The amount of taxes subjected to a business vary depending on several factors. Failure to pay these taxes can lead to tax credits, tax liens, or even get you in trouble with the IRA. It is advised to understand the basics of the tax-business relationship to avoid costly mistakes.
Business Tax Responsibilities
The type of business you have typically determines the amount of taxes you have to pay. The five main types of business taxes are
- Income Tax – All businesses, save for partnerships, have to file an annual income tax return report. They have to pay taxes for their earnings during the year.
- Employment Taxes – These taxes are paid to the IRS by employers on behalf of their employees.
- Estimated Taxes – If a taxpayer receives income such as capital gains, prizes, awards, alimony, interest, or the amount of income tax from your business is not enough, you are liable to pay estimated taxes. The IRS requires that estimated taxes be paid throughout the year. An estimated tax form for entrepreneurs combines personal income and business taxes.
- Excise Tax – These are taxes charged on specific products, equipment, or facilities. Excise taxes are usually paid either quarterly or annually using form 720, depending on the usage.
- Self-employment Tax – This is a Medicare and Social Security tax. It primarily applies to people who work for themselves, such as sole proprietors, partnerships, and limited liability companies, depending on their businesses’ net income.
Business Tax Liens
A business tax lien can be hurtful to your business and possibly even put it in jeopardy. A tax lien arises when the IRS claims that you owe them taxes, sends you a notice for payment, but you do not pay. Tax liens are made public and often devastating. Hence, you may want to do everything possible to remove a tax lien. Tax liens are often filed against your personal or business property. Your first goal should be to pay the owed taxes. You may also apply to have the lien withdrawn. There are several remedies to help you deal with your tax lien. Most businesses often require professional help removing an IRS tax lien.