Business Income and Sales Taxes
Navigating the complex landscape of business taxes is crucial for maintaining a healthy and compliant enterprise. Understanding the various types of taxes you must pay can help avoid penalties and manage financial obligations effectively.
Federal Taxes (IRS)
Federal Taxes Federal taxes are imposed by the U.S. government and include:
- Corporate Income Tax: This tax is levied on a company’s profits. The rate varies depending on the amount of taxable income.
- Self-Employment Tax: Entrepreneurs and sole proprietors must pay this tax to cover Social Security and Medicare obligations.
Payroll Taxes
Payroll taxes are mandatory deductions from employee wages for personal income taxes and others to fund federal programs:
- Social Security and Medicare Taxes (FICA): Employers and employees each contribute 6.2% for Social Security and 1.45% for Medicare.
- Federal Unemployment Tax (FUTA): Paid by employers to provide unemployment benefits to workers who lose their jobs.
State and Local Sales Taxes
Each state and locality may have different tax requirements, which can include:
- State Income Tax: Levied on businesses operating within a specific state. Rates and regulations vary by state.
- Local Business Taxes: These can include city or county taxes assessed on gross receipts, business licenses, or property.
- Sales tax: Sales taxes are collected by businesses on behalf of the state for goods and services sold and remitted to your local revenue agency.
Understanding these taxes and ensuring compliance is essential for the smooth operation of your business and to avoid penalties and unnecessary costs. Stay informed and consider consulting a tax professional to navigate these obligations effectively.
Learn how to distinguish between W2 and 1099 wages here: 1099 Earnings
Links to More Information
Information available on the IRS website: