Small businesses continue to make up 99.9% of all businesses in the United States. From 2019 to 2021, small business owners established 1.8 million new small businesses in the United States over two years.
If you’re thinking about starting a small business of your own or you currently run your own small business, you have to keep in mind the small business taxes you will be responsible for. Here’s a list of common small business taxes you may have to pay.
Income Taxes
As a small business owner, a common type of small business tax you are responsible for is your income tax. Income tax is collected on two levels: federal and state. If you live in one of the nine states that don’t collect income tax, you only have to pay federal.
Self Employment Taxes
The Federal Insurance Contribution Act (FICA) established taxes that would help fund national social security and Medicare programs. This tax burden is usually split between employers and employees.
As a freelancer, you become responsible for paying the employer portion of FICA tax, as well. This is also known as the self-employment tax. Visit Daily Prosper to know if can self employment payments be garnished.
Estimated Taxes
The IRS collects taxes on income that you earn throughout the year.
As a W2 employee, you’ll usually see these taxes “withheld” from your weekly paychecks. As a small business owner, you would pay estimated taxes every quarter based on the amount of income you expect to make.
Estimated taxes apply to business owners who expect to owe over $1000 in taxes when filing their tax returns.
Payroll Taxes
If you operate your business with the help of employees, you become responsible for paying employer taxes.
As mentioned above in the section, “self-employment taxes,” employers pay social security and medicare taxes. Additional taxes for businesses include the federal unemployment tax and your federal income tax withholding.
Sales Taxes
Sales taxes is one of the most common types of taxes that apply to small business owners. If your small business sells goods, you may have to collect sales taxes on each transaction for the state, city, and local county that you do business in.
Property Taxes
If you’re a real estate investor or your business owns any building, property, or land, you will have to pay property taxes. The tax rate for property taxes varies by state. You can check your state’s property tax rates here.
Other Types of Small Business Taxes
You may also be responsible for paying small business taxes including dividend taxes and excise taxes. If you’re looking to take full advantage of existing tax laws and tax credits for your business, hire a tax professional to establish a solid business tax strategy for your business.
If you’re a tax expert yourself, consider joining a growing network of tax professionals and offering your tax expertise for hire.
Filing Small Business Taxes Made Easy
Filing small business taxes should not hold you back from running a well-profitable business. If you’re worried about filing taxes, consider hiring an accountant to crunch your business numbers.
Shoot for the stars and trust that you have the support you need to succeed. For more business tips and advice, be sure to read more from our blog!
