As we know, the amount of your business’s tax (whether sales tax or otherwise) can vary depending on the type of your business and even your business entity. For example, the owners of small businesses pay taxes on Schedule C, along with private tax returns; meanwhile, LLCs and Partnerships are being taxed from their net income. Corporations in their turn, are also taxed on net income.
Tax Rate for a Small Business
If you are a small business owner, we are rushing to bring good news, since the vast majority of small businesses are exempt from paying income tax at a business rate. And since nearly 80% of small businesses are not corporations, they pay taxes on a personal level. As we can see, small business tax rates are an integral part of the business owner’s personal income. Our main mission is to scrutinize the current individual tax rate more closely:
How Do Small Businesses Pay Taxes?
As it was mentioned before, most of the small businesses are being operated by individuals. Partnership, LLC, and Sole Proprietor business owners do not have to pay business taxes, since all the taxes are being paid solely by the owners on personal tax returns. As a result, if we try to figure out the amount of taxes that small business owners pay, it might come as an eye-opener
How Do You Can Figure the Amount of Your Small Business’s Taxes?
If you want to find out the amount of taxes for your small business, then you should calculate taxes through Form 1040, where you have to mention all the sources of your income. Do not forget to mention tax credits and tax deductions. Once you get your final taxable income, you can try to figure out your tax by using tax tables provided by the IRS..
Additional Taxes that Small Business Must Pay
Along with income taxes, small business owners also have to pay:
- Payroll taxes
- Capital Gain Taxes
- Property Tax
- Tax on Dividends
If you’re unsure about what any of this means, just drop us a call at Prestige Auditors and we’ll bring you up to speed.
About Self-Employment Taxes
Since most small business owners are exempt from paying income taxes and Social Security taxes, they have to compensate these taxes by paying self-employment tax. The tax rate is nearly 15.3% based on your net income for the year.
Business Income Tax Deduction
Since the majority part of small businesses are not corporations and the amount of their taxes is passing through the business owner, there is a new tax deduction which was launched by Congress (called the QBI, or Qualified Income Deduction) which is nearly 20% of the business owners’ net income.
The process of tax calculation can sometimes be very tricky. And if you do not have enough knowledge in this sphere, this process can turn into a real nightmare for you. However, Prestige Auditors’ professional tax experts are always open to assist you in the entire process of your business’s tax calculation in order to keep you away from paying additional money. Message us right now and we will handle all your tax issues in the shortest period of time.
Zoya Maryam, is an Entrepreneur, Active Author, Marketing, and Fundraising Consultant. Her breakthrough is primarily from generating millions of digital impressions for Entertainment, Blockchain Industry, and various Startups.