When you start a business there are 4 different taxes you should be aware of. Unpaid taxes are a major reason businesses fail. Understand , that the money you collect is taxed, so a portion of that money goes to the government. That is why it is beneficial to have a bookkeeper. We will keep track of how much you owe and when you owe it based on the transactions made in your business. The fist tax a business owner should be aware of is sales tax.
Many different services or products require for a business to collect sales tax. If you are in business and you are selling a product that is taxed by the state and you do not collect the tax you are still responsible to pay the tax. You can contact your states department of revenue and ask what tax your service or product is required to collect. It can be a financial burden on your business if you are required to pay a tax that you did not collect.
Some states have state taxes such as federal taxes. The tax and exemptions vary from state to state. If your state do not have a State income tax it mostly likely incorporated a Business Corporate tax to collect taxes from business in the state. There may be different thresholds by state, such as you may have to make a yearly gross income of $50,000 or higher. If you make less than that, you may not have to pay the tax but you still have to report it.
Everybody know about the federal income tax. When you become a business owner you are filing your business taxes with your typical 1040 unless your business is a C Corporation. You will see your income tax will be a little different. There are additional business forms that will now be attached as well as a business tax that will be added called a self employment tax.
Many business owners are familiar with payroll tax because as a W2 employee these taxes where withheld from your paycheck. As a business owner, you not only have to withhold the tax but you have to make sure you pay the tax to the IRS in a timely fashion. Depending on how large your business is, that can be yearly, quarterly, monthly or biweekly. These taxes are Income taxes, Medicare, Social security and additional responsibility such as workers compensation payments, state unemployment payments (SUTA) , Federal Unemployment payments (FUTA).
These taxes not only need to get paid but also have corresponding reports or forms that also needs to be submitted. These things can be time consuming and overwhelming for someone not educated on how to submit them. My recommendation is to know your different taxes and due dates, however delegate the work to a professional.