Small businesses are required to pay taxes just like everyone else, but they face more complicated filing requirements and typically have quarterly or monthly deadlines. The section “Business Tax” from Hispanic Business Blog It includes information about your tax obligations and benefits (such as valuable deductions and incentives).
What business taxes should I pay if I have a business?
This section will help you prepare for a business audit, understand what tax forms are required, take advantage of important tax deductions, learn the difference between capital and current expenses, and more.
Labor and payroll taxes
If you are an employee (as opposed to an independent contractor or freelancer), you are likely aware of taxes, Social Security and other expenses deducted from your paycheck. It is your employer’s responsibility to pay these taxes, some of which go to Medicare and other social programs. If it is determined that you paid too much in taxes through these deductions, you will likely receive a refund. These are collectively known as payroll taxes.
Business owners and those handling their employer’s payroll are also responsible for paying in the federal and state unemployment insurance systems. This is not paid out of the employee’s salary, although it is based on wages.
Small business and income taxes
Unless your small business is incorporated, you will likely pay business taxes as personal income. If you are a sole proprietor or run your business as an LLC (and you are the sole owner), you can report your business income and expenses on a Schedule C form. Corporations and some LLCs, however, must file a separate corporate tax return (Form 1120).
Those who are self-employed (including sole proprietors and independent contractors) typically file annual returns but pay estimated taxes quarterly. In addition to income tax, self-employed persons also pay a self-employment tax (SE). This is paid into Social Security and Medicare, which would otherwise be deducted from your paycheck as an employee.
Business tax deductions
Since any business requires certain expenses to grow, state and federal tax authorities allow certain exemptions to stimulate investment. To successfully manage income and cash flow, it is absolutely crucial to understand how these deductions work. The following types of business expenses are generally deductible (this is by no means an exhaustive list):
- Office (or home office) rental
- Employee compensation
- Travels
- Business supplies
- Unchargable debts
Tax Audits of Companies
If a tax authority (typically the IRS) has reason to believe that you owe more tax than reported, then it may conduct an audit. This is one of the reasons you need to keep your tax information for the past few years. The auditors will ask for a series of documents and records, including checks and bank statements; online records; calendars and appointment books; and other materials.
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