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All About Small Business Taxes: What They Are and How To Pay Them

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December 30, 2019

 

TAXES! As a small business owner, you’ve probably heard that word about a million times more than you ever wanted too, am I right? It’s true though, it’s a necessary evil of doing business but I’m here today to break it down for you a little bit and simplify the ever-dreaded word, TAXES!!

 

Specifically, I want to talk about income tax. There are different types of income taxes that you as a business owner are liable for and they are due at different times throughout the year. You can’t avoid them so you may as well gain some knowledge in this area and be prepared. 

 

  1. Income Tax

All businesses are responsible for filing an income tax return each and every year. The way your business is set up determines the type of income tax return you must file and when it is due. Any business that is set up as a C Corp is required to file taxes at the Corporate level and the return is due each year on April 15th. Any business set up as a sole proprietor, or LLC and is not electing any type of corporate treatment is considered a pass-through entity and is required to file a Schedule C with your personal income tax return due on April 15th each year. Any business that is set up as a partnership or S-Corporation is required to file its own business income tax return and is due on March 15th each year. Partnerships and S-Corps are also considered pass-through entities so the business owner will receive a K-1 stating their individual income that needs to be reported on their personal income tax return.

 

2. Estimated Taxes

How many times have you read a blog or heard someone say that you need to be paying estimated taxes throughout the year? It can be so confusing because as a business owner you may already be paying in sales tax and/or payroll taxes each quarter so you may think that you have already done your part. Think again! Estimated taxes are related to your personal income tax and as a business owner, you need to be making these estimated payments because all of your income is not being taxed like it would if you were receiving a W2 at a traditional employer. These estimated taxes should be based on your business profit and vary at different times throughout the year. Tax planning with a CPA is a great way to know exactly what you should be paying in estimated taxes throughout the year. Below are the due dates for these estimated tax payments. You want to be sure to plan for these and pay on time so you are not hit with penalties at tax time.

 

Payment Period   Due Date
January 1 – March 31    April 15
April 1 – May 31    June 15
June 1 – August 31    September 15
September 1 – December 31     January 15

 

 

3. Self Employment Taxes

Yes, it’s true – there is yet another tax for business owners and it’s called self-employment tax. If you are self-employed you are required to pay your social security and medicare taxes that are not withheld from your pay as it would be at a typical W2 position. These taxes are paid on Schedule SE when filing your personal income tax return. The current Self-employment tax rate is 15.3%; however, as a small business owner, you can claim a deduction for half of the self-employment tax that you pay.

 

4. State and Local Taxes

Depending on where you live, it’s likely that you will have to pay some type of state and/or local income tax. Due dates for income tax returns are usually similar to the federal due dates I listed in #1 but you will want to check with your specific state to be sure of your due date. Beyond income tax, you may also have sales tax, property tax or franchise taxes due each year that are specific to the state, county or district you live in. 

 

Taxes don’t have to be stressful and intimidating! We LOVE to crunch the numbers and conquer all things taxes for small businesses all over the U.S. If you’d like more information about what we have to offer, check out our Services page. 

 

We know that all of the different taxes and due dates can seem a bit overwhelming and hard to keep track of which is why we send out a monthly tax due dates reminder email each and every month! If you’d like to start receiving those emails, simply click here to sign up and you’ll start receiving them along with other tips and news from us. 

Want more tax tips? Be sure to check out our Facebook Live trainings this month. We’ll be focusing on a different tax topic each week and we’d love for you to join us. Click here to view our events and be sure to RSVP to those you are interested in!

  1. 3 Biggest Tax Mistakes Small Businesses Make and How to Avoid Them - www.steadfastbookkeeping.com

    January 27th, 2020 at 8:09 am

    […] done by a CPA will tell you exactly what you need to pay in and when. You can also check out this recent post where we outline estimated tax due dates and provide some more insight on what they are and how to […]

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