Steps to Pay Your District of Columbia Small Business Taxes
Paying your taxes isn’t enjoyable, but it is a crucial component of keeping your business legally compliant and in good standing with the District of Columbia. But knowing exactly what taxes you need to pay and when can cause anxiety for even the most experienced small business owners. If filing Washington D.C. small business taxes has you nervous, we’re here to help. Read on to learn more about the types of taxes you might face as a Washington D.C. business owner, how and when to pay them, and which of our products and services can help make the process smoother when the time comes to file.
If you need more complete legal compliance, check out our Worry-Free Compliance service, which keeps your business documents organized and can help keep you on track with required business filings. No matter what size your business is or what stage, we have the tools you need to help your business succeed.
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 Washington D.C. business’s corporate income tax obligations
Business taxes in the District of Columbia depend largely on the entity’s structure, and most prominently include a corporate franchise tax and an unincorporated franchise tax. As implied, the corporate franchise tax applies to corporations and the unincorporated franchise tax applies to all other business entities. These are both forms of income tax.
D.C. Business Tax Rate
If you have chosen a pass-through tax structure, the income from your business will be passed through to you personally. This means that income is subject to taxation on your personal state tax return. Each individual shareholder is subject to taxes on their share of the income. S corporations in Washington D.C. are not taxed as corporations. Instead, they’re subject to pass-through taxation. Other pass-through entities include limited liability companies, partnerships, and sole proprietorships. These unincorporated business entities are subject to a $250 minimum tax if gross receipts are $1 million or less and $1,000 minimum tax if gross receipts are over $1 million.
The D.C business tax rate is 8.25% for franchise taxes, which apply to corporations. In comparison, the income tax range is 4% to 8.95%.
When are taxes due?
Tax returns are generally due to the state by April 15th for both corporations and unincorporated business entities. There are options for deadline extensions if necessary, as there are penalties for filing late without an extension.
Step 2: Determine your Washington D.C. business’s employment taxes
District of Columbia employers must withhold D.C. income taxes on wage payments made to residents who work there. Some states call this an employment tax. In Washington D.C. it’s called a withholding tax. The Washington D.C. unemployment insurance contribution rate for most new employers is 2.70%.
All employees in Washington D.C. must complete a federal Form W-4 and complete a Form D-4 DC Withholding Allowance Certificate. In the absence of Form D-4, the employer must withhold income tax as if no withholding allowances were claimed. You can pay withholding taxes monthly, quarterly, or annually.
Step 3: Establish your Washington D.C. business’s additional state tax obligations
There are several types of Washington D.C. small business taxes to potentially be aware of to stay compliant.
There is a 6% state sales tax in Washington D.C. on retail sales, lease, or rental of most goods and on some services. Sales tax returns are always due on the 20th of the month following the business’s reporting period.
A use tax is collected on the use, storage, or consumption of goods in the District of Columbia if sales tax wasn’t paid on the purchase of goods. This tax rate is the same as the sales tax rate.
New employers and established employers may be taxed differently for unemployment taxes in Washington D.C. New employers are assigned a standard tax rate equaling 2.7% or the average rate of contributions paid by all employers the preceding year, depending on what rate is higher. After 4 of 5 years of operation, the rate may change.
Washington D.C. imposes a state excise tax on vehicles based on weight class and miles per gallon. The official rates are found in D.C. Official Code § 50-2201.03(j)(1A)(G). Excise taxes are also imposed on tobacco products, motor fuel, and alcoholic beverages.
Step 4: Prepare to file and pay your Washington D.C. business taxes
File all D.C. small business taxes through the Office of Tax and Revenue. Electronic filing is available for most tax forms using MyTax.DC.gov. Mail or deliver your D.C. small business taxes to the Office of Tax and Revenue. The exact address depends on which form you’re filing.
Preparing to file your D.C. small business taxes is an ongoing process involving the organization of business documents. These may include receipts, accounting records, legal documents, and more. This means that keeping track of your business’s expenses and income in an organized manner can make things a lot easier at tax time.
Not sure how to stay compliant? Learn more about legal compliance for small business owners.
Do I need an accountant?
Taxes can be tricky, and most small businesses will find value in help from a professional accountant. Filing your own personal income taxes can be hard enough when you’re not a business owner. Because there are so many different forms and state specific requirements, an accountant can be very helpful.
There are consequences for failing to pay your business taxes in the District of Columbia. If you’re late, you may receive a letter from the Office of Tax and Revenue. If you choose not to respond to the letter, penalties will begin to accrue and you may be contacted by a representative from the Collection Division to rectify the delinquency. The Office of Tax and Revenue then has the authority to file a tax lien allowing for the seizure of property to pay your Washington D.C. small business taxes. The District’s Recorder of Deeds office records the lien. This lien becomes public information and may appear on your credit report for up to 10 years.
Not all accountants and tax professionals have the same qualifications. The IRS has a guide to Tax Return Preparer Credentials and Qualifications to help you understand the differences in expertise. The Office of Tax and Revenue also supplies some helpful online guides for filing your D.C. small business taxes in their Tax Practitioner Service Center.
How we can help
Keeping track of your business’s tax requirements can be tough. With all the documents, receipts, contracts, and more, it seems like it might take a miracle to keep it all straight. But we are here to help with the ZenBusiness Money App for invoicing and payments. This helps you to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard.
If you’re just starting your business, our Washington D.C. LLC Formation Services can help you get started.
No matter what size your business is or what stage, we have the tools you need to help your business succeed.
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 a Washington D.C. small business make before paying taxes?
All businesses need to submit income tax returns regardless of how much they make. At the federal level, partnerships are the exception. This business files an information return instead. And if you have employees, withholding and unemployment taxes are mandatory. D.C. small business taxes are a minimum of $250. If your business is a corporation, you will be taxed at a specific rate.
- What percentage does a Washington D.C. small business pay in taxes?
The corporate tax rate for Washington D.C. is 8.25%. Other business entities are taxed at a flat rate depending on their income level.
- How does a Washington D.C. small business pay taxes?
File D.C. small business taxes through the Office of Tax and Revenue. Electronic filing is available for most tax forms using MyTax.DC.gov. Mail or deliver your D.C. small business taxes to the Office of Tax and Revenue. The exact address depends on which form is being filed.
- Do I have to file taxes for my small business in Washington D.C.?
Any business in Washington D.C. must file state income taxes.