| This article will guide you through the small business | | | | State tax withholding from the employees' gross |
| tax maze and describe in details the various tax types | | | | wages (For current Federal Withholding rates please |
| your small business may be expose to. Use the article | | | | refer to IRS Publication 17 and for the Stare withholding |
| to learn which federal and state taxes you, as the | | | | rate, please refer to the State's Revenue or Finance |
| owner of a sole proprietorship, general member in an | | | | department), Social Security, also known as FICA |
| LLC or officer of an S. Corporation is responsible for. | | | | (currently at 6.2% of gross wages is the employer's |
| Federal Income Tax | | | | responsibility and the same amount is the employee's |
| The Internal Revenue Code (the IRC) is the source for | | | | contributions with cap of $106,800 on gross wages) |
| imposing income tax on small businesses. The tax | | | | and Medicare (currently at 1.45% of gross wages is |
| code treats each entity type a little different but in the | | | | the employer's part and the same amount is the |
| end the income tax on the business taxable profits is | | | | employee's contributions), Federal & State income tax |
| payable by the small business owner. Sole Proprietor | | | | withholding (at the rates publishes by the IRS and each |
| has to file schedule C to report business income and | | | | State's department of Revenue), Federal |
| expenses and then report the taxable income on form | | | | Unemployment, also known as FUTA (currently at a |
| 1040 where he discloses all of his income sources. | | | | rate of 0.008 of gross wages up to $7,000 per year) |
| Member of a partnership or an LLC reports his/her | | | | and State Unemployment, also known as SUTA, at |
| share from the business taxable income on form 1040 | | | | rates assessed by each State Unemployment |
| and Owner of an S. Corporation does the same. The | | | | Insurance Department. To register with each State, |
| rates of the federal income tax that a small business | | | | you should complete an employer application with the |
| owner will pay depend on his/her filing status and | | | | Department of Revenue and open an account with |
| residency status. For current tax rates please refer to | | | | the State's Unemployment Insurance Department. |
| IRS Publication 17 To register with the IRS you must fill | | | | Sales Tax |
| out IRS form SS4 to obtain Employer ID Number (EIN). | | | | Sales tax is tax imposed on gross sales made to end |
| State Income Tax | | | | users (as appose to resellers who purchase the |
| If your business is operating in a state that imposes | | | | product for inventory) and has many names: |
| income tax on business income, you will be liable for | | | | transaction privilege tax, gross receipts tax, general |
| that tax in addition and regardless of the federal tax | | | | excise tax and more. The tax is imposed by each |
| due on the same income. Very few States (Seven to | | | | State, and in many cases includes Base Rates for all |
| be exact) do not impose income tax and among them | | | | States residents and then additional rates that vary by |
| are Alaska, Florida, Nevada, South Dakota, Texas, | | | | county and city. Rates of sales tax vary by States |
| Washington and Wyoming. Two others, New | | | | with few States that impose zero percent tax (such |
| Hampshire and Tennessee, tax only dividend and | | | | as Delaware, Montana & Oregon) and others that |
| interest income. In general state income tax rates | | | | impose rates in excess of 10% (such as Chicago |
| range from the lowest rate of 3% in Illinois to the | | | | Illinois) |
| highest rate of 11% in Hawaii. To register with each | | | | About The leading source of information for small |
| State's Department of Revenue, you must complete | | | | business taxes. Access free guides, articles, tips and |
| the applicable registration forms to obtain State Tax ID | | | | tools that help you to stay in compliance and browse |
| Number. | | | | products & services that will make your business more |
| Payroll taxAs soon as your business start hiring part or | | | | efficient and keep more money in your pockets. |
| full time employees, it will be subject to Federal & | | | | |