Are you one of the over 30 million small businesses in America? Chances are that you’re going to look at your taxes this year and find them rather confusing compared to your individual income tax. Expenses, payroll, and insurance all make a big difference when completing your taxes. Here is business tax 101 and how to stay ahead of your taxes.
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If your company made any profit throughout the financial year, you’re going to have to pay income tax as part of your business taxes. Of all the taxes, this business tax will consist of most of your tax bill.
This applies to both the state and federal income tax levels. Every state has its own rules for business income tax, though.
In most instances, you will pay income tax throughout the year, rather than during tax filing time.
Payroll taxes refer to the taxes you pay for having employees. Payroll taxes consist of the part you need to pay to the government and the part you withhold from employees that they pay to the government.
When you pay your employee, you’re required by the Federal Insurance Contributions Act to pay into that employee’s Medicare and Social Security. The business currently pays for half of the tax rate, while the employee pays for the other half.
That rate is currently 12.4% for Social Security and 2.9% for Medicare. This makes the business half, 6.2% for Social Security and 1.45% for Medicare.
Sales tax will come down to the state that you’re operating in and even selling to. Some states have an extremely high sales tax, like Tennessee, which is 9.55% while other states, like Oregon, have no sales tax.
Depending on the state, you might be required to pay taxes to them. You can offset that cost by applying the tax to your customer rather than yourself.
If you’re in Oregon and need tax services for the coming fiscal year, Oregon Tax CPA offers all the services that your business needs.
Expenses and Losses
You can negate some of these taxes by writing off expenses and losses. Whether this is through meals, office space, or even traveling, these are all items you had to pay for to keep your business running.
If you traveled with a vehicle for your business, you can write off the mileage that you drove.
If you have an investment portfolio for your business and it incurred losses, those are also items you can write off.
Business Tax 101: Key Takeaways
Now that you’ve gone through business tax 101, you can start the process of filing. With businesses, it often works out better to pay taxes monthly or quarterly rather than waiting until the tax deadline. It makes filing easier for everyone involved and will make understanding taxes that much easier.
If you want to learn more about small business taxes, then be sure to check out the rest of the blog. Know another business owner? Share this article with them so they know what taxes they need to file this year as well.