How Does It All Work? Your Taxes Explained
Setting up your own business comes with a lot of baggage and there are several things that you must ensure you are on top of, if you want to have a successful company. One of them is your tax. When you become a business owner, it is your responsibility to fill out all those lengthy forms and pay out business taxes. There are three primary types of business taxes, and it may be daunting if it is your first time to handle your own business. You can always seek help from a tax preparer business, but it is also good to know the basics of paying business taxes, so you know where a percentage of your money goes.
Tax deductions
One of the upsides of having your own business is that you can deduct business expenses from your taxes. These business expenses can save you some money if you purchase items such as computers and other office supplies for your business. Even if you get tax deductions for these items, it is important you understand not to abuse it, as you will still be paying using your own money. The deductions simply help when you purchase items that are necessary for your business to run. Tax deductions are applicable on meals, Internet, office costs, and travel and can help out a lot when initially setting up the early stages of your newfound business enterprise. You can take that potential client out for lunch or attend that important conference, with piece of mind that you can reduce the overall costs.
Types of business taxes
The three primary types of business taxes are the ones that you should know about. These are crucial, to ensure the IRS won’t come after you.
- Income taxes. Some states and the federal government will require you to pay an income tax that is based on the net earnings of your business. Income tax forms are due on April 15th, of the following year after earning your income. Procure the necessary income tax form from the IRS and fill out the information. You are required to send the IRS an estimated amount that you owe every quarter.
- Revenue taxes. As a business owner, you also have to pay revenue taxes, which is a percentage of the amount of sales receipts your business accumulated throughout the financial year. Revenue taxes are typically just a small percentage of your revenue, and the amount depends on the type of business you are in and the actual income you get from your business.
- Employment taxes. This type of tax is the one you pay to federal agencies and the state based on the salaries of your employees. The amount includes Medicare taxes and Social Security taxes. In addition, you are also required to pay state unemployment taxes for salaries that reach $7,000 for each year.
If the idea of preparing tax forms scare you, so it might be helpful to get help from an accountant to aid with tax preparations for your business. The support of a professional will ensure all your taxes are paid on time and that you don’t forget to submit forms required by the IRS. It’s of great importance that you always plan ahead, some new entrepreneurs tend to neglect their tax responsibilities, which can lead to more problems for the business at a later stage. No one wants that official looking letter dropping into their mailbox, demanding a staggering amount of money. It helps to know the things that are required of you, so that you can have a successful business for many years to come.
Category: Taxes
