VWB Blog Did you know that there are over 10,000 different types of taxes? Unless you’re a senator working on tax policy, your knowledge probably stops at state, federal, and sales taxes.
But many businesses and government organizations rely on more specific taxation methods to ensure they can function properly. If you want to run a profitable business, it’s important to have at least a basic understanding of different types of taxes.
This article will give an overview of all the different kinds of taxes so you can get started.
Income Taxes
Federal income taxes are a percentage of a business’s profits and are paid to the federal government. State income taxes are a percentage of a business’s profits and are paid to the state government. Local business taxes are a percentage of a business’s profits and are paid to the local government.
The tax rates for each of these vary depending on the business’s profits and the state in which the business is located. All businesses must pay these taxes to operate legally.
Self-Employment Taxes
Self-employment taxes are taxes paid by self-employed individuals and are used to fund Social Security and Medicare.
The self-employment tax rate is 15.3% and is paid on the first $106,800 of self-employment income.
Employment Taxes
Employment Taxes include Social Security and Medicare taxes, which are withheld from an employee’s paycheck. Businesses are also responsible for matching these amounts and paying taxes to the government.
Income tax withholding is also included in employment taxes. This is a required payment of federal income tax by employers to the U.S. government on behalf of their employees. The amount withheld is based on the wages paid to the employee and the employee’s tax filing status.
Sales Taxes
Sales taxes are a tax imposed on the sale of goods and services. The tax is usually calculated as a percentage of the sale price. Sales taxes are imposed by governments at the national, state, or local levels.
In some countries, sales taxes are imposed on the seller, while in others, they are imposed on the buyer. Sales taxes are generally regressive, meaning they impose a greater burden on low-income earners than high-income earners.
Estimated Taxes
As a business owner, it’s important to know the different taxes you may be liable for. Estimated taxes is one type of tax that businesses may have to pay.
Estimated taxes are taxes paid on income that is not subject to withholding. This includes income from self-employment, investments, and other sources. Businesses may have to make estimated tax payments if they expect to owe the year $1,000 or more in taxes.
Generally, estimated tax payments are made quarterly. Too often, businesses forget to pay small business taxes due to the lengthy time interval of dues. So that you don’t miss any payment deadlines and can avoid penalties from the government, you should consider choosing the best accounting service.
All You Need to Know About the Different Types of Taxes
There are many different types of taxes that businesses have to pay. This can be confusing and overwhelming. However, it is important to understand the different types of taxes to comply with the law and avoid penalties.
This guide has provided a basic overview of the different types of taxes that businesses have to pay. If you have any further questions, please consult a tax professional.
If you’re interested in learning more about how to pay taxes, you should check out the helpful resource section on our website! We’ve tons of great content about taxes, tax laws, and more for you to explore!