small occupation owners are besides busy running their own businesses to spend any more time than necessity on english issues like taxes. however, it ‘s critical to handle your humble business taxes correctly, or you could get a filthy surprise from the IRS or other tax agencies. It ‘d take a book to amply describe everything about the taxes modest businesses have to pay. With that in take care, though, this guide will give you an insertion to taxes for business owners and provide you with a starting point for doing your tax planning — while placid leaving you time to run your occupation.
What are the types of taxes businesses pay?
Businesses pay a wide kind of unlike types of taxes. not every business pays every tax, but here ‘s a sampling of some of the more common taxes you ‘re likely to run into as a small business owner .
1. Income tax
All businesses that make a profit must pay income taxes at the federal flat. many states besides impose clientele income taxes of their own, with similar but not always identical rules. Specifics vary depending on the form of business you choose, but income tax frequently makes up a substantial helping of your overall tax load .
2. Sales tax
If your occupation sells products or certain services, then you may be submit to sales tax. Businesses typically pass the effect of a state or local sales tax on to their customers, but it ‘s up to you to collect the proper tax and send it on to the allow tax authority. If you do n’t collect the sales tax, you ‘re even potentially on the hook for paying it .
3. Property tax
many state and local government entities charge businesses tax on the property they own. This can include veridical estate a well as palpable property such as clientele equipment .
4. Payroll taxes
If you have employees, you ‘ll typically have to pay payroll taxes for Social Security, Medicare, and unemployment insurance. You ‘re creditworthy for withholding the allow payroll taxes from your employees ‘ paychecks, but you ‘ll besides have to add in the employer part of each tax .
5. Self-employment taxes
If your commercial enterprise is set up as a lone proprietorship, a partnership, or a limited liability ship’s company that chooses to be taxed as a partnership, you ‘ll have to pay self-employment taxes on the income of the business. This is different from a pure income tax, because the business itself pays no tax. alternatively, the self-employment tax is borne by the owners individually, normally ( but not constantly ) in proportion to their ownership sake in the business .
6. Other taxes
There are many early taxes that can apply in certain cases, including strike taxes on sealed goods such as fuel or alcohol, arrant receipts taxes, franchise taxes, and dividend taxes on corporations. These taxes typically apply alone to a choose fixed of small businesses .
How can you determine the tax rate your small business will pay?
Each tax comes with its own plant of rates, and the rate your occupation pays can depend on factors specific to each type of tax. Below, we ‘ll look at several tax rate schemes that typically apply to small businesses .
Percentages of income
Income taxes and self-employment taxes are typically based on the net income of your clientele .
- Corporate tax rates at the federal level are 21%, and state-level corporate tax rates differ greatly from state to state.
- Sole proprietorships, partnerships, and LLCs often pay no tax at the entity level, but income is taxed on your personal income tax return at rates as high as 37% federally.
- Self-employment tax rates are 15.3% up to a certain maximum wage limit applying to Social Security payroll taxes, and 2.9% above that limit.
Percentages of gross sales
Sales tax gets charged on the gross you raise from selling taxable goods or services, careless of whether you make a profit.
Sales tax rates vary greatly from state to express, with some states charging no sales tax at all, while others have rates adenine high as 10 % or more when you add local city and town sales taxes to the general statewide levy .
Tax per dollar of property value
property taxes are charged against the assess value of property. frequently, tax rates are stated in terms of the sum per $ 100 of value, which roughly corresponds to a percentage. For example, a tax of $ 1 per $ 100 is basically the like as a 1 % tax .
Percentages of wages
payroll taxes are broadly collected on a percentage of the wages you pay to employees. Some of these amounts apply only to a certain come of income, above which no foster tax applies .
How to file your small business taxes
The accurate process for each type of small occupation tax differs, so there ‘s no one-size-fits-all routine to follow. however, the stick to steps can give you general tax preparation checklist for your humble business that you can fit and tailor to the specific taxes you ‘ll owe .
Step 1: Learn about the tax
The best position to start learning about business taxes is the entity that ‘s responsible for collecting it. That ‘s the IRS for federal income and self-employment taxes, your submit secretary of state or department of gross for submit business taxes and local occupation taxes on sales or income, and your local business adjustment function for most property and early types of taxes. There, you ‘ll learn about which types of taxes apply to your business, and you can get beneficial information about what ‘s involved in filing minor business taxes for the first time and paying any tax due .
Step 2: Collect your tax records and documentation
once you know what ‘s involved, the following step is to gather the supporting information that you ‘ll need in order to inform tax authorities and calculate the proper tax .
Step 3: Fill out any required forms or information
Most taxes come with associated forms you need to complete. For exemplify, income tax forms will have you put in your gross sales from your business, list any allow deductions from your income, and then do the mathematics to come up with taxable income and entire tax due. Sales tax forms, on the other hand, might lone include your entire receipts and then apply the percentage of the tax to the entire total. increasingly, tax authorities are using on-line electronic filing to submit tax forms of diverse kinds. In some cases, you ‘ll have to use an on-line file method acting, while other tax solicitation processes give you the choice of a wallpaper or electronic filing. Some people use tax software for filing business taxes .
Step 4: Send your filing to the proper tax authorities
once you ‘ve completed any needed forms, all you have to do is to get them to the tax authorities. Again, some people use newspaper filing by mail or overnight pitch servicing, while others prefer electronic submission when given a option.
Don’t ignore your business taxes
possibly the biggest mistake many small businesses make is not researching the taxes they have to pay. not filing your taxes properly can get your commercial enterprise into big trouble. By learning about any taxes that apply to your small business upfront, you ‘ll avoid potential pitfalls and be able to spend more clock making your business successful .