| Taxes, taxes, taxes. Like
it or not, they are there. And, to make sure your obligations are being met, here
is a list of those and some you may have forgotten: - Federal
income tax
- State income tax
- Local
income tax
- Social security/Medicare
- Unemployment
compensation
- Sales tax
- Excise
tax
- Use tax
- Intangible
property taxes
Federal income
taxes apply to all businesses, but the tax rate and filing procedure varies with
the type of business entity. C- corporations are taxed on the net income before
taxes, which is found in the income statement. The
same applies to S-corporations, but there is some maneuverability for the business'
owner. Under this type of corporation owners are expected to provide themselves
with an acceptable level of compensation in the form of a wage or salary based
on the type of business, and the rest of that individual's income can be diverted
to dividends. The dividends will come back
to the owner's personal filings, but are not subject to social security taxes.
Secondly, it reduces corporate tax exposure on net income. Just issue the dividend
before the end of the tax year. Sole
proprietors incorporate all business income into personal filings via the Schedule
C. For employees you must match their Social Security deductions at the rate of
6.2% on the first $76,200 of their income. Your self-employment rate is 12.4%.
You must match the employee's Medicare deduction of 1.45% and pay 2.9% on self-employment.
There is not upper limit on income. State
income taxes vary from state to state. Some don't even have an income tax. To
learn more for your state go to the State
Government Web Servers site to access your state's official web site. Unemployment
compensation tax is for those of you with a workforce. The tax is collected by
your state's Department of Labor. This tax funds unemployment compensation to
individuals who typically lose a job through no fault of their own. For a detailed
description of your state's tax rate and procedures go to the AFSCME
State Departments of Labor directory. Sales
taxes represent state and local revenue streams from the sale of tangible products.
If you sell product directly to the end-user, your business is responsible for
collecting the sales tax and passing it on directly to your state's Department
of Revenue. Even if the tax is for more local entities within the state you will
typically pass it on to the state, which will then redistribute the funds. I suggest
you access your state's Department
of Revenue directory at the National Association of State Information Resource
Executives (NASRE) web site. Excise
taxes can come in two forms: A penalty by a company for failure to comply to certain
state statutes or procedures, and A periodic license fee to perform a certain
function within the specific state charging the tax, typically a tax in addition
to another sales tax. State and local
taxing districts commonly exercise this revenue option. Along with excise fees,
usage, lodging, intangible and fuel taxes are examples most often related to businesses
in specific categories of product and service. The Federation
of Tax Administrators and other hyperlinks noted above should provide you
adequate sources of information about all tax obligations regarding your business.
It's one thing to pay the tax. It's
another to pay penalties due to ignorance. Know your obligations. | 
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