Small business tax planning is important, and being able to handle it requires knowledge and preparation.
Small business tax must be fulfilled, businesses are expected to withhold taxes from their employee’s salaries and pay them to the Inland Revenue Service. The amount to be paid depends on the size of the payment, the employee’s marital status, the number of exemptions claimed by each employee, and the frequency of the payments.
Apart from employment tax, Here is some other small business Tax;
Businesses are expected to pay their income tax which is charged on the profit of the business.
How the tax is paid is dependent on the structure a business takes; sole proprietorships can pay tax on their personal income tax returns which is payable to the Federal government.
Income Tax applies to all people who earn a certain amount of money each year.
The amount of tax owed depends on how much income you earned in the previous year (or if you were self-employed).
The more money you made during that period, the higher the percentage rate applies to your total taxable income—that means higher taxes!
This type of tax is for individuals who work for themselves. This is mostly paid by sole proprietors and partners based on the income the business makes, these set of people do not earn salaries, hence there is no salary to withhold taxes from.
Owners of corporations are required to pay self-employment tax. Note that they do not need to pay if they work as employees in the company.
Also read: Tax Base – What is a Tax Base
Sales tax is also called Value Added Tax (VAT). It is a consumption tax that is levied on a product repeatedly at every point of sale at which value has been added.
It is to be collected by the business owner on specific products and services.
Sales taxes are typically based on a percentage of the purchase price, but there are also sales taxes that may be assessed based on specific items purchased (like strollers) or where they were purchased (like online).
The main drawback to this method for collecting sales tax is that it can be complicated for both buyers and sellers.
If you’re selling something online through an eCommerce platform like Amazon or eBay, then you need to make sure your customers pay their own sales tax; otherwise, they’ll end up paying twice!
You may have heard of employment taxes, but do you know what they are?
Employment taxes are those that businesses must pay to the government in order to legally operate.
If your business is an employer, then you will be required by law to withhold some amount from each paycheck based on these numbers:
- Taxable Compensation: This is the total amount paid in wages during a given year; it includes hourly wages plus commissions but does not include tips or bonuses unless those two types of remuneration equal more than 10% of total annual compensation (which can happen). If this percentage exceeds 10%, then only taxable benefits should be included in determining taxable income for that year; otherwise, both types must be included since they’re equally taxed at 25%.
Most business owners find Tax-related concerns complicated, if you do, It is advised that you hire a professional to help you put your tax affairs in order.
Small business tax is complex, but it can be managed by the regular filing of returns and careful planning.
Effective small business tax planning requires knowledge of the various rules and regulations, as well as the ability to handle them when they change over time.
We hope that this article has provided you with some information on how to optimize your small business tax situation so that you can stay ahead of the curve!