Beginner’s Guide to Filing Business Taxes in Florida
Tax compliance can be a hassle, especially when you’re juggling a busy schedule and the demands of running a company in the Sunshine State. Overwhelming as it may be, filing business taxes in Florida correctly is key to setting your small business up for success. But where should you start?
Our guide is designed to help owners who are filing small business taxes for the first time or need clarification after changing the structure of their business. However, corporate tax rules are complex and constantly evolving, so I recommend discussing the specifics of your case with a corporate taxation lawyer.
- Do LLCs Pay State Taxes in Florida?
- How to Pay Florida Corporate Taxes
- Other Kinds of State Taxes for Florida Small Businesses
- Let Us Take the Stress Out of Filing Business Taxes in Florida
Do LLCs Pay State Taxes in Florida?
If you own a Limited Liability Company (LLC), you will likely not have to file separate corporate taxes for your Florida business. Most Florida LLCs must only pay Florida’s 6% sales tax and potentially the federal self-employment tax of 15.3%.
Florida doesn’t impose state income taxes on individuals, so pass-through entities like partnerships, S corps, and sole proprietorships are exempt from corporate taxes. However, if your LLC is taxed as a C corp, you will have to pay corporate taxes in Florida (more on that below).
The way LLCs pay taxes in Florida depends on their business structure:
Sole Proprietorships
In a sole proprietorship, the business and the owner are the same for taxation purposes. The owner will report business income and expenses on their individual tax return (Form 1040) using Schedule C. They pay federal taxes on the profits at their individual tax rate, along with self-employment taxes for Social Security and Medicare.
Partnerships
General partnerships, as well as limited liability partnerships and limited partnerships, are not taxed at the entity level. Instead, the individual partners report their share of profits and losses on their personal tax returns. The partnership files an information return (Form 1065) to report income, deductions, gains, and losses from its operations.
S Corporations
S corporations offer a unique tax structure. They are similar to C corporations in that they are separate legal entities, but they avoid double taxation. S corporations don’t pay federal income tax at the corporate level; instead, income and losses pass through to the shareholders, who report them on their personal tax returns. The corporation files Form 1120S to report its income, deductions, gains, and losses.
C Corporations
C corporations are separate tax entities from their owners. The corporation files its own tax return (Form 1120) to pay taxes on its profits at the corporate tax rate. Shareholders also pay taxes on their dividends from the corporation, resulting in potential double taxation. Owners of C corporations and LLCs with C corp status in Florida must file state and federal corporate tax returns.
How Are C Corporations Taxed in Florida?
Florida mandates a corporate income tax on C corporations for the privilege of doing business in the state. Your C corp business tax return is calculated by applying the higher of two tax rates to your corporation’s net income.
To determine your income, the state will look at three business factors—payroll, property, and sales—and add certain non-business income. Once you subtract any qualified exemptions or tax credits, the remaining is your taxable net income.
After calculating your business’s net income, you’ll need to figure out your tax rate. If you run a C corp in Florida (or an LLC classified as a C corp), you must pay the higher of these two tax rates:
- The standard rate minus exemptions and tax credits, or
- The alternative minimum tax (AMT) of 3.3%.
Tax Rates for Florida C Corporations
The standard corporate tax rate for Florida businesses opened after 2022 is 5.5% of its federal taxable income. The first $50,000 of earnings is exempt from the corporate tax rate.
The standard tax rate in Florida varies slightly depending on when your business was formed:
- 5.5% tax rate for businesses opened before January 1, 2019
- 4.458% tax rate for businesses opened between January 1, 2019 and December 31, 2020
- 3.535% tax rate for businesses opened between January 1, 2021 and December 31, 2021
Tax Credits for Florida C Corporations
There are dozens of tax incentives to help Florida businesses lower their tax burden. Many tax credits relate to clean energy, job creation, investment strategies, and employee health care. Some of the most common Florida corporate tax incentives include:
- Internship Tax Credit. Qualified companies can save $2,000 per hire in taxes by employing student interns.
- Investment Tax Credit. This credit is available for certain investments in qualified property, such as equipment or facilities used in manufacturing, producing, or transporting goods.
- New Markets Tax Credit. This credit is designed to incentivize investments in low-income communities.
- Research and Development Tax Credit. Businesses that engage in qualified research activities may be eligible for a federal tax credit based on a percentage of their qualified research expenses.
- Renewable Energy Production Tax Credit. Companies approved by the Florida Department of Agriculture and Consumer Services can save on taxes by producing renewable energy.
- Rural Job Tax Credit. Businesses can offset their taxes by creating new jobs for rural employees in designated areas.
- Work Opportunity Tax Credit. Hiring individuals from target groups, such as military veterans or beneficiaries of certain public assistance, might make employers eligible for a tax credit.
Although C corporations get something of a “bad” reputation because of the double taxation (corporate income, then on distributions to shareholders), such a structure isn’t necessarily a bad thing. Indeed, one of the most valuable capital gains tax avoidance provisions is only available to C corporations.
How to Pay Florida Corporate Taxes
Florida corporations are required to file Form F-1120 each year to report their income, even if there are no taxes due. The filing due date varies depending on your corporation’s tax year. For example, the due date is October 1 for tax years ending June 30.
Your C Corp will also need to make estimated quarterly tax payments if you make more than $2,500 in corporate income tax each year. Estimated tax payments can be filed online with Form F-1120ES. If you underpay, you’ll incur a 12% penalty on your prior year’s taxes.
Estimated tax due dates vary depending on the tax year:
- Tax years ending June 30: Payments are due on the last day of the fourth month, the last day of the sixth month, the last day of the ninth month, and the last day of the tax year.
- Tax years not ending June 30: Payments are due on the last day of the fifth month, the last day of the sixth month, the last day of the ninth month, and the last day of the tax year.
Federal Taxes on Florida Corporations
Similar to Florida, the IRS considers domestic LLCs as either sole proprietorships, partnerships, or corporations. Only corporations are required to file federal income taxes for their businesses. Partnerships and sole proprietorships will not be considered separate from their owners unless they elect corporation status by filing Form 8832.
Florida corporations have additional tax burdens at the federal level, such as:
- Estimated Tax. The federal government requires corporations to pay taxes as they receive income during the year. If you or your employees do not have income tax withheld from your regular pay, you will likely have to make estimated tax payments each quarter. Chances are, you will have to pay quarterly estimated taxes.
- Self-Employment Tax. If you own your own business and earn more than $400 per year, you will likely have to pay self-employment taxes. These taxes are collected to pay for your Social Security and Medicare coverage after retirement. Self-employment tax is 15.3% of your earnings. It’s a sizeable bite for which you should weigh the pro/con of electing S Corp status
- Employment Taxes. If your business has employees, you are liable for the costs of their federal income tax withholding, unemployment tax, and Social Security and Medicare taxes.
- Excise Tax. You may have to pay excise taxes depending on the nature and specifics of your business operations. For example, ground transportation companies may need to file Form 720 to pay fuel and environmental taxes as well as Form 2290 to pay federal excise taxes on vehicles weighing 55,000 pounds or more.
Other Kinds of State Taxes for Florida Small Businesses
While regular LLCs may not have to pay taxes on income, business owners may be subject to other taxes in the state of Florida. These could include:
- Sales and use tax. Florida requires some businesses to pay sales tax (collected from the purchaser at sale) and use tax (paid at use if sales tax wasn’t collected at purchase). Sales and use tax are reported on Form DR-15 and may be paid annually, quarterly, or monthly, depending on the amount of earnings.
- Reemployment tax. If you hire employees for your Florida small business, you’ll need to pay reemployment tax. This tax is collected by the Florida Department of Revenue and contributes to the Unemployment Compensation Trust Fund, which provides reemployment assistance and benefits to eligible workers. To fulfill your obligations, you must file Form RT-6 by the end of each month following the close of the quarter, even if you didn’t have any employees or wages to report during that period
- Excise tax. Certain luxury items like cigarettes, vehicles, gas, cell phones, and alcohol incur excise taxes in Florida.
- Multistate taxes. If your business operates outside of Florida, you or your employees may be subject to other state’s tax laws.
Let Us Take the Stress Out of Filing Business Taxes in Florida
Whether you’re an owner, investor, or operator of a small business, we can guide you through filing taxes for your small business. We can find qualified tax deductions, create tax strategies and planning for the future, and ensure that your company documents are in line with your goals. If you have any questions, email us at hello@yolofskylaw.com today or schedule a 15-minute call.