Preparing to file your small business taxes for the first time may seem like an overwhelming task. Instead of putting off filing your small business taxes, you should work to learn the basics of business tax requirements to help with your stress level. Knowing a few basic concepts will assist you as you move forward with your business.
Employer Identification Number (EIN)
The EIN is a number that identifies a business in much the same way that a social security number identifies an individual. Unlike for an individual, the EIN is not private, and businesses may give this number out to vendors or clients in various situations. Once you have an EIN, every financial transaction in which your business engages should be attached to that number.
Employees and Taxes
Paying taxes on employees can get complicated quickly. All employers pay FICA taxes on their employees. The employee also pays for half of that money (the FICA deduction appears on employees’ pay stubs as a pre-tax withdrawal). Employers will need to put aside this money to pay the government each quarter. Employers also need to pay social security taxes on their employees and may need to pay workers’ compensation and unemployment taxes. Check with both federal and state governments before hiring anyone to find out exactly what you need to pay for each employee.
Receipts, Receipts, Receipts
For a small business to be profitable, you will need to deduct the largest amount that you can from your revenue to reduce the amount that you are paying in taxes (profit, not revenue, determines tax rate). Save your receipts and make notes on them as soon as you get them. Each receipt should match a specific expense file. Entering your purchases as expenses in a software program helps make this part of small business tax filings more palatable for most business owners.