Small Business Taxes in Wisconsin | Our Essential Guide


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Steve Bennett
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Wisconsin Small Business Taxes

Owning and operating a small business in Wisconsin is exciting and fulfilling. However, it also comes with responsibilities, including staying informed about Wisconsin tax laws and ensuring that your Wisconsin business complies with all applicable regulations. If you will start a Limited Liability Company in Wisconsin, this one’s for you! 

This comprehensive guide will walk you through the critical aspects of Small Business Taxes in Wisconsin. Understanding different taxes allows you to make informed decisions that will benefit your business and help you stay on the right side of the law.

Webinarcare Editorial Team will help you easily understand small business taxes in Wisconsin. You must be guided by all the factors gathered in this article.

Small Business Tax Law in Wisconsin

Wisconsin’s small business tax law defines and outlines the tax obligations and exemptions for various businesses, including Limited Liability Companies (LLCs). These laws comprise various taxes that small businesses must comply with for income, sales, payroll, property, and other industry-specific taxes. Each type of tax presents unique implications for small businesses, and navigating through this maze can be quite challenging. Therefore, understanding these taxes in detail is crucial for LLCs as it aids in effective tax planning and helps avoid non-compliance penalties.

LLCs in Wisconsin enjoy certain benefits under the small business tax law. Generally, an LLC is considered a pass-through entity, and its profits are passed directly to its owners, who then report this income on their personal tax returns. This differs from starting a corporation in Wisconsin that faces double taxation on corporate profits and dividends. However, it’s noteworthy that the taxable profit of an LLC is not just the cash the owners take out – it includes the company’s overall profits.

So, appropriate measures must be taken to ensure accurate reporting and minimize tax liabilities as much as possible. Tax laws concerning LLCs often change, and keeping abreast of these updates plays a pivotal role in the successful running of the business. If you are still looking for an LLC service to help you with your taxes, we reviewed these services, including the top features and affordable prices.

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Type of Taxes For Small Businesses in Wisconsin

Starting a business in Wisconsin significantly contributes to the local economy. However, operating such businesses here requires an in-depth understanding of the types of small business taxes. Small businesses must adhere to these taxes’ specific regulations, rates, and filing deadlines to avoid penalties and operational interruptions. These taxes include but are not limited to:

  • Income Tax: Typically, all businesses in Wisconsin must file an income tax return and may need to pay capital gains tax on any profits. The income tax rate in Wisconsin can range from 4% – 7.65% (depending on income).
  • Sales Tax: Businesses in Wisconsin that sell physical products might be required to collect sales tax on transactions and forward it to the Wisconsin government. The sales tax rate in Wisconsin is 5.00%.
  • Payroll Tax: If a business in Wisconsin has employees, it is responsible for withholding payroll taxes from the employee’s wages and transferring them to the relevant tax agency.
  • Property Tax: Businesses that own property in Wisconsin may be subject to a property tax varying from county to county. The property tax rate in Wisconsin is 1.76%.
  • Franchise Tax: Some states, including Wisconsin, may have a franchise tax, which applies to businesses simply for the privilege of operating in that state. Wisconsin does not have a franchise tax for LLCs.
  • Self-Employment Tax: Sole proprietors and freelancers in Wisconsin may be required to pay self-employment taxes, covering social security and Medicare costs.
  • Excise Tax: Some businesses may be liable to pay excise taxes, typically applied to certain goods and services such as alcohol, tobacco, and gasoline.
  • Unemployment Insurance Tax: Employers in Wisconsin might be required to pay unemployment insurance taxes, which fund unemployment benefits for workers who lose their jobs.

Understanding the types of small business taxes in Wisconsin is the first step towards financial transparency. Remember, when you start an LLC, you’re not only launching a business, you’re also taking on a mantle of fiscal responsibility. Stay informed, stay compliant, and contribute to the growth of Wisconsin’s economy.

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Calculate Taxes in Wisconsin

Understanding how to calculate taxes for small businesses in Wisconsin. You will not just fathom the different taxes and how they work but also how you came up with them. Here is how you calculate taxes in Wisconsin.

  • Income Tax: Business income tax is calculated based on the profits reported on your income tax return. The amount of tax due will be based on the tax rate in your specific tax bracket.
  • Sales Tax: To calculate sales tax, multiply the total sales receipts by the sales tax rate in Wisconsin. The sales tax amount should be added to the customer’s price for goods or services.
  • Payroll Tax: Payroll taxes include federal income tax, Social Security, and Medicare taxes. You can use the tax tables or tax calculator provided by the IRS to calculate these taxes. In addition, employers are responsible for paying the Federal Unemployment Tax (FUTA).
  • Property Tax: Property taxes are calculated by multiplying the property’s assessed value by the local property tax rate.
  • Franchise Tax: Franchise tax calculation varies by state. It could be based on your net worth, income, or a flat fee. Consult the Wisconsin Department of Revenue for details.
  • Self-Employment Tax: Self-employment tax consists of Social Security and Medicare taxes. To calculate it, multiply your net profit from self-employment by 15.3%.
  • Excise Tax: Excise taxes are usually included in the product’s price, like gasoline or alcohol, and are often levied per unit (like per gallon or bottle) rather than as a price percentage.
  • Unemployment Insurance Tax: These rates vary by state and by the individual employer’s experience rating. The employer’s experience rating is based on the benefits paid to former employees, so new businesses in Wisconsin usually have a relatively low rate.

It is recommended to consult a tax professional to ensure accuracy and compliance with all relevant tax laws.

File and Pay Business Taxes in Wisconsin

The process of filing and paying taxes in Wisconsin can be broken down into several steps. Here is a step-by-step guide on how to go about it:

  1. Gather all relevant documents: Collect all the necessary paperwork, including W-2 forms from your employer(s), 1099 forms for freelance or self-employment income, income statements from banks or financial institutions, and any other relevant receipts or records.
  2. Determine your filing status: Assess your marital status and household situation to determine the appropriate filing status, such as Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child.
  3. Choose a filing method: In Wisconsin, you can file taxes electronically using tax software or prepare a paper return. Electronic filing is generally faster, more convenient, and can minimize errors. You can file your taxes by mail and submit them to the Wisconsin Department of Revenue.
  4. Calculate your taxable income: Calculate your total income by adding up all your earnings, including wages, tips, self-employment income, dividends, and interest. Deduct any eligible adjustments and deductions to arrive at your taxable income.
  5. Complete the tax return: Fill out the Wisconsin tax forms electronically or on paper based on your chosen filing method. Take your time to review and double-check the information provided to minimize errors.
  6. Submit your tax return: If filing electronically, follow the instructions provided by the tax software to submit your return electronically. If filing on paper, mail your completed tax return to the Wisconsin Department of Revenue. Include any required forms, schedules, and copies of your W-2 or other income statements.
  7. Determine your payment method: Calculate the taxes owed or the refund due. If you owe taxes, there are several payment options available, such as electronically via direct debit or credit card, by mail with a check or money order, or through an electronic funds transfer. Choose the payment method that suits you best.
  8. Pay your taxes: Submit your tax payment by the Wisconsin deadline. Ensure the payment is postmarked by the due date to avoid penalties or interest charges.
  9. Keep copies for your records: Make copies of all documents associated with your tax return, including the completed forms, payment proof, and any supporting documentation. Store these records in a safe place for future reference.

Remember to consult Wisconsin’s official tax website or seek professional advice to ensure compliance with any specific tax regulations or updates in the state.

Small Business Tax Deductions

Tracking and claiming deductions for your Wisconsin small business can significantly reduce your tax burden. Some common deductions available to small businesses in Wisconsin include:

  • Business Expenses: Ordinary and necessary expenses, such as rent, utilities, and office supplies, can be deducted from your income.
  • Depreciation: The cost of business property, such as equipment, vehicles, and buildings, can be deducted over a specified period. Knowing it has tax deductions is better if you plan to create a rental property for your Wisconsin LLC
  • Employee Wages and Benefits: Employees’ salaries, wages, and benefits can be deducted as a business expense. 
  • Business-related Travel and Meals: Expenses incurred while traveling for business purposes or meals consumed during business meetings can be deducted, subject to certain limitations.
  • Home Office Deduction: If you use a portion of your home exclusively for business purposes, you may be able to deduct a portion of your home expenses, such as mortgage interest, property taxes, and utilities.
  • Retirement Plan Contributions: Contributions made to a qualified retirement plan for yourself and your employees can be deducted as a business expense.

Hire a Tax Professional in Wisconsin

Accurate tax filing requires a certain level of expertise. Recognizing this, seeking the services of a good tax professional in Wisconsin can be beneficial for your small business. Hiring a tax professional will safeguard you from possible mistakes and help you maximize your tax savings. Considering their value, selecting the right professional becomes crucial.

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Sanctions For Not Filing Small Business Taxes in Wisconsin

Sanctions and penalties exist for not paying taxes for a small business in Wisconsin. The specific sanctions and penalties can vary depending on the amount owed and the time the taxes remain unpaid. Some common sanctions and penalties for unpaid small business taxes in Wisconsin include:

  • Late payment fees
  • Interest charges on unpaid taxes
  • Revocation of business license
  • Seizure of business assets
  • Legal action, such as wage garnishment or liens on the property.

Paying small business taxes on time and in full is important to avoid these sanctions and penalties. Suppose you are unable to pay your small business taxes. In that case, it is recommended that you contact the Wisconsin Department of Revenue or a tax professional to discuss payment options and avoid any penalties.

Where Do I File My Small Business Taxes in Wisconsin?

Small business taxes in Wisconsin can be filed with the Wisconsin Department of Revenue or a state-approved online tax filing service. The specific process for filing small business taxes can vary depending on the business entity type and the revenue earned during the tax year. It is recommended that small business owners consult with a tax professional or visit the Wisconsin Department of Revenue website for more information on how to file small business taxes in Wisconsin.

FAQs

What is the tax rate for small businesses in Wisconsin?
The tax rate for small businesses in Wisconsin depends on their income tax bracket, but it ranges from 4% to 7.9%.
How do I register my small business in Wisconsin for taxes?
You can register your small business for taxes in Wisconsin by visiting the Department of Revenue website and completing the necessary forms.
When are small business taxes due in Wisconsin?
Small business taxes in Wisconsin are due annually on April 15th, the same as personal income taxes.
What is the penalty for late payment or failure to file small business taxes in Wisconsin?
The penalty for late payment or failure to file small business taxes in Wisconsin is 5% of the unpaid tax per month up to a maximum of 25% of the unpaid tax.
Can small businesses in Wisconsin claim deductions for home office expenses?
Yes, small businesses in Wisconsin can claim deductions for home office expenses if their home is their primary place of business and they meet certain IRS criteria.
What is the sales tax rate for small businesses in Wisconsin?
The sales tax rate for small businesses in Wisconsin depends on the location of the business, ranging from 5% to 5.6%.
How do I pay my small business taxes in Wisconsin?
You can pay your small business taxes in Wisconsin by mailing a check with your tax return or by using the online payment system on the Department of Revenue website.
Do small businesses in Wisconsin have to pay any other local taxes?
Some cities and counties in Wisconsin impose local sales or use taxes that small businesses may be required to remit.
What paperwork is required for small business taxes in Wisconsin?
Small businesses in Wisconsin must file an annual tax form along with any applicable schedules and attachments.
Can I file my small business taxes electronically in Wisconsin?
Yes, businesses can file their taxes electronically in Wisconsin, whether they use a tax professional or choose to use an online service.
Can small business owners in Wisconsin claim credits for job creation or investment?
Yes, Wisconsin offers tax credits to small business owners who create new jobs, invest in certain industries, or achieve other milestones.
What is the Wisconsin Corporate Franchise tax and who has to pay it?
The Wisconsin Corporate Franchise tax is a levy on all corporations that do business in the state. Small business owners who operate an incorporated business may be required to pay this tax.
How does Wisconsin tax income from out-of-state sources for small businesses?
Wisconsin taxes income from all sources that are attributable to a business with nexus in the state, even if the income was earned elsewhere.
What is the Business Personal Property tax in Wisconsin?
The Business Personal Property tax is a tax on tangible assets that a business owns, including equipment, furniture, and inventory.
Are there any tax incentives or credits for promoting energy efficiency in Wisconsin for small businesses?
Yes, Wisconsin offers a variety of tax credits and exemptions to small businesses that invest in renewable energy or use sustainable materials and practices.
What is the Wisconsin Corporate Income tax rate for small businesses?
The Wisconsin Corporate Income tax rate for small businesses is 7.9%.
Do small businesses in Wisconsin have to register for unemployment tax?
Yes, small businesses in Wisconsin are required to register for unemployment tax and to pay taxes on employee wages.
Can I request a payment plan for delinquent small business taxes in Wisconsin?
Yes, Wisconsin offers payment plans for delinquent small business taxes in specific situations.
Do nonprofits in Wisconsin have to pay taxes?
Nonprofits in Wisconsin have to pay state and federal taxes on unrelated business income or if they operate as a taxable entity.
What taxes does a small business in Wisconsin have to pay besides income tax?
In addition to income tax, small businesses in Wisconsin are also subject to sales tax, property tax, and employment-related taxes like unemployment tax and withholding tax.
Are small business owners in Wisconsin who work for themselves considered employees for tax purposes?
No, small business owners in Wisconsin who work for themselves are not considered employees and are therefore not subject to employment taxes.
What is the Wisconsin Use tax and who has to pay it?
The Wisconsin Use tax is a tax on goods that are purchased outside of Wisconsin but used within the state. Small businesses that make purchases from out-of-state suppliers may be subject to this tax.
How can small businesses in Wisconsin avoid tax penalties?
Small businesses in Wisconsin can avoid tax penalties by filing their taxes on time, paying taxes when they are due, and keeping accurate records.
What is a Nexus and how does it apply to small business taxes in Wisconsin?
A Nexus is a sufficient physical presence of a business in Wisconsin that creates a tax obligation for the business. Small businesses that have a Nexus in Wisconsin must file and pay taxes in the state.
Are there any tax exemptions for exports for small businesses in Wisconsin?
Yes, small businesses in Wisconsin that primarily engage in export activity may be eligible for tax exemptions.
What is the cap on business personal property tax for small businesses in Wisconsin?
There is no cap on Business Personal Property tax on small businesses in Wisconsin. They are taxed on tangible when their value is $5,000 or more.
What is the impact on the all or part of the small business taxes in Wisconsin when filing for bankruptcy?
The impact of bankruptcy on small business taxes in Wisconsin may depend on the type of bankruptcy, debts owed to the state or federal government, and specific circumstances related to the business.
What is the composition of Small Businesses considered for paying taxes in Wisconsin?
The composition of Small Businesses that are considered for paying taxes in Wisconsin include limited liability companies, partnerships and LLCs that are treated as S-corporations for tax purposes.
Does inventory purchases require tax payments in Wisconsin?
No, inventory purchases do not require tax payments in Wisconsin, but sales of taxable items from that inventory are subject to sales tax.
Can names/business names be deducted as expenses while filing tax returns for small businesses in Wisconsin?
No, generally, you can’t deduct a business name or brand name on your taxes in Wisconsin because they constitute capital expenses associated with establishing the enterprise. However, costs associated with researching, registering, and licensing a business name or domain or image or trademark are eligible.

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Conclusion

Understanding and complying with small business tax laws in Wisconsin is crucial for the success of your business. By staying informed about filing requirements, tax rates, deductions, and credits, you can make informed decisions that will benefit your business and help you avoid potential tax penalties. Consider consulting with a tax professional to ensure your small business fully complies with all applicable tax laws in Wisconsin.

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