Taxes are an integral part of every business. As a business owner, you need to obtain an Employee Identification Number or EIN from the IRS to operate your business. You will also need the social security numbers of your employees if you have them. The type of business you have will determine the type of taxes you pay as well as how you pay your taxes. For example, businesses that file their income taxes as a corporation are considered “C” corporations and will pay corporate taxes. Conversely, a sole proprietor reports his business profits and losses on his income tax return. Essentially, the type of business you run determines how your business is classified for tax purposes and how you file your taxes. Your small business taxes are an essential part of running a successful business.
Business Expense Deductions
Your business expenses should be documented and calculated for tax purposes. Business expenses can include a wide range of costs you have to pay associated with your business. Even if you run a business from your home, the space dedicated for business use may be tax-deductible. However, common business expenses can include but aren’t limited to:
-Rent expense if applicable
-Interest in the money you borrowed for business activities.
-Federal, state, local, and foreign taxes directly attributable to your business
-The necessary cost of insurance Insurance as a business expense for your trade, business, or profession
Tax Requirements for Businesses
Businesses are required to pay quarterly taxes. However, how much a business is required to pay may vary according to how the business is classified for tax purposes. For example, corporations are required to make quarterly payments if they expect to owe $500 or more in taxes for the fiscal year. If your business is classified as individual, a sole proprietorship, partnership, S corporation, or shareholder, you must make quarterly tax payments if you expect to owe $1000 or more in taxes. Business owners should actively seek help from a tax professional that specializes in or has experience with sole proprietorships, corporations, or whatever tax classification your business holds.