Have you just started, or are about to start, a small business? Are you wondering about taxes for small businesses and how to pay them?
Small business taxes can seem like a hassle that you don’t need. However, taxes are a critical aspect of your business. They can be overwhelming, but they don’t have to be! This quick guide will walk you through everything you need to know to make filing your small business taxes a breeze.
Keep reading to find out all about small business taxes for dummies, understanding business tax, and small business tax deductions.
Small Business Taxes for Dummies
From common deductions to complex tax laws, we’ve got you covered. So whether you’re a tax novice or a seasoned pro, this guide is for you. Let’s get started!
Business Income Tax
There are different taxes that businesses are required to pay. Business income tax is one of the most important. This tax is imposed on the income of the business, and it is used to fund several government programs and services.
Businesses are required to file a tax return and pay this tax. If a business does not pay its business income tax, it may be subject to penalties and interest.
Claiming Business Expenses
Business expenses are deductible if they are necessary and ordinary. Necessary expenses are those that are essential to running your business. Ordinary expenses are those that are common and accepted in your industry.
These expenses are for personal use, such as travel or entertainment, and fines or penalties. You must be able to prove that the expense was incurred solely for business purposes.
Keep good records of all your expenses, including receipts, invoices, and canceled checks. If you don’t have receipts, the IRS may allow you to deduct your expenses if you can prove them with other documentation, such as canceled checks, bank statements, or credit card statements.
Your payment setup can make this part easier, which is why many owners look for payment solutions for small businesses, such as Digitech Payments, that provide clear transaction and deposit reports to match against your bank statements at tax time.
Self-Employment Tax
The self-employment tax is a Social Security and Medicare tax for self-employed individuals. This tax is paid in addition to any other taxes that you may owe, such as income tax.
If you’re self-employed, you’ll need to file a return and pay the self-employment tax by April 15th of each year. You may also need to make estimated tax payments throughout the year if you expect to owe more than $1,000 in taxes.
Estimated Taxes
Estimated taxes are taxes that you pay on income that is not subject to withholding. This includes income from self-employment, dividends, interests, rent, alimony, and capital gains. You must make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.
If you don’t pay the right amount of tax through withholding or estimated tax payments, you may be charged a penalty. To avoid this penalty, you must pay at least 90% of the tax you expect to owe for the present year or 100% of the tax you owe for the previous year, whichever is smaller.
If you’re not sure how much tax you’ll owe, you can use the 2022 SmallBusiness Tax Rate Calculator to help you calculate your payments.
Now You Know!
If you are a small business owner, it is essential to know what taxes you need to pay and when they are due. This quick guide about small business taxes for dummies will help you understand the basics of small business taxes so that you can keep your business compliant. Remember, if you have any questions, be sure to speak with a tax professional to get the answers you need.
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