Kelly A. Mansdorf & Co.: CPA Advice on Business Taxes

May 30, 2012 - PRLog -- Taxes are complicated and often affect each other in very hidden ways. While different businesses types will include different taxes, there are four universal types of business taxes:...

   Different business types will include different taxes but there are four universal types of business taxes: Income tax, self-employment tax, employment taxes and excise taxes.

   Income taxes are filed by all businesses except for partnerships. The income tax is a "pay-as-you-go" tax, meaning you pay the tax as you earn income over the course of the year. The income tax is usually withheld from employees' paychecks. Although if there are not enough taxes being withheld from your paycheck or there is income that is not subject to withholding, you may have to pay estimated taxes.

   Estimated tax is used to pay self-employment tax and income tax that have not already been paid. Sole proprietors, partners (including traditional partnerships and LLC's) and S corporations usually have to make estimated tax payment if they're expected to owe $1,000 in taxes or more. Corporations commonly have to make an estimated tax payment if they're expected to owe a tax of $500 or more.

   Self-employment tax is a social security and Medicare tax predominantly for individuals who work for themselves. If your net earnings are more than $400 and/or you have church employee income of 108.28 or more you must pay self-employment tax.

   Employment taxes are for when you have employees. These include: Federal income tax withholding, social security and Medicare taxes and Federal unemployment (FUTA) tax. The federal income tax will be withdrawn from your employee's paychecks and the amount withheld depends on the amount the individual employee makes. Social security and Medicare taxes pay for benefits that employees and their families received under the Federal Insurance Contributions Act. These taxes are as well withdrawn from your employee's paychecks and you pay a matching amount yourself. Federal unemployment tax is what helps pay employees unemployment compensation when they lose their job. The business pays for this out of their own funds, the employees do not pay this tax.

   If you started your business to do what you love, don't get bogged down in tax issues and paperwork. Give us a call. We are happy to help!

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