Every business and every type of business is required to pay some form of tax. The amount of the taxes which the business must pay, the type of taxes, and the tax rates which apply depend upon the particular type of business that is being operated.
The laws which govern small business tax, for example, will be different from laws which govern the tax laws applicable to large corporations. Business taxes form an important part of the revenue each state receives.
Business owners must know their tax obligations and when their business taxes are due. If a business fails to pay its taxes, it may negatively affect how the business is perceived in the market.
If a business fails to pay their taxes, it may negatively affect the way in which the business is perceived in the market.
What are the Different Types of Business Taxes?
There are four main categories of business taxes which are modeled after the structural formation of the businesses. As previously noted, the rates and other details regarding the taxation of each different type of business will differ depending upon the jurisdiction or state.
The main types of business taxes include:
- Income tax;
- Self-employment tax;
- Employment tax; and
- Excise tax.
Income taxes are business taxes based upon the business’s yearly income. The form of the taxes and the amount which must be paid depends upon the business operated.
Self-employment tax, also called SE tax, applies to self-employed individuals. These types of taxes are related to Medicare and Social Security issues.
Employment taxes are taxes that are levied on organizations that have formal employer-employee relationships. An employer is required to pay employment taxes.
Excise taxes are taxes that are imposed on certain types of businesses, including businesses that:
- Operate specific business types;
- Use certain products, equipment, or facilities; or
- Receive payment for specified services.
In addition, there are subcategories of excise taxes, which includes:
- Environmental taxes;
- Fuel taxes; and
- Communications or transport taxes.
Due to the numerous categories of taxes, businesses may be required to pay numerous different taxes in one single tax year. If the business changes, it may require corresponding tax adjustments.
What Tax Issues Might a Small Business Face?
Like other types of businesses, small businesses have their share of tax requirements and issues. A small business is generally required to pay several categories of taxes, including:
- Annual business taxes;
- Sales taxes;
- Property taxes; and
- Various other tax requirements.
It is important to note that small businesses may have various tax complexities which do not exist for other, more conventional, business types. A small business, for example, may be eligible to utilize tax breaks or preferential tax treatment, which may be available depending upon the local and state business laws.
The Internal Revenue Service (IRS) has provided standard types of deductions that may be available for a small business, including:
- General and administrative expenses;
- Company-related travel;
- Automobile expenses, which may include maintenance and repairs of company vehicles;
- Company-related entertainment; and
- Employee benefits.
What are Corporate Taxes?
Corporate taxes, which may also be referred to as corporation or company taxes, are fees the federal government imposes on the profits of a business. Federal corporate tax rates are subject to change, but the current rate is 21%.
Corporations may also be required to pay taxes that specifically apply to the divisions of the business. Common types of corporate taxes which businesses may be required to pay include:
- Employment or payroll taxes;
- Real estate taxes;
- Estimated taxes;
- Franchise taxes; and
- Excise taxes.
Employment or payroll taxes involve a percentage deducted from the employee’s paycheck. Employment tax deductions can be used to pay taxes for Social Security benefits, Medicare, and unemployment.
Some businesses may be required to pay real estate taxes on the property they own. For example, if a corporation owns the building where the business operates.
In some cases, businesses may be required to make installment payments on taxes periodically during the year. This is typically required when the business expects to owe $500 or more in federal income taxes.
In some states, businesses must pay a special tax for operating or remaining open in a specific state. This type of tax is referred to as a franchise tax.
An excise tax is another type of tax a business may be required to pay. These taxes only apply to specific types of goods, including:
- Alcohol;
- Gasoline;
- Cigarettes;
- Some luxury goods; and
- Tax laws regulate other goods or items.
What are Business Cell Phone Taxes?
Pursuant to current laws, if a business issues a cell phone to employees and wishes to write off the phone bills as expenses, the business must keep records of every phone bill to tabulate the exact dollar amount which can be written off. Currently, cell phones are listed property under United States tax laws.
This means that the cell phone is business property that inherently lends itself to personal use. Therefore, to retain records that the cell phones are being used for a business purpose that would withstand an audit’s scrutiny, a business must retain each cell phone bill it receives.
For a larger business, this requirement is very inconvenient, as the business may issue cell phones to hundreds of employees and will then be required to keep all related records. To comply with these requirements, an employer should keep these records well-organized.
At the very least, the employer should require the employees to keep their cell phone bill records. There is a possibility that the listed property status of cell phones may change, which would make it much easier for businesses to write off their use for tax purposes.
What are Business Tax Disputes?
A business tax dispute is a legal issue that is tax-related and occurs during the business’s course. Business tax disputes can be very serious and may affect the reputation of a business.
Business owners with tax issues should consult with an attorney who knows the changing tax laws and the numerous tax liabilities that the business owner may face. In certain cases, a business tax dispute may be negotiated into a settlement in federal court.
A tax dispute may differ depending upon the type of business which is involved in the tax dispute. Additionally, these disputes may arise for many reasons.
For example, it is common for a dispute to arise between an employer and an employee regarding tax deductions. In addition, there may be issues involving mistakes made on business tax return forms.
A dispute regarding a business tax deduction is common, especially with a small business. If an individual has a dispute regarding a business tax, it should gather all relevant documents which may be related to the issue, which may include but are not limited to:
- Documents;
- Tax forms;
- Accounting sheets; and
- Expense reports.
These types of documents may be required if an individual has to file a lawsuit related to their dispute.
Do I Need a Lawyer for Help with Business Tax Issues?
Business tax can be very complicated, especially with corporations. In addition, self-employed individuals may also face difficult tax issues.
It may be very helpful to have the assistance of an experienced tax lawyer for any issues, questions, or concerns you may have related to business taxes. Tax issues can be overwhelming and intimidating, and consulting with a business lawyer can help you avoid or even resolve your tax issue.
