The business owners of Bloomfield need adequate knowledge of the different types of taxes they must pay at local, state, and federal levels. While hiring a Bloomfield, MI accountant can address various tax issues for business owners in the area, understanding business taxes can assist in ensuring compliance with your business operations.
However, it is pertinent to mention that business taxes may be complex and require substantial expertise and experience to deal with them. Therefore, it’s always wiser to hire a professional for business taxes.
Exploring the usual types of business taxes
The types of taxes you need to pay are based on the type of your business and the state you operate in. However, some main types of business taxes are as follows:
- Income tax: All businesses in the United States must file and pay taxes on income earned during a calendar year. However, partnership businesses are required to file estimated taxes.
- Estimated tax: Partnership businesses, solo entrepreneurs, freelancers, and S corporation shareholders are required to file estimated taxes if they anticipate income of $1,000 or more. The estimated tax payment is made every quarter as per IRS guidelines.
- Self-employment tax: Self-employed individuals file a self-employment tax or SE tax. The SE tax is actually their contribution towards the Social Security system, which provides coverage for retirement, survivor, disability, and Medicare benefits.
- Employment tax: Businesses with W-2 employees are required to file and pay federal income tax withholding, social security and Medicare tax, federal unemployment tax, and state-specific employment taxes.
- Excise tax: Excise taxes are usually applicable to companies that are involved in the business of motor fuel, tobacco, air tickets, alcohol, and healthcare goods and services.
Understanding the significance of EIN
Most businesses require an Employer Identification Number (EIN), which is the company’s federal tax ID number. If one of the following applies to your business, then you may need to apply for an EIN:
- You own a business or corporation.
- You have hired employees for your business.
- You have a tax-deferred pension plan, aka Keogh.
- You withhold taxes on a nonresident’s income.
- You file employment or excise tax.
- You are involved with a business with a specific structure.
Common tax forms businesses may require
You may require one or multiple of the following forms to file the taxes levied on your business:
- Form-1065 for a partnership business to file an annual return of income.
- Form-1040 for individual income tax return.
- Form-1040 Schedule C for profit or loss from a business
- Form-1040 Schedule-E is for the partnership businesses to report supplemental income and loss.
- Form-1120 is for C corporations to file income taxes.
- Form-1120-S & Schedule K-I for the S corporations to file a tax return
Other than the above, self-employed individuals and businesses may require Form 1040, 1040-ES, 941, 943, 944, W-2, W-3, etc., to file the taxes.
