Tax collection totaled 1000 billion dollars in 2019 and the numbers keep rising.
As long as you have a business you’re going to need to pay taxes. These taxes. The best thing you can do for your business is to make sure that you keep accurate records of your business transactions and be as prepared as possible for tax season.
Getting prepared for tax season does not necessarily have to be tedious. Here’s a look at everything you need to know about the different types of taxes.
Income Taxes
An income tax return must be filed by every business annually. If your business is a C corporation you will pay income tax at corporate rates.
Other businesses will not need to pay their taxes in this way. They will be considered passed-through entities and are usually taxed using individual rates.
Estimated Taxes
If you are a freelancer, independent contractor or you own a small business and you expect that you will owe at least $1,000 in taxes, you need to make an estimate and then pay over quarterly taxes.
If you fail to pay them or you pay too little you can get penalties and interest levied at you by the IRS. If you do get in trouble with the law for withholding taxes, you can ask advice from a former IRS tax lawyer to find out what you can do to make things right for your business.
Employment Taxes
If you are employing people then you will need to pay employment taxes. These employment taxes can include social security and federal income withholdings.
Medicare taxes and federal unemployment taxes are often applicable as well.
As you can see this is quite a several business taxes you need to pay for your employees. If you’re a small business owner then keeping everything organized can be a challenge.
It might be a good idea to hire an accountant to assist you since failure to pay can bring severe legal problems.
Sales Tax
If you sell goods then you will need to collect sales tax for them. When you sell online things can become a little bit more complicated for you, because some states will charge you based on where you are located.
Other states may charge based on where the buyer is located. Using accounting software to keep track of your taxes in this situation can be very helpful.
Understanding the Different Types of Taxes
As a business owner, you must recognize the different types of taxes that your business needs to pay. Failure to adhere to tax guidelines can be costly in the long run.
Sooner or later you will end up paying taxes even if you manage to evade the system for a while. Understanding all the different types of taxes you need to pay can go a long way in ensuring that you are always compliant.
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