Every year, 627,000 small businesses are started each year in the United States. People are choosing to start their businesses over working for a larger corporation. It gives people more control over their income, time, and work/life balances.
When you start a small business, one of the biggest hurdles is small business taxes. Paying taxes is already complicated enough as an individual, but as a business owner, you have more to consider. This guide will quickly explain the different types of taxes you need to pay.
Income taxes are filed yearly. It is how the IRS knows how much your business made in a year. All businesses file income taxes unless they are a partnership.
Partnerships will file an information return. The amount your buisness’ income is taxed will depend on the type of business you are in. You will file this and your income taxes.
As a small business, if you think you will owe at least $1000 after filing taxes, you need to pay quarterly taxes. This is for income that cannot be withheld and are not part of the self-employment tax.
Here is the cycle for quarterly taxes:
- For a January 1st – March 31st payment period: Taxes are Due April 15th
- For an April 1st – May 31st payment period: Taxes are Due June 15th
- For a June 1st – August 31st payment period: Taxes are Due September 15th
- For a September 1st – December 31st payment period: Taxes are Due January 15th the following year.
Self-Employment and Employment Tax
You will pay Self-Employment taxes if you make more than $400. It covers your social security and medicare taxes that were not taken out of your income when you received it. If you are the sole proprietor, independent contractor, or small business owner, you pay self-employment taxes.
Employment taxes cover social security, medicare, federal taxes, and unemployment taxes for any employees you have. You pay half of the expenses yourself and the other half is removed from your employees’ paychecks.
Sales Tax and Tax Deductions
Sales tax vary by state. It is collected when someone buys something from you. When you file taxes, the sales tax is returned to the state.
Tax deductions are expenses you can deduct from your income tax. For example, advertising expenses, business insurance, moving expenses, and items purchased for your business are deductible. If you want deductions, keep track of all paperwork related to what you want to deduct.
Don’t File Your Taxes By Yourself
Even these short descriptions can feel overwhelming. Paying taxes can feel like a lot of pressure, especially when you’re doing it for the first time. Services like Avitus Group recommend getting help from professional accounting services.
A tax professional will know exactly how to pay taxes and will ensure you don’t miss anything. Letting someone else focus on the taxes can give you more time to fulfill the needs of your business.
Tackle Your Small Business Taxes with Confidence
There are a lot of small business taxes to take into consideration, but you don’t have to do it alone. Working with accounting services can make filing taxes easy. Reaching out to your local tax accountant today can help you file your taxes with confidence.
If you liked this article and you want to take your small buisness’ finances to the next level, check out the rest of our blog.