All businesses must pay taxes to state and federal governments. The types of taxes vary, so paying taxes every year can get confusing. That’s why you need a tax preparation and tax planning partner on your side. In today’s blog, LongSchaefer’s tax planning experts discuss the taxes you must pay as a business owner.
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All businesses must pay a tax on their income, much in the same way individuals pay income taxes. Your business structure determines how you pay income taxes. Self-employment taxes are essentially double what you pay as an employee of a business. Sole proprietors may have similar income taxes to that of self-employed individuals, in that both self-employment and sole proprietors pay taxes on the net income of the business (profit minus expenses).
Partners in a partnership arrangement pay their income taxes separately, based on their share of the business. Limited liability companies and S-corporations pay income taxes based on the owners’ share of the companies. Corporations pay income taxes as separate entities from the owners. LongSchaefer’s tax planning experts help you determine what income tax strategy is right for you based on your company structure as a legal entity.
Employment or Payroll Tax
Business owners pay their share of payroll taxes based on the number of employees on staff. How much payroll tax you must withhold is based on an employee’s gross pay. Each employee’s portion of the payroll tax (called FICA, collectively) lowers their overall paycheck. Business owners must pay their portion of Social Security, Medicare, and federal unemployment taxes based on their employees’ income. Our tax planning experts can show you what this means for your workers and your revenue.
Do you own your facility or office? What about any company vehicles? Chances are good you’ll pay property taxes to the city or county in which your business is located. Contact your local tax authority, usually a county treasurer, auditor, or assessor, to find out how much property taxes you owe and when they are due. LongSchaefer can help with this process.
Sales or Excise Taxes
Sales and excise taxes are similar to each other. Your company pays sales tax on products and services bought or sold. For example, your company sells lawnmowers. Your business pays sales tax to state and local authorities based on a percentage of the sale price. If your business purchases certain goods or services, you’ll pay sales tax as part of the overall price (but the company selling the item distributes the tax).
Excise taxes involve using or consuming certain products, such as fuel used in transportation. If you have a fleet of vehicles, your business may have to pay state or federal excise taxes. Tax planning experts at LongSchaefer can teach you how to account for excise taxes and when to pay them based on your company’s unique situation.