If you are a business owner or an entrepreneur, you should always pay your taxes responsibly. But before that, you must have an idea about the taxes you are liable to pay.
Read on to gain an insight into the various vital aspects of tax and their payments.
A Closer Look at Business Tax
The type of payable taxes and how business owners must pay them depends on the type of business being operated. Given below are the five general kinds of business taxes:
- Estimated Taxes – Individuals, including S corporation shareholders, sole proprietors, and partners, generally need to pay estimated taxes if they anticipate owing taxes of $1,000 or more while filing returns.
- Self-Employment Tax – Self-employment tax or SE tax refers to a Medicare tax and social security primarily meant for individuals working for themselves. These tax payments contribute towards an individual’s coverage under the social security system.
- Employment Taxes – Employers have some employment tax responsibilities that they must pay. These taxes include Federal Unemployment Tax (FUTA), Social Security and Medicare taxes, Federal income tax withholding.
- Income Tax – Every business except partnerships should file an income tax return annually. The form used depends on how a business is organized.
- Excise Tax – You must pay excise tax if you sell or manufacture some particular products, operate certain types of businesses, receive payment for some specific services, or use different kinds of products, equipment, or facilities. Besides this, there are certain forms that you need to file.
An Overview of Corporate Tax
Corporate tax refers to the tax levied on a corporation’s profits. These taxes are paid on the company’s taxable income that includes revenue minus cost of goods sold (COGS), selling and marketing, general and administrative (G&A) expenses, depreciation, research and development, and other operating costs.
For business owners, paying corporate tax can prove to be more beneficial instead of paying individual income tax additionally. Corporate tax returns deduct fringe benefits, including retirement plans, medical insurance for families and tax-deferred trusts. Moreover, it is easier for an organization to deduct losses.
An organization may deduct the total loss amount, while a sole proprietor should provide evidence for the intent to make a profit before deducting losses. Finally, the profit that an organization makes may be left within it only, thereby allowing for potential future tax advantages and tax planning.
What if You Are Late with Your Tax Payment or Do Not Pay Them at All?
Taxpayers may need to pay the penalty if they do not meet their tax obligations. The IRS charges a penalty for several reasons like if taxpayers do not:
- Offer accurate information returns
- File tax return on time
- Pay any owed tax on time and in the correct way
- Prepare accurate tax return
If a taxpayer does not pay the penalty in full, the IRS may charge interest on the same – they will charge some penalties each month until the concerned individual pays the entire owed amount.
When the IRS charges a penalty, they send a letter or notice via mail. This letter or notice illustrates the penalty details, the reason for the same and what needs to be done next.
If your organization lacks proper infrastructure in areas of payroll, HR and risk management, it may lead to several issues within the system. These may further result in you not paying taxes on time and thereby facing a penalty. So, in that case, you can consider us as an option to go for. As a reference, you can check out some blogs on our website that will help you to get an insight into what we offer.
Reference Links:
https://www.thebalancesmb.com/late-payment-of-business-taxes-397688
https://www.irs.gov/newsroom/if-youve-filed-but-havent-paid
https://www.irs.gov/payments/penalties
https://www.taxesforexpats.com/expat-tax-advice/IRS-tax-penalties.html
https://www.investopedia.com/financial-edge/0312/what-happens-when-you-cant-pay-your-taxes.aspx
https://www.irs.gov/businesses/small-businesses-self-employed/business-taxes
https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
https://www.investopedia.com/terms/t/taxes.asp#toc-types-of-taxes
https://www.investopedia.com/terms/c/corporatetax.asp
https://www.thehartford.com/business-insurance/strategy/understanding-business-taxes/types
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