ConnectPay Blog » Latest Articles
Jan 13, 2020 ConnectPay

Is This Your Situation: Figuring Out Your Business Taxes | ConnectPay

Is This Your Situation: Figuring Out Your Business Taxes | ConnectPay

Is This Your Situation: Figuring Out Your Business Taxes

The type of business will determine the type of taxes that will be required to be remitted. Having a trusted advisor such as a CPA, accountant or bookkeeper, and a trustworthy payroll provider will help make sure your business is in compliance and there are no surprises at year-end.

Income Taxes

You know this tax — it gives the government a share of your net income. Generally, all businesses must file an annual income tax return. The forms that the business will be required to file will depend on how the business is organized. Businesses organized as C Corporations generally will pay the income tax at the entity level. However, businesses organized as pass-through entities (such as S Corporations and Partnerships), generally, pass through the income tax liability to the individual shareholders.

Payroll Taxes

For employers with employees, the company must withhold and pay certain taxes on behalf of its employees. The following types of payroll taxes may be required: Social Security and Medicare taxes, federal and state income tax, and federal unemployment tax.

The Federal Insurance Contributions Act regulates the collection of Social Security and Medicare taxes. Employers must withhold Social Security tax and Medicare tax. There is a salary ceiling above which no more Social Security is collected, and it is typically adjusted every year. There is no limit on the amount of wages subject to the 1.45 percent Medicare tax.

Income tax withholding is based on the withholding conditions the employee states on his or her W-4 form, the employee’s taxable wages, and the taxing authorities withholding table that matches the employee’s situation.

Payroll taxes and withholdings are held in trust by the business until the business makes the required tax deposits. Failure to collect, truthfully account for and pay these taxes can result in large penalties and is not dischargeable in bankruptcy. The fines and penalties can be up to a $10,000 fine or five years in prison, or both.

Excise Taxes

If a business manufactures or sells certain goods the company may have to pay federal or state excise taxes. These are basically extra taxes for the use or consumption of certain products. Some manufacturers or resellers include these “duties” in the price of the product (such as with cigarettes and gasoline). Businesses pay excise taxes on such things as ozone-depleting chemicals and fuel, and purchases of trucks, trailers and semitrailers, and sport fishing equipment, for example.

Business taxes can get complicated quickly, so be sure to keep in close touch with your accountant, CPA or bookkeeper to make sure you’re in full compliance.

Copyright 2020

New call-to-action
Published by ConnectPay January 13, 2020