When you own a business, there are many important details that you must attend to. Taxes are one of the items that should top your list when it comes to following the rules. Filing business taxes incorrectly could create long-term problems with the Internal Revenue Service and nobody wants that.
Depending on what the structure is of the business, such as a sole proprietorship or limited liability corporation, the profits and losses will be calculated on your personal income taxes differently. Corporations pay a flat rate of 21 percent in contrast to other business types who are taxed based on their personal tax brackets and their filing status.
The good news for limited liability corporations and sole proprietorships is they can deduct a maximum of 20 percent of the business’ income if their income is no more than $157,500 for single filers. For joint filers, those who make $315,000 or less can take the deduction. This is a good way to lower your taxable income right from the start. It’s important for business owners to find and take the deductions relevant to the business to help lower your taxes overall. Tax percentages range from as low as 10 percent and as high as 37 percent based on the income for the year.
There are other taxes that a business may have to pay like employment taxes. Companies who have employees must withhold the following from employee paychecks: social security, Medicare, and unemployment taxes for both the federal and state portions. Other business taxes include sales, property, and excise depending on what kind of business it is. There are also state income taxes for businesses that vary in tax rates.
Since federal and state taxes for businesses can be complicated, many owners opt to hire a professional tax preparer instead of doing it themselves. Using a tax service saves time and money, and potentially any problems in the future.