Business Tax 101: Types of Taxes for Small Business
Every Taxes Small Business owner knows exactly what it’s like to prepare taxes. More accurately, taxes are a fact of a business owner’s life. As Taxes Small Business preparers and accountants, you all deal with these taxes as you were hired to process them. You simply can’t avoid tax preparation, but you can make sure it’s done right and always on time. Small Business owners are always concerned about minimizing costs and avoiding penalties to make their business profitable and functioning properly. But what exactly are the types of taxes that business owners are responsible for? Let’s enumerate and break down each and every one of them.
Income Tax Small Business
As a tax preparer and professional, you must report annually, on behalf of your client, the company’s income and expenses. If your client’s business is a regular C corporation, the corporation files its own tax return and is a separate taxpayer for income taxes. It pays a flat 21% tax rate on profits.
On the other hand, if the business is registered as a pass-through entity, which could be a sole proprietorship, partnership, LLC, or S corporation, you need to file an annual return. Still, the income flows through to the owners and should be reported separately on their own personal tax returns.
Employment Tax Small Business
If your client has a couple of people employed under them, then filing and paying payroll taxes is also under the owner’s responsibility. This is a tax they deduct from employee paychecks and are actually divided into different tax types like:
- Payroll Taxes
- Income Tax Withholding
- FICA Tax
- FUTA Tax
- State Unemployment Tax
- Other Withholding Taxes on the State-Level
Sales Tax Small Business
Although there’s no such thing as a federal sales tax, 45 states do have their own sales tax requirements. If your client is selling goods and services, they are then required to remit sales tax to whatever state the business is based in. As the tax preparer, you’re responsible for calculating and reporting your client’s sales tax. If your client is selling to customers out of state, they may even be required to collect sales tax for that particular state where their buyers are. In addition to collecting and turning over the sales tax, you must also file reports about the company’s sales tax activity.
Property Taxes
Property Taxes are a tax a company pays on any commercial property, land, or real estate that the business owns. Payment dates for this vary by location, so you should be aware of when the property taxes are due for your client. Any business property tax will be regulated on the local level based on where the business is located.
Excise Tax
Depending on the nature of the business and industry, your client might be responsible for paying excise taxes. These are indirect taxes that are not paid directly by the consumer of a product. Excise taxes are often called sin taxes and are included within the product’s price, such as with cigarettes, gasoline, and liquor. As with property and sales taxes, the company is responsible for collecting the taxes and remitting them directly to the IRS.
Conclusion
Tax preparation isn’t exactly a walk in the park, especially after seeing all the taxes a business needs to collect and pay for. Most of the time, business owners use software for tax preparers or what accounting firms call professional tax preparation software to help them calculate and consolidate everything.
Keystone Tax Solutions offers you one of the best professional tax software solutions in the market today. As a leader in the industry, we offer 15 years of experience to accounting and bookkeeping professionals who could use intuitive tax pro software at an affordable price. Contact us today to book a demo of our software.
