What every small business owner needs to know about taxes
As a small business owner, it’s important to have a basic understanding of the different types of taxes you may be required to pay. There are federal, state, and local taxes that can apply to your business, and each type of tax has its own rules and regulations.
The first step in understanding your business taxes is to determine which type of taxes you may owe.
Here’s a quick overview of the different types of taxes that could apply to your small business:
1. Federal Taxes:
All businesses are required to pay federal income tax on their taxable income. The current corporate tax rate is 21 percent.
2. State Taxes:
Depending on the state in which your business operates, you may be required to pay state income tax, sales tax, and/or property tax.
3. Local Taxes:
Some localities also impose taxes on businesses, such as a business license tax or a gross receipts tax.
Now that you have a basic understanding of the types of taxes you may owe as a small business owner, let’s take a closer look at each one.
1. Federal Taxes:
All businesses are required to pay federal income tax on their taxable income. The current corporate tax rate is 21 percent. If you’re self-employed, you’ll pay federal income taxes as well, at the individual tax rates (which range from 10 percent to 37 percent for 2018). In addition to income taxes, your business may also owe payroll taxes, such as Social Security and Medicare taxes.
2. State Taxes:
Depending on the state in which your business operates, you may be required to pay state income tax, sales tax, and/or property tax. Most states levy an income tax on businesses, though the rates and rules vary by state.
Some states also require businesses to collect and remit sales taxes on the goods and services they sell. And if you own commercial real estate, you’ll likely owe property taxes to your local government.
3. Local Taxes:
Some localities also impose taxes on businesses, such as a business license tax or a gross receipts tax. Business license taxes are typically annual fees charged by cities or counties for the privilege of doing business there. And gross receipts taxes are levied on the total revenue of a business, regardless of profit.
As a small business owner, it’s important to have a solid understanding of the tax implications of running your own business. Not only will this help you to avoid any potential problems down the road, but it can also save you a significant amount of money.
There are a few key things that every small business owner needs to know about taxes, and we’ll go over them in this article.
First and foremost, you need to be aware of the different types of taxes that may apply to your business. These include income taxes, payroll taxes, and self-employment taxes.
Income Taxes:
The first type of tax that you need to be aware of is the income tax. This is the tax that you will pay on any money that your business earns. The amount of income tax you will owe will depend on a number of factors, including the type of business you run and the state in which you operate.
Payroll Taxes:
Another type of tax that may apply to your business is the payroll tax. This tax is imposed on all businesses that have employees. The amount of payroll tax you will owe will depend on the number of employees you have and the amount of money they are paid.
Self-Employment Taxes:
The final type of tax that you need to be aware of is the self-employment tax. This tax is imposed on all individuals who are self-employed. The amount of self-employment tax you will owe will depend on your income and the state in which you reside.
Conclusion:
These are just a few of the things that every small business owner needs to know about taxes. By understanding the different types of taxes that may apply to your business, you can save yourself a significant amount of money.