Business Basics Resource Guide
Milt Wright & Associates
Resources Needed to Start Your Own Business Cont.
General
Types of business Taxes
Income
Tax
The federal income tax is a pay-as-you-go tax. You must
pay the tax as you earn or receive income during the
year. An employee usually has income tax withheld from
his or her pay. If you do not pay your tax through withholding,
or do not pay enough tax that way, you might have to
pay estimated tax. If you are not required to make estimated
tax payments, you may pay any tax due when you file
your return.
Internal Revenue Service
www.irs.gov
Self
Employment Tax
Self-employment
tax is simply a shorter way of saying Social Security
and Medicare taxes for a self-employed person. However,
it is a significantly larger amount than what comes
out of your paycheck as an employee, so be prepared
for the shock. As an employee, 7.65% is deducted from
your pay. The amount you will pay is almost twice what
you pay as an employee. The reason for this is that
your employer matches what comes out of your check so
that 15.3% actually gets paid in to the Social Security
Administration on your behalf. When you are self-employed,
you are essentially both the employee and the employer.
Since there is no one else to pay the other half for
you, you get to pay them both. You do get a couple of
breaks so that the amount is not quite double. We'll
get to that in the computation section.
Internal Revenue Service
www.irs.gov
Employment
Taxes
Small business owners often have great responsibilities
while operating and managing a business. Before you
become an employer and hire employees, you need a Federal
Employer Identification Number. If you have employees,
you are responsible for several federal, state, and
local taxes. As an employer, you must withhold.
Federal income tax, Social Security and Medicare
taxes, and Federal unemployment tax act (FUTA).
www.irs.gov/businesses/small/content/0,,id=98942,00.html
Excise
Taxes
Environmental taxes, Communications and air transportation
taxes Fuel taxes, Tax on the first retail sale of heavy
trucks, trailers, and tractors, Luxury tax on passenger
cars, Manufacturers' taxes on the sale or use of a variety
of different articles.
IRS Small Business Taxes Website www.irs.gov/businesses/small/article/0,,id=98966,00.html
Tax
Credits
An employer may be eligible for a tax credit of up to
$8,500 if the employee is a member of a designated target
group. This group includes welfare recipients, veterans
receiving food stamps, ex-felons, high risk youth, and
vocational rehabilitation referrals.
www.edd.ca.gov/wotcergd.htm
*The Build WorkSource web site provides material on topics of interest to businesses. It is not intended as legal advice or to answer specific legal or employment problems. The information presented in the Build WorkSource web site is from many sources therefore there can be no warranty or responsibility as to the accuracy, originality or completeness. Build WorkSource is not engaged in rendering legal or other professional counsel.