Making sure you are caught up on your IRS tax obligations as a business owner is an important part of maintaining your company’s finances and avoiding a myriad of IRS issues. Failing to file, filing too late, or simply filing incorrectly can potentially land you in serious trouble, with repercussions ranging from hefty fines and lawsuits to even more extreme consequences, such as jail time.
No matter how small or large your company, it is a good idea to stay up on your business tax knowledge, especially if you are a new business owner just beginning operation.
General Tax Categories
There are multiple kinds of business taxes, some of which may not apply to you and your business. Consult with your accountant and a knowledgeable tax law attorney to confirm what type of tax you are expected to pay.
Consider the general categories of business taxes and their applicable guidelines:
SE Tax – SE tax, or self-employment tax, applies to independent contractors or those who employ themselves. It is a type of Medicare and social security tax that must be paid to the IRS. Your payments go toward your social security coverage, which includes retirement and disability benefits, as well as Medicare benefits. If you earn $400 or more from your self-employment, you will be required to pay SE tax via Form 1040.
Income Tax – Unless you are a partnership, all business owners are required to pay federal income tax. Partnerships must file an information return, instead. Income tax must be paid as you earn income throughout the year. Typically, this type of tax is withheld from an employee’s paycheck. However, if the employee does not pay this way, then he or she may be required to pay estimated tax payments.
Estimated Tax – Speaking of tax estimates, this is something most owners will be responsible for as they operate their business throughout the year. The basic rule of thumb is that if you are a sole proprietor, partner, or S corporation shareholder, you will likely have to make estimated tax payments if you expect to owe $1,000 or more when your return is filed. Form 1040-ES is used to calculate your estimated taxes. Factors such as your adjusted gross income, taxable income, deductions, and credits for the year will all be taken into account when figuring these numbers.
Employment Taxes – If you staff employees, then you as the employer must pay certain taxes and file the proper, corresponding forms. Otherwise, you may be held liable for any unreported taxes. As an employer responsible for your staff, you open yourself up to a host of potential IRS issues if you neglect your employment tax duties. These taxes include everything from federal unemployment and income tax withholding to social security and Medicare.
Understanding and following through with your tax responsibilities allows you to maintain a profitable, efficient operation. If you are experiencing any liability issues, or would like to put a stop to a potential IRS issue before it gets worse, talk to a qualified Cook County business tax and IRS defense attorney today. Call the Law Offices of Eric G. Zelazny at 708-888-2299 for a personal consultation.