When you start a new business, there are plenty of considerations that you need to take into account. One of the areas is taxes. However, it is not just one type of tax, but several that a new business owner will need to track and pay in a timely fashion. Your tax professional or accountant, such as MVW Services in Artesia, CA, can assist you in making sure that you make accurate and timely payments to avoid any potential tax penalties. These taxes may also be applied on the federal and state level. Additionally, the way you operate your business may also require you to pay additional taxes. Here are four main types that generally apply to all businesses.
For all businesses, the IRS requires all business file a yearly tax return, except if you have a partnership. Using a withholding method of paying taxes typically pays taxes as they earn their income. Another option is to pay estimated taxes on a quarterly basis throughout the year. Then if there is any additional tax due at the filing of their tax return, they can simply write a check for the difference without further penalties.
Some states may also require that businesses pay income tax based on the legal structure of business. Therefore, you will want to be sure to check with your state to determine what taxes your business may be responsible for on a state level in terms of income.
If you are a freelancer or own a small business, you may be responsible for your own employment taxes. However, you will be able to take a modest deduction for the share that you pay as your own employer. These taxes include your contribution to Social Security and Medicare. This can provide the benefit of retirement, disability and even hospital insurance in retirement. Self-employment tax is 15.3% and 12.4% of that will go to Social Security. The Social Security portion will only be paid on the first $106,800 of income earned by the taxpayer.
So how can you determine if you need to pay this tax? The IRS defines self-employed as one who carries on a trade or business as the sole proprietor or independent contractor or otherwise in business for themselves. Therefore, you will want to make sure that you consult with your accountant to see if you owe this tax and to make sure that you have paid it in a timely fashion.
An employer must pay taxes to cover Social Security and Medicare taxes for their employees, in addition to withholding the right portion from your employees’ paychecks. There is also the federal unemployment tax that must be paid for all employees. The taxes must be paid via an electronic deposit, check, money order or cash. States may also require businesses to pay additional state employment taxes for worker’s compensation insurance and unemployment insurance.
Depending on your state, you may also have additional taxes for a variety of other workers’ benefits that will need to be paid. Therefore, it is important to work with your accountant to determine what your tax obligations are for your employees on a state and federal level and that those payments are made on a timely fashion to avoid penalties.
If your business is selling or manufacturing a product, you may have additional taxes in the form of excise taxes. The government levies these taxes based on the type of business you run, how you operate your business, the type of equipment that is involved and the products you may use to produce your goods and the types of payments that you receive for your goods and services as a result.
These taxes can include environmental taxes, communications and air transportation taxes and fuel taxes, just to name a few. Consult with your tax professional or accountant to determine what, if any, of these taxes would apply to you and your business.
As you can see, there are a variety of potential business taxes that might apply to your business. Therefore, it is important to do your homework and make sure that you have paid all the appropriate taxes to avoid any potential penalties.
Click on the link below to contact a tax professional or accountant in the offices of MVW Services in Artesia, CA, to assist you in determining which taxes your business is responsible for at the state and federal levels and making sure that you pay them on time to avoid any potential penalties as a result.
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