They say the only things certain in life are death and taxes. For small businesses, should be the saying, if you do not manage your taxes, you will be the death of your business! Failure to maintain financial responsibility is a common pitfall for business, but there is no reason to fear the tax man. Keep up your business up to date on federal and state functions is not particularly difficult, and all employers should be eager to develop internal systems to ensure that taxes are never a problem.
Depending on your type of business, your tax obligations vary. For most, the list includes state and local licenses and permits, sales and use tax, payroll taxes, and for businesses, state and federal income taxes.
Licenses and fees
Licenses and permits depending where your business is based and include state registration fees paid by companies (for limited liability companies and corporations), business licenses, county or city, and local permits required for your business type. It is very important that you pay these fees on time. Not keep up will end up costing more and set the protection by the LLC or corporation granted in danger.
Protect your business schedule of all fees due at least 10 working days before the due date. If your expected expenses are high, as in the annual franchise tax in California or anywhere in the initial charge, make sure these fees are working within their budget. You can a little aside each month or the plan for the full amount of the expiration month, but make sure that you have enough money to cover the bill when the time comes. Follow along all licensing information and license submitted – a 3-ring binder can be an excellent way to be to save these important documents – and a system for tracking the expiration dates of each installment.
Pay the government’s share turnover of state and local sales taxes is a common problem for small businesses. Often, the sales tax in the daily receipts are collected together with the proceeds from the cash shop available and as deposited by the owners. When the due date comes around (usually once a quarter), the bill of sales tax much higher than expected, and generates a cash flow problem seriously. As in, there is plenty of cash to cover the taxes! A few periods of tax cuts later, the company is on the verge of self-destruction. These amounts add up quickly – is only $ 100 per day tax collected more than a $ 9,000 tax bill in three months!
There are some simple solutions to this problem. First, consider the opening of a separate bank account for sales to keep tax revenues. Your accounting software or POS system detects the amount of sales tax collected every day, and you can deposit or transfer the amount of the tax bill on a daily or weekly basis. This ensures that you have the money on hand when the tax bill is due and is in less temptation to spend the money on other supplies or inventory. You also earn interest on deposits in the coming months sitting idle. Not much, but it’s your money!
A second way to avoid the cost of sales tax revenue is to use the accounts to determine how much money to spend, you are available. Cancellations have properly set up from the outset, the accounting software collected the sales tax for their own, apart from its cash account. As long as it is not based on the current account balance, to tell you how much you can spend, the money will still be there when the bill comes through.
Payroll taxes are another common pitfall for small business. It is very important that you understand your responsibilities as an employer before hiring your first employee. Tax liability for employees is split between employer and employee – Total federal taxes equal to 15.3% of the salary of their employees keep half salary and half the employer pays out of pocket. Therefore, the company is responsible for the presentation of both the retention payments and the employer. If your area has a state income tax, you are responsible for sending payments. Re-employment tax rule are due quarterly, unless your payroll exceeds a certain amount, or a poor history of paying on time.
Small business owners run into the same problem with tax payments, as they do with the sales tax. Unless a system in place for the removal of the correct amount for the period, it is very difficult to reach on time to full payment. Also you can find some employers retention procedures and formalities to be confusing and do not choose to participate. As you’ve probably learned, not ignoring the problem does not go away it! Before hiring employees, you will learn everything you configured on their responsibilities in relation to tax and accounting software with the right numbers.
If you need to register your business as a business, you must file an annual federal, state and possibly tax refunds. It is generally assumed quarterly estimated tax payments to the government to forward so that they can keep their deposits until tax time. Failure to follow the correct quarterly amounts submit or file on time can lead to significant penalties tax time, so it is important to be aware of deadlines. When you register your business as an LLC, probably the quarterly payment of personal income tax is to be. Self-employment tax is 15.3% of their income – the same amount as is usually paid jointly by the employer and employee. If you are taking regular distributions from your LLC, it is recommended that from its 15.3% each pay period to cover the income tax.
The closing of the tax for your business is to understand the different types and amounts of tax due and develop a system to set aside the money and pay on time. Like everything else related to your business, become a good planning before tax an issue, you save a lot of headaches and increase the chances of success of your