In the United States, we levy a business tax on the income earned in the USA by companies operating here. This is the tax that most people think of when you say business tax. But this is not really all that is involved. What is business tax? It is a total of all the taxes that a business is required to pay to federal, state, and local governments. It is comprised of several kinds of taxes.
Income Tax
The rules of what is owed and the forms to complete it vary based on the structure of the business:
- Sole Proprietorship
- Partnership
- Corporation
All businesses, except partnerships, must file an annual income tax return. Partnerships file an information return. There are tax advantages to using different structures of the businesses. Brunsdon Law Offices can advise you on which business structure would mean the best tax savings for your business.
Other Business Taxes
In addition to federal income tax, there are other kinds of business taxes as well. State and local governments also levy income taxes. What you have to pay, and how the payment should be sent depends on the structure of business that you operate. The IRS identifies the following general types of business taxes as well:
- Estimated Taxes
All profitable businesses must send in regular payments of estimated taxes based on earnings during the year. - Self-Employment Tax
If you work for yourself and make more than $400, you must pay into Social Security and Medicare. These payments contribute to the coverage you will receive in retirement. This is paid with form SE on the 1040. - Employment Taxes
If you have employees, you are required to pay:- Social Security and Medicare
- Unemployment (FUTA) and state unemployment
- Federal, State, and Local Income Tax Withholding
- Worker’s Compensation
While most of these can be withheld from their paychecks and just passed through, others need to be in your budget.
- Excise Tax
Excise tax is required for:- Environmental taxes
- Communications and air transportation taxes
- Fuel taxes
- Tax on the first retail sale of heavy trucks, trailers, and tractors
- Manufacturers taxes on the sale or use of a variety of different articles
- Taxes on wagering pools and lotteries
- Certain trucks, truck tractors, and buses used on public highways
- Others
- Inventory Tax
- Sales Tax
- Real Estate Tax
- School District Withholding Tax from Employee Paychecks
You will need to check with local authorities to see if you have other local taxes to consider. You may need to pay things like:
How Can I Be Sure that I’m Paying What I Owe?
While this seems to get more and more complicated, you can get help learning which taxes to pay and when and how to pay them. Terri Brunsdon of Brunsdon Law Firm is a CPA and has her Master’s Degree in Tax. She would be glad to answer any of your questions about what you owe or to assist you in financial planning for your business. Contact Brunsdon Law Offices today to make an appointment to review your business taxes. Ask for information on tax exemptions, as well.
