Five Important Taxes You Must Know About as a Business Owner
Business owners are in the unique position to be able to earn their own living, help the local economy, and provide jobs for others. What this means is that they also have a great deal of responsibility when it comes time to do their taxes. In fact, those taxes can be downright confusing, especially for the new business owner that is used to just filling out a quick tax return every spring. As a business owner, you need to at least have an understanding of these five important tax concepts, and then you still will likely want to enlist the help of an accountant in Billings, Montana.
Income Tax
There are various forms of taxation depending on which business model you choose. A partnership will be taxed differently than an LLC; an LLC will be taxed differently than an S Corp; an S Corp will be taxed differently than a sole proprietorship. Understanding your business model, and how your income taxes need to be paid, can save you a lot of trouble when your tax return needs to be filed.
Self-Employment Tax
If you are an employee, then your employer will take care of half of your FICA taxes. However, when you are self employed, you are responsible to pay all of those taxes. Now there are some variations depending on how much you earn, how your business is structured, and a variety of other factors. The bottom line is that if you are self employed, you can expect to pay an additional tax.
Estimated Tax Payments
Most income tax is paid as you go. For instance, an employee has taxes withheld from his or her paycheck. However, if you are self employed, then you will likely need to pay estimated taxes throughout the year. These quarterly filings will help reduce a large tax burden come spring; failing to file adequately and in a timely manner could result in penalties from the IRS.
Employment Taxes
With employees there are even more taxes that you have to know and worry about. You must still tend to your own tax situation, but now you also need to pay half of your employees Social Security and Medicare taxes (FICA taxes), you have to calculate out income tax withholdings, and there is also unemployment taxes to take into consideration.
Excise Tax
There are some businesses that must pay what is called an excise tax. This tax applies primarily to industries that manufacture certain goods. The issue at hand is that these industries have the potential to do a lot of environmental damage, and the tax helps to offset cleanup costs. For instance, transportation of oil or gasoline may be subject to excise tax.
There is a lot to know and understand about taxes when you are a business owner. That is precisely why many people will choose not to worry about the taxes, and enlist the help of an accountant in Billings, Montana instead. They can focus on running their business, and leave the number crunching to the professionals.
Here at Practical Taxes we can handle your business taxes, personal taxes, payroll services, and anything else that has to do with business and accounting.