As an Arkansas small business owner, you likely already know that you’re responsible for filing state, local, and federal small business taxes. Paying taxes is an essential step you must take to keep your business legally compliant, and failing to file or filing incorrect information can mean that your business could face fines and other penalties. Although this may sound scary, we are here to help. Read on to learn more about what kinds of state taxes your Arkansas small business might need to pay and how we can help make the process easier.
With our Worry-Free Compliance Service, we take the worry out of complying with requirements for Arkansas state-required tax reports. We monitor ongoing compliance requirements and provide alerts for filing events and deadlines. If your company misses a deadline, we can help you correct the mistake.
If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses to learn more.
Step 1: Establish your Arkansas business’s corporate income tax obligations
Unlike pass-through entities, such as LLCs and sole proprietorships, the income earned by corporations is taxed twice.
The owner or member of a pass-through entity pays personal income taxes on the company’s net income “passed through” to the owner. The pass-through entity isn’t required to pay business taxes on income earned by the company.
However, a corporation pays state corporate income taxes based on the company’s net income. In addition, the corporate shareholders pay personal income taxes on the dividends they receive from the corporation.
What is the business tax rate for Arkansas?
Arkansas uses a graduated scale to assign the business tax rate as determined by the company’s net income for the taxable year. As of 2021, the Arkansas business tax rate for corporate income taxes is:
- 1% on amounts up to $3,000
- 2% on amounts between $3,000 to $6,000
- 3% on amount between $6,0001 to $11,000
- 5% on amounts between $11,001 to $25,000
- For amounts between $25,001 and $10,000, $940 plus 6% of the amount over $25,000
- For amounts over $100,000, $5,440 plus 6.2% of the amount over $100,000
The Arkansas tax code was amended to lower the corporate income tax rate to a maximum of 6.2% of taxable income that exceeds $100,000 for tax years beginning January 1, 2021. Also, the tax code was amended to lower the maximum tax rate for taxable income exceeding $25,000 to 5.9% starting on January 1, 2022.
Because tax laws could change at any time, it’s always best for small business owners to confirm the current corporate tax rate before paying business taxes in Arkansas.
When are corporate income taxes due in Arkansas?
Corporations must file corporate income tax returns and pay business taxes in Arkansas by the 15th day of the fourth month following the close of the corporation’s tax year. Most companies use a calendar year for their corporate tax returns. Therefore, corporate income taxes would be due by April 15 of each year. If the company files for an extension to file a tax return, the extension does not apply to the payment of taxes owed to the state.
Estimated corporate income tax payments are due on the 15th day of the fourth, sixth, ninth, and twelfth months of the tax year. A company with estimated quarterly taxes of more than $20,000 must pay via the EFT (Electronic Funds Transfer) system. Corporations can register their company and pay corporate income taxes through the Arkansas Taxpayer Access Point (ATAP).
Step 2: Determine your Arkansas business’s employment taxes
Employers are required to withhold state income taxes from employees’ wages. The amount of withholding tax is based on the employee’s wages and deductions. Employers must register for an Arkansas withholding tax account with the Arkansas Department of Finance and Administration.
You can report new employees online through the Department of Workforce Services. Depending on the amount of withholding taxes you collect, you may be required to file reports and submit taxes monthly or annually, and most companies are required to pay withholding taxes monthly.
Monthly withholding taxes are due by the 15th day of the month following the month the taxes were withheld from an employee’s wages. Businesses that have high withholding taxes submit payments electronically. However, all employers may use the ATAP system to pay withholding taxes.
Step 3: Establish your Arkansas business’s additional state tax obligations
There may be a requirement to pay additional business taxes in Arkansas. Below are some of the standard business taxes small businesses may have to pay.
Arkansas charges a 6.5% sales tax on selected services and tangible personal property sold within the state. However, the amount of sales tax may be lower on some items.
Small businesses must collect sales tax from transactions and remit those taxes to the Department of Finance and Administration (DFA). Business owners can find a schedule of the due dates for paying sales taxes and filing monthly reports on the DFA’s website. Reports are due once a month, and sales tax payments are due twice a month.
A franchise tax is a tax charged for doing business within the State of Arkansas. Arkansas charges an annual franchise tax for all corporations, LLCs, banks, and insurance companies. Failing to pay the franchise tax may result in revocation of the authority to conduct business in the state.
Business owners pay franchise taxes to the Arkansas Secretary of State, and they may make payments online through the SOS website. The minimum franchise fee for corporations without stock is $150. The minimum fee for corporations with stock is $300.
Businesses with employees must apply for a Division of Workforce Services (DWS) employer account number. In addition, each business must have an Arkansas state unemployment account (SUTA). Employers are required to pay unemployment taxes based on the amount of wages paid to employees. The unemployment tax rate is currently 0.1% to 5%.
Excise taxes may be applied to specific goods or services in addition to sales taxes. For example, Arkansas charges excise taxes on a small number of products, such as fuel, alcohol, and cigarettes. Therefore, check with The Office of Excise Tax Administration to determine if it must pay excise taxes based on the products or services provided by the company.
Step 4: Prepare to file and pay your Arkansas business taxes
You may need to learn how to file small business taxes in Arkansas through more than one state taxing agency. The Department of Finance and Administration is the primary taxing agency in Arkansas. However, there may be a requirement to pay certain types of taxes to other state agencies.
Most companies are required to pay business taxes through the Arkansas Taxpayer Access Point (ATAP) system. Small business owners can register their companies with the ATAP system.
A small business must complete various tax returns, reports, and statements to calculate the amount of business tax owed to the state. Documents that you will need to prepare your business tax forms include:
- Bank account statements
- Employer wage reports
- Balance sheet
- Asset purchase statements
- Sales reports
- Balance sheet
- Accounting documents
- Credit card statements
- Income statement
Tracking invoices and payments to prepare your corporate tax returns can be time-consuming for a small business owner. Our ZenBusiness Money App can help you track income and expenses to make preparing corporate tax returns easier.
Does your small business need an accountant?
Most small business owners benefit from hiring professional accounting help. A small error on business tax returns could result in costly penalties and fines. It can be difficult for a small business owner to keep up with the changing tax code.
An accountant can assist you in ensuring that you meet all requirements for business tax payments in Arkansas. The Internal Revenue Service provides a guide for business owners regarding the credentials and qualifications for tax return preparers, which can be found on its website.
How We Can Help
We’re here to provide guidance and tips for small business owners regarding their tax requirements. With our ZenBusiness Money App, you can track invoices and payments. It helps you manage clients through an easy-to-use system. Here, you can manage your billing and receipts through a centralized Smart Dashboard. Having this information in one system makes it easier to calculate your state corporate income taxes and other tax obligations.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
- How much can an Arkansas small business make before paying taxes?
Arkansas uses a graduated scale for calculating the state income tax obligation for a small business. A corporation is required to pay income taxes on all earnings, even if the earnings are minimal. The tax rate is 1% on amounts earned up to $3,000.
- What percentage does an Arkansas small business pay in taxes?
As discussed above, Arkansas charges a graduated percentage for small business taxes. The minimum tax rate for 2021 is 1%, and the maximum tax rate for 2021 is 6.2%.
- How does an Arkansas small business pay taxes?
Most companies must pay their taxes online through the Arkansas Taxpayer Access Point (ATAP) system. You must register your business and apply for an account online through the ATAP system.
- Do I have to file taxes for my small business in Arkansas?
Corporations are required to file state tax returns in Arkansas. Your small business may also be required to file other tax returns and reports on a monthly and annual basis. Common tax returns and monthly reports for a small business include unemployment taxes, sales taxes, franchise taxes, income taxes, and excise taxes.
The type of business you conduct, your revenue, and whether you have employees determine the types of tax returns you must file and the small business taxes you must pay in Arkansas.
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