Because tax laws can
be extremely complex, small business owners are strongly encouraged to seek professional
assistance. A good accountant or CPA (Certified Public Accountant) will help
navigate through local, state and laws and also explain how to minimize future
tax obligations. Even if you retain professional tax assistance, your tax
responsibilities are still solely your obligation. You should understand how
the various tax systems impact your business.
Although the
following information is not comprehensive, it does provide an overview of
the most common
business tax requirements. Business owners are required by law to withhold the
following from the wages paid to employees: federal income taxes, state income
taxes and FICA (Social Security) Insurance.
Income taxes will
also be levied by the federal and state governments on earnings of any business.
Therefore, each business must file an income tax return with both agencies. Businesses
may be required to file estimated tax returns and pay estimated taxes on a quarterly
basis.
For federal tax
information, contact the U.S. Internal Revenue Service (IRS) You can go to
IRS's website area for business taxes or call your local IRS office to receive a
number of publications that are available upon request to small businesses. One
of the most helpful is Your Business Tax Kit, which includes data and forms for
a Federal Employer Identification Number and a tax guide for small businesses
that can be ordered by calling Forms and Publications at (800) 829-3676 or by
visit to your local IRS office.
Federal Self-Employment Tax
Everyone must pay
Social Security Tax. If you are self-employed, your Social Security contribution
is made through the self-employment tax. You will need to calculate how best to
report earnings and pay your business taxes.
Contact the IRS at
(800) 829-1040, visit your local IRS office, go to the Official IRS Web site
for more information. The IRS may seem like a complicated maze, but there are publications,
counselors and workshops available to help you sort it out.
Unemployment Insurance Tax
Businesses are
required by the state to pay unemployment insurance tax if the company has one
or more employees for 20 weeks in a calendar year, or it has paid gross wages
of $1,500 or more in a calendar year. Go to your state home page to check the
figures for your state. Unemployment insurance must be reported and returns
made to the state.
EIN
An Employer
Identification Number, (EIN, sometimes called Federal Tax ID Number) is a nine-digit
number assigned by the IRS. EINs are used by employers, sole proprietors,
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