![]() ![]() Become familiar with your qualified tax deductions and tax credits to know how to reduce your liability.Gather and organize tax paperwork, including all tax forms, receipts, credit card statements, bank account records, and canceled checks pertinent to your business taxes.Here are a few other things you can do to get ready for tax season. The other taxes we mentioned before may have different filing or payment requirements outside of the traditional tax season, but it's vital information to have organized throughout the year. We can't say this enough: organization is the key to successful tax prep.Īs we move forward, the information on the checklist applies primarily to year-end income taxes, the ones due in March or April. Organization is one of the best ways to get through tax season without losing your hair or throwing your computer at the wall. How do I prepare my small business for tax season? Now that you're familiar with the types of taxes you might come across, let's get to the checklist. Usually, you’ll send it quarterly and complete a sales tax return to submit with your payment. You’ll typically collect sales tax from a customer at the time of purchase and send your sales tax payments to the state. This is a state tax paid on selling certain goods and services. You can find a complete list of excise taxes on the IRS website. If you deal in any of the following, excise taxes may apply to you. States vary, so check with yours for the rate.Įxcise taxes are imposed on certain goods and services, and not all businesses have to pay them. The federal unemployment tax rate is 6% on the first $7,000 of each employee's wage every year. Federal and state unemployment tax: You have to pay federal and, in most cases, state unemployment taxes.Most states have their version of a W-4, and you’ll use that to calculate their state income tax withholding. Federal and state income tax withholding: As part of payroll, you have to withhold federal income taxes for your employees based on their Form W-4 information.And your employee will have identical amounts withheld from their paycheck. Your part is 6.2% for Social Security and 1.45% for Medicare. Social Security and Medicare taxes (FICA): Remember that 15.3% rate from above? It applies here as well, only now you pay half, and the employee pays half.But it also means you have some employment taxes to take care of, and you need them to be correct. If your business does well enough to support employees, congratulations. Half of the self-employment tax is deductible on your tax return, so you only pay the "employee" portion of the tax –the same as you'd pay as a regular W-2 employee. For 2022, the wage limit is $147,000, which means if your business’s taxable income is above this amount, you only pay Medicare tax on the overage. Social Security has a wage limit that changes each year. The self-employment tax rate is a flat 15.3%, which breaks down to 12.4% for Social Security and 2.9% for Medicare. If you own a sole proprietorship or an LLC, the IRS slaps you with self-employment taxes based on your business's taxable income. Self-employment taxesīeing self-employed doesn't mean you get to skip out on those FICA payroll taxes you paid as a W-2 employee. They can get a bit complicated, so using a tax pro can save you the headache of figuring it all out. As you might expect, states like New York, Massachusetts, and California have higher state taxes, so consider this when starting your business.Īlso, keep in mind that if you do business in multiple states, you may have tax reporting requirements in each one. ![]() State income taxes vary, and they sometimes include county taxes. That means income passes through the business to your personal finances, where you pay taxes based on your tax bracket. Sole proprietorships, partnerships, limited liability companies (LLCs), and S corporations use pass-through taxation. The federal corporate income tax rate can change, but for the 2022 tax year, the rate is 21%. If you have a C corporation, your taxable income decides your taxes. Your tax obligations vary depending on your business type. You pay both federal and state taxes unless you live where there's no state income tax requirement. Income taxes are those you pay on your company's profits. ![]()
0 Comments
Leave a Reply. |