Importance Of Taxes In Your Business
As a law abiding citizen, you are liable to pay your taxes on time. The Government makes use of these taxes to raise its revenue which then becomes the budget for several Government services. Especially if you handle a business of your own, it is essential for you to know about the different taxes that are applicable to you. Taxes vary depending on whether it is state, federal or local taxes. The taxes are different based on whether you are self-employed, owns a business, have employees working under them, is engaged in businesses that involve trading of taxable services or products, etc and earning profit out of it.
If you have only started your dream business, bought a new property for it or engaged in any of the above mentioned activities, then you definitely need to be educated about the different types of taxes and the importance of paying these taxes.
Different Taxes Applicable In A Business
The following are some of the important taxes which you are liable to pay in a business:-
- Income Tax – Tax Return Filing And GST Return
Whatever income a business earns, the business owners are supposed to pay tax on the profit they reap out of it. Profit implies the income earned minus the expenses. Small businesses and partnership businesses pay their taxes not as businesses but rather through their personal tax returns. As per the law, tax return filing should be done by businesses every year. Businesses are also supposed to file monthly GST return twice as well as one annual return.
The sole proprietors of businesses usually pay their tax through the Schedule C within personal returns. If it is a partnership, then the partners or members go for partnership business tax return filing but tend to pay it through their personal returns on income.
- Property Tax
If you own a business property like buildings, land, etc., then you should pay tax for the same to the local taxing authority. This property tax is based on the value of the property you own. In case you sell a property too, you may need to pay tax on capital gain basis.
- Sales Tax
There is no need to directly pay sales tax on the products you sell in every state. Some states need you to pay state income tax in which case you need to have a provision for collecting, paying and reporting this tax. The payment is usually to the revenue department of the particular state.
- Excise Taxes
If a business needs you to use a fuel or spend in communication, transportation, etc, excise taxes need to be paid. These are usually paid for an annual year or every quarterly need to the Indian Revenue Service based on the consumption.
Taxes For The Business Owners And The Self Employed
The following are some of the taxes that need to be paid by the business owners or the self-employed citizens of the country:-
- Estimated Taxes
The business owners are required to pay this tax every quarter to the IRS by including both personal as well as business income taxes. This also constitutes the self-employment tax.
- Self-Employment Tax
These are paid by partners in a partnership, sole proprietors and LLC owners on the basis of their income for Social Security and Medicare. Though corporation owners who are also employees need not pay this tax.
- Gross Receipts Tax
Instead of the state income taxes imposed on business owners, some states need them to pay a tax on the gross revenue of their businesses. Although there might be exceptions in some states.
- Payroll Taxes
These are employment taxes paid by the business owners to the Social Security Administration and IRS on the basis of the total payment to their employees. This constitutes state and federal unemployment as well as workers compensation taxes, FICA taxes, etc.
- Franchise Tax
Based on the overall value of the company, corporation owners might need to pay a franchise tax which is identical to the gross receipt tax or state income tax.
- Dividend Tax
Dividend taxes are paid by corporate shareholders for the income received from the shares.
Knowing about your taxes can enable you to reduce the amount of tax you need to pay by being educated in detail about various business tax policies. It is preferable to hire an online tax consultant or professional for avoiding any tax frauds or illegal tax evasions on your part due to lack of knowledge on tax payment.