Paying taxes is essential in formalizing the existence of a business. Regardless of the size, all companies must pay different kinds of taxes. As part of the nation, commercial establishments must pay taxes to contribute to the overall investment and growth. In turn, businesses expect quality infrastructure and services of the local government to keep business dealings thriving. Here are the different kinds of taxes that companies must pay annually.
Every business owner has to pay the income tax, an amount based on their annual income. Small companies pay pass-through entities, which signifies the taxes passing through to the owners on their tariff. Single-member LLC and owners of sole proprietor businesses must accomplish Schedule C in paying taxes based on their business income.
Co-owners in partnerships and multiple-member LLC owners, on the other hand, must file the partnership business tax return. S corporations follow the same principle applied to partnerships. Both types of businesses require division of their income equality to their owners. In turn, each of them receives a Schedule K-1 that they must include in their income tax return.
Estimated taxes are a combination of business and personal income and taxes, including self-employment taxes. Business owners must pay this type of tax quarterly per IRS requirement. There are specific deadlines that business owners must follow in paying estimated taxes. For the first quarter, its payment is due April 15. The second quarter is on July 15, the third quarter deadline on September 15, and January 15 the next year.
To determine the amount of this tax, you should use Form 1040-ES. One can get the final amount of the estimated tax considering your expected adjusted gross income, taxes, deductions, taxable income, and credits for that year.
Sole proprietors, partners in a partnership, and LCC owners for Social Security and Medicare are the ones who have to pay self-employment taxes. This type of tax relies on the net income of the business. To calculate how much is your self-employment tax, you must use the Schedule SE. You will have to add the amount you can derive from this operation to the total amount of tax considered your personal tax return.
Businesses that have employers have the responsibility to settle employment taxes for people working for the company. Employment taxes include other (1) social security and Medicare taxes, (2) federal income tax withholding, (3) federal unemployment (FUTA) tax.
You may have to pay excise taxes for fuel consumption or if you manufacture or sell certain products. This tax type also applies if your company uses various kinds of equipment, facilities, or products. If you are a contractor receiving payments for specific services, you may also have to pay excise taxes.
In computing the excise taxes, you may also want to know how you have to pay for the property capital allowances of some equipment in your company like lifts, fire escapes, heating, lighting, wiring, and security systems. The accountant has to visit your property to identify these items and find others not included in the paperwork.
Through the years, the government has made filing taxes more effortless and more convenient. With the Internet’s presence, one can readily upload files and forms with guided instructions in the electronic filing for business and self-employed taxpayers.
The Internal Revenue Service provides two options for taxpayers in settling their taxes online. One way is to pay them using their Bank Account through Direct Pay services. Another option is to use a Debit Card or Credit card. Businesses that may pay larger amounts may also use the agency’s Electronic Federal Tax Payment System. One can again do it via Electronic Funds Withdrawal during e-filing. There is also a same-day-wire option in transferring funds to the IRS. This process may require bank fees from the sender. Taxpayers may also pay taxes using checks or money orders, or cash.
The IRS also gives options and payment plans to businesses that may have a hard time settling their taxes. Interested individuals must fill-up a form online and wait for approval of the payment plan. One can also discuss the delay and propose a compromise in settling the tax debt on an installment basis or in full amount. The institution also accepts requests for temporary delay of tax collection until the business’s financial status will improve soon. To be granted this request, the individual must accomplish several forms and submit proof of their financial situation.
During the delay period, the IRS will have to impose interest and charges, increasing one’s debt. The institution will then review again the taxpayer’s ability to pay.