top of page
Search
kesha91

Business Tax Basics for Beginners

Updated: Jan 5, 2022

It’s one of Benjamin Franklin’s most famous quotations: “In this world nothing can be said to be certain, except death and taxes.” While business taxes are a certainty, the actual tax rates you pay are anything but certain in the current political climate.

As politicians continue to wrangle about tax rates on large corporations and small businesses, the types of taxes a small business owner will be reporting and paying are pretty stable. They include federal and state income taxes, employment taxes and sales taxes. But before you can pay your share, you need a tax ID.


An Employer Identification Number (EIN) is a nine-digit number the IRS uses to identity taxpayers who are required to file various business tax returns. EINs are used by employers, corporations, partnerships, and sole proprietors, among other business entities. You can apply for an EIN online through the IRS website.

If you are self-employed earning $400 or more annually, you need to pay the self-employment tax, which consists of Social Security and Medicare taxes. For most wage earners, these taxes are figured by their employers, but as your own employer, you need to calculate the self-employment tax yourself using Schedule SE on Form 1040.

In addition to business taxes required by the federal government, you may have state and local tax obligations as well. The most common small business state tax requirements are income taxes and unemployment taxes. Nearly every state has a business or corporate income tax and all states require payment of state workers’ compensation insurance and unemployment insurance taxes.

Generally, you should collect, report and pay sales tax on most goods and some services that are delivered to a customer in a state where your business has a physical presence. But sales tax rates and regulations vary from state to state and even city to city or county to county. To find the sales and use tax rates for your area, go online and search your state’s department of revenue or taxation.

19 views0 comments

Comments

Couldn’t Load Comments
It looks like there was a technical problem. Try reconnecting or refreshing the page.
bottom of page