Running a business is no easy task. Even after you have managed to obtain revenue, you’re going to need to pay taxes. Make sure you understand what and how you need to pay in order to avoid problems with the IRS.
Income taxes are first and foremost the most basic and necessary tax that you will pay. Everybody – whether it be individuals, institutions, or companies – pays income taxes. After you have calculated your full revenue, you can subtract all of your business expenses. That will include employee wages, repairs, transportation costs, and any other expense that was used to support your business. Afterward, you will have your profit, and that is what you will pay income tax on. The exact percentage of tax on this profit will depend heavily on whether you are a corporation, trust, or other legal entity. Make sure you are aware of which category you will fall into before you begin the tax paperwork.
FICA taxes are essentially the taxes that are taken from employees to help the government with programs like Social Security and Medicare. You, as an employer, will have the responsibility to deduct everything automatically from your employees’ paychecks before they are paid. You also will deduct corresponding taxes from your own company’s profit. You also need to report the payments in the paperwork that you do for the IRS. Your subtype of corporation will also play a factor in how you do FICA taxes – S-corps help you reduce FICA taxes by protecting some of your business revenue from them.
Excise taxes will not apply to all businesses. You should only really be worried about them if you create a certain product, manufacture a certain material, use specific kinds of equipment, or certain technologies. A lot of excise taxes are related to the environment. For example, you may have to pay an excise tax if you use a certain kind of truck on a highway for business purposes. The same goes for if you use specific factories that have a high rate of emissions. Businesses related to gambling or selling lottery tickets can also be subject. Make sure you know if you will have to deal with excise taxes.
The most helpful tool you have is preparation. Knowing what to expect and how to deal with your specific required taxes will make everything much smoother. Do the research required to ensure that your business doesn’t get blindsided by an unexpected cost.
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