Frequently Asked Questions

Business Filing Requirements

Q. I have incorporated my business. What forms do I need to send Tennessee to let them know my company exists?
A. The initial step for businesses establishing themselves as domestic corporations (ones incorporated in the state of operations) is to file a charter and Form SS-4238, Application for Certificate of Existence/Authorization. If the business is considered a foreign corporation (incorporated in a state other than that in which it will operate) then Form SS-4431, Application for Certificate of Authority, should be filed. All of these are filed with the secretary of state.

Q. If my business is operating as a LLC, do I need to tell Tennessee?
A. Domestic limited liability companies (LLC) must follow similar procedures with domestic LLCs filing articles of organization and Form SS-4231, Application for Certificate of Existence/Authorization, while foreign LLCs apply for Form SS-4233, Application for Certificate of Authority. All of these forms are filed with the secretary of state.

Q. What about IRS, do I need to file with them?
A. Any corporation, partnership, or LLC must also obtain from the federal government an employer's identification number (EIN). If a sole proprietor intends to hire employees, then this individual must also have an EIN. To obtain an EIN, Form SS-4, Application for Employer's Identification Number, must be submitted. This number will ecome the identifier for the business on all future tax filings.

Q. I intend to hire employees. What forms do I initially need to have?
A. You will need a federal employer identification number (EIN). To obtain an EIN, Form SS-4, Application for Employer's Identification Number, must be submitted. This number will become the identifier for the business on all future tax filings. The next step is to acquire a state unemployment account. In Tennessee that means filling out Form DES 210.1, Report to Determine Status. This form is only necessary when a business will have at least a single employee who is either paid at least $1,500 or employed at least 20 weeks. Both situations are viewed within a calendar year. New employers receive a rate of 2.70 percent, unless they are classified as part of industries deemed to be at high risk of unemployment. Rates are initially reviewed after three years and annually thereafter.

Q. What information do I need to have employees complete?
A. Businesses need to have every employee fill out Form W-4, Employee's Withholding Allowance Certificate, and Form I-9, Employment Eligibility Verification, upon hire. While these forms are maintained in the company files, all new hires must be reported to the state government within 20 days. In the state of Tennessee, a private company handles this function. This process can be done by phone, fax, e-mail, or "old-fashioned" mail.

Q. What kind of payroll taxes do I need to withhold in Tennessee?
A. Employers are required to withhold taxes from employees. Based upon their Form W-4 information, federal income tax is withheld dependent upon frequency of pay, income, and number of deductions. Federal Insurance Contributions Act (FICA) taxes, commonly referred to as Social Security taxes, are comprised of two parts: Medicare and Old ge, Survivors & Disability Insurance (OASDI) The OASDI portion is 6.2% and the Medicare portion is 1.45%. The OASDI portion is paid on the first $80,400 in wages in 2001, but the Medicare portion is paid on all wages. Employers must match the FICA taxes withheld. These taxes are deposited with a financial institution in the time frame designated by the employer's deposit status.

Q. What about quarterly payroll returns?
A. The actual federal payroll tax return is the Form 941, Employer's Quarterly Federal Tax Return. This return is filed quarterly, based on a calendar year with quarters ending in March, June, September, and December. Form 941s are due by the last day of the month following the end of the quarter. Amounts due less than $100 may be paid with the return. Note that some businesses may qualify as "de-minimis" filers if their total liability for the entire quarter is less than $1,000. These filers may pay the entire amount with the return.

Federal unemployment tax is reported on Form 940, Employer's Annual Federal Unemployment Tax Return. This return is due by the last day of January of the following year. The rate is 6.2 percent with a credit of up to 5.4 percent, (effective rate 0.8 percent), allowed if state unemployment taxes have been timely and completely paid. Deposits must be made quarterly anytime the cumulative liability reaches $100. These deposits are handled in the same manner as the deposits for Form 941.

State governments also require payroll-related filings. Unemployment taxes must be reported and paid on Form DES 220-5, Employer's Quarterly Contribution Report. This return is due by the last day of the month following the end of the quarter. All amounts due are paid with the return. While Tennessee does not have a tax on wages, most other states do. For these states, businesses must also remit and report state income tax withheld from employees. Due dates vary from state to state.

Q. If I have a corporation, what type of federal income tax return do I file?
A. If the business is a corporation, either "C" or "S", returns are due by the 15th day of the third month after the end of the year. In the case of a business using a calendar year, this means March 15. C corporations use Form 1120, U.S. Corporation Income Tax Return, while those with S status use Form 1120S, U.S. Income Tax Return for an S Corporation. Extensions can move the due date forward by six months. In most cases, estimated payments should be made during the tax year.

Q. I operate my company as an LLC, what income tax return do I file with IRS?
A. If the business is a partnership or a multi-member LLC, the return used is a Form 1065, U.S. Partnership Return of Income. This return is due by the 15th day of the fourth month after the year-end, usually April 15. Extensions of up to six months may be requested on this form. There is no federal income tax due on a partnership, so no estimates are required of the entity. Instead, each partner receives a Schedule K-1 reporting his/her share of income. Each partner should therefore include partnership income in calculating his/her individual tax estimates.

Q. What type of income tax return does my company file for Tennessee?
A. Tennessee taxes business income through the Form FAE 170, Tennessee Franchise and Excise Return. This return breaks the tax into two parts, one based on capital invested and the other on income. Franchise and excise tax returns are generally required of all business entities: Corporations, S corporations, LLCs and limited partnerships. The due date is the fifteenth day of the fourth month following the end of the year. As with federal income taxes, estimated payments may be necessary.

Q. I hear a lot of business owners discussing information returns. Do I need to file them also?
A. Yes, you may need to file a information return, the Form 1099. The varieties of this form are too numerous to be listed here, but the most common is the Form 1099-MISC, Miscellaneous Income. This form is given to vendors or non-employees providing services in excess of $600, not including vendors which are incorporated. Form 1099s are due to the vendor by the last day of January and to the federal government by the last day of February. Form 1096 serves as a cover sheet. There are also form 1099 for dividends and interest you may need to file also.

Q. Do I need to register with Tennessee for sales tax?
A. Form RV-R0000201, Sales and Use Return. Depending on the nature of the business, this return may not be required. Specifics are too many to detail, but generally if a business sells or leases tangible personal property, offers a taxable service, or buys and consumes in Tennessee untaxed merchandise from another state, it must collect and remit sales tax via this return. The rate for sales tax in Tennessee is broken into state and local portions. The state portion is 6 percent, while the local portion may vary between 1 percent and 2.75 percent. Timely returns are allowed vendor's compensation of 2 percent on the first $2,500 as a reduction of taxes remitted. Filing status is either monthly, quarterly, or annually and again is dependent upon the nature of the business. The due date is the 20th day of the month following the end of the reporting period.

Tennessee also requires corporations, LLCs, and LLPs to file annual reports. The due date for these reports is the first day of the fourth month after the year-end. There are varying fees associated with these annual reports.

On the county or city level, there are still more filings with which to contend. By the last day of February, businesses are required to submit a tangible personal property schedule. This schedule is basically a listing, by category and age, of all tangible personal property owned or leased. There are no fees due with this report. It does, however, become the basis for determining personality taxes.

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