-form-1023" target="_blank" rel="noreferrer noopener">Form 1023</a>&nbsp;is a form used to request tax-exempt status for your organization. When filling out this form, you’re essentially explaining to the IRS your organization’s business plan and reasoning for seeking tax exemption.</p>



<p>Form 1023 qualifies organizations for federal tax exemption. If you live in a place where you pay state taxes, you need to register your organization with the state to obtain state tax exemption.</p>



<p>Boasting multiple pages and schedules, Form 1023 is a long, arduous document. If your organization is eligible, you may be able to file&nbsp;<a class="link" href="https://www.irs.gov/uac/about-form-1023ez" target="_blank" rel="noreferrer noopener">Form 1023-EZ,</a>&nbsp;which is a much shorter and simpler version. This form is geared toward smaller non profit organizations.</p>



<p>Your organization may qualify for Form 1023-EZ if it meets the following requirements:&nbsp;</p>



<ul>
<li>Projected annual gross receipts&nbsp; do not exceed $50,000 in any of the next 3 years</li>



<li>Actual annual gross receipts have not exceeded $50,000 in any of the past 3 years</li>



<li>Total assets do not exceed $250,000</li>



<li>The organization must not be a foreign organization, LLC, a successor to a for-profit entity, church, school, or hospital</li>



<li>The organization must not request classification as a supporting organization or a private operating foundation</li>



<li>The organization must not maintain or plan to maintain one or more donor-advised funds</li>
</ul>



<h2>Who Can File Form 1023?</h2>



<p>There are numerous types of&nbsp;<a class="link" href="https://1800accountant.com/blog/having-a-509a-status">501(c) organizations</a>, the most common types of nonprofits. To be a 501(c)(3) organization, your nonprofit must:</p>



<ul>
<li>Be organized as a trust, an unincorporated association or a corporation</li>



<li>Operate exclusively for a purpose established under section 501(c)(3), which includes charitable, scientific, educational, and religious purposes, among others</li>
</ul>



<p>501(c)(3) organizations are prohibited from participating in political campaigns, unfairly dispersing the organization’s earnings among board members and managers, and engaging in opportunities unrelated to the organization’s mission statement.</p>



<p>Houses of worship, such as churches, synagogues, and mosques, are not technically required to file Form 1023, but it is recommended because it guarantees that the donations they receive are tax-deductible for donors.</p>



<h2>How to Fill Out Form 1023</h2>



<p>Before starting your Form 1023, make sure to look at the&nbsp;<a class="link" href="http://form1023.org/wp-content/uploads/form-1023-checklist.pdf" target="_blank" rel="noreferrer noopener">Form 1023 checklist</a>&nbsp;to find out what information and materials you will need to successfully complete the form. Some of this information includes your <a class="link" href="https://1800accountant.com/blog/ein">Employer Identification Number (EIN)</a> and articles of organization. If you need to <a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">file for your EIN</a>, we can assist you with that.</p>



<p>Form 1023 sections explained:</p>



<ul>
<li>Part I – Identification information. Fill in your name, address, EIN, date of organization formation, etc.</li>



<li>Part II – State your organization’s structure (trust, limited liability company, etc.)</li>



<li>Part III – This section verifies if your organization meets the criteria of section 501(c)(3).</li>



<li>Part IV – Describe your organization’s past, present, and future activities.</li>



<li>Part V – This section is where you put information regarding compensation for employees, officers, directors, trustees, and independent contractors.</li>



<li>Part VI – Write down groups and other organizations that benefit from your nonprofit.</li>



<li>Part VII – This section asks if you are a successor to another organization and if you are submitting this form 27 months after your organization’s formation.</li>



<li>Part VIII – This section asks about your organization’s activities including fundraising, political affiliations and relationships with other organizations.</li>



<li>Part IX – Input financial data, investment income, and contributions and grants you received.</li>



<li>Part X – Classify whether your organization is a public charity, private foundation, or private operating foundation.</li>



<li>Part XI – User fee information. You will have to pay either $400 or $850. If your annual gross receipts exceed $10,000 over a four-year period, you will need to pay the $850 fee.</li>
</ul>



<p>Depending on the type of organization you are operating, you will need to complete one or more of the following schedules:</p>



<ul>
<li>Schedule A – Churches.</li>



<li>Schedule B – Schools, colleges, and universities.</li>



<li>Schedule C – Hospitals and medical research organizations.</li>



<li>Schedule D – Section 509(a)(3) supporting organizations.</li>



<li>Schedule E – Organizations not filing Form 1023 within 27 months of formation.</li>



<li>Schedule F – Homes for the elderly or handicapped and low-income housing.</li>



<li>Schedule G – Successors to other organizations.</li>



<li>Schedule H – Organizations providing scholarships, fellowships, educational loans or other education grants to individuals and private foundations requesting advance approval of individual grant procedures.</li>
</ul>



<h2>Work with the Experts</h2>



<p>Working with 1-800Accountant can significantly streamline the process of filling out complex forms like IRS Form 1023. Our team of expert accountants offers a wealth of knowledge and experience in <a class="link" href="https://1800accountant.com/services/industry/nonprofit">non-profit tax and financial matters</a>, which helps to ensure accuracy and compliance. </p>



<p>We can handle complex tasks such as filing for your <a class="link" href="https://1800accountant.com/services/ein-tax-id-filing">Employer Identification Number (EIN</a>) or completing Form 1023, saving you time and effort. By entrusting your accounting and tax needs to 1-800Accountant, you free up more time to focus on your organization's mission.</p>



<p>You can also learn more about the unique and complicated landscape of <a class="link" href="https://1800accountant.com/blog/nonprofit-taxes">non-profit taxes</a> with this helpful guide.</p>

Understanding Form 1023 is a crucial for non-profits seeking tax-exempt status. It can be tricky to fill out accurately and ontime. When successfully filed and accepted, Form 1023 grants exemption from federal income tax, which is crucial for nonprofit organizations success. This blog simplifies Form 1023, clarifying eligibility and the filing process with step-by-step guidance. [&hellip;]

Group of professionals in a blue-tinted office discussing, with text overlay reading "form 1023 the key to becoming a tax-exempt organization".

form-1023

Form 1023: The Key to Becoming a Tax-Exempt Organization

<p>The complexity of the Internal Revenue Code can be intimidating, especially when dealing with IRS section 4947(a). This is a crucial provision that governs nonexempt trusts and split-interest trusts. You need to understand its implications for a smooth tax filing experience. </p>



<p>In this blog article, we will discuss this complex tax code provision in detail. You'll learn the definition of nonexempt charitable trusts (4947(a)(1) trusts), split-interest trusts (4947(a)(2) trusts), as well as the tax obligations associated with each of them. We'll also guide you through the necessary tax forms these trusts need to file, and how to potentially avoid unnecessary excise taxes. </p>



<h2>What is 4947(a)?</h2>



<p><a class="link" href="https://www.law.cornell.edu/uscode/text/26/4947" target="_blank" rel="noreferrer noopener">4947(a)</a>&nbsp;refers to a section in the Internal Revenue Code regarding the application of tax to certain nonexempt trusts – charitable trusts and split-interest trusts. These trusts are treated as&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/charitable-organizations/private-foundations" target="_blank" rel="noreferrer noopener">private foundations</a>&nbsp;unless they meet the requirements of a&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/charitable-organizations/public-charities" target="_blank" rel="noreferrer noopener">public charity</a>. 4947(a) was created so these types of trusts could not avoid private foundation restrictions, which include&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/private-foundations/private-foundation-excise-taxes" target="_blank" rel="noreferrer noopener">private foundation excise taxes</a>, termination provisions of section 507, and governing instrument requirements under section 508(e).</p>



<h2>Different Types of section 4947(a) Trusts</h2>



<h3>Nonexempt Charitable Trusts – or 4947(a)(1) Trusts</h3>



<p>According to the Internal Revenue Code, a nonexempt charitable trust is a trust:</p>



<ul>
<li>Not exempt from tax under section 501(a).</li>



<li>In which all the unexpired interests are devoted to one or more charitable purposes.</li>



<li>Eligible for a charitable contribution deduction.</li>
</ul>



<p>A nonexempt charitable trust may not have any taxable income if it truly pays or uses all of its income for charitable purposes. Otherwise, if these trusts fail to use all income for charitable purposes, they must file <a class="link" href="https://www.irs.gov/uac/about-form-1041" target="_blank" rel="noreferrer noopener">Form 1041</a>. Any trusts created before October 9, 1969, may not have to file this return.</p>



<p>Along with Form 1041, nonexempt charitable trusts must also file&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f990pf.pdf" target="_blank" rel="noreferrer noopener">Form 990-PF</a>. Additionally, this includes a 1 or 2 percent excise tax on investment income. If your nonexempt charitable trust is eligible, you may file&nbsp;<a class="link" href="https://www.irs.gov/pub/irs-pdf/f990.pdf" target="_blank" rel="noreferrer noopener">Form 990</a>, which would alleviate the excise tax.</p>



<h3>Split-Interest Trusts – or 4947(a)(2) Trusts</h3>



<p>According to the Internal Revenue Code, a&nbsp;<a class="link" href="https://www.irs.gov/charities-non-profits/private-foundations/split-interest-trusts" target="_blank" rel="noreferrer noopener">split-interest trust</a>&nbsp;is a trust:</p>



<ul>
<li>Not exempt from tax under section 501(a).</li>



<li>With some unexpired interests that are devoted to purposes unrelated to charity.</li>



<li>That has amounts transferred in trust in which a charitable deduction was allowed under section 170 and similar sections of the Internal Revenue Code.</li>
</ul>



<p>Any amounts transferred in trust before May 27, 1969, are not subject to the same provisions as private foundations.</p>



<p>To report financial activities and calculate deductions, split-interest trusts must file&nbsp;<a class="link" href="https://www.irs.gov/uac/form-5227-split-interest-trust-information-return" target="_blank" rel="noreferrer noopener">Form 5227</a>.</p>



<h2>Work With Experts Who Understand Trusts Under Section 4947(a)</h2>



<p>If you're feeling overwhelmed by these complex tax provisions, get in touch with our experts at 1-800Accountant. We're a virtual accounting firm that specializes in <a class="link" href="https://1800accountant.com/services/business-tax-advisory">tax advisory</a>, <a class="link" href="https://1800accountant.com/services/small-business-taxes">preparation</a>, <a class="link" href="https://1800accountant.com/services/payroll">payroll</a>, <a class="link" href="https://1800accountant.com/services/bookkeeping">bookkeeping</a>, <a class="link" href="https://1800accountant.com/services/audit-defense">audit defense</a>, and much more. By leveraging our tax professionals you're able to focus on what truly matters – growing your bottom line.</p>

The complexity of the Internal Revenue Code can be intimidating, especially when dealing with IRS section 4947(a). This is a crucial provision that governs nonexempt trusts and split-interest trusts. You need to understand its implications for a smooth tax filing experience. In this blog article, we will discuss this complex tax code provision in detail. [&hellip;]

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Trusts Under Section 4947(a)

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