Tips for Starting a New Business: #3 Know Your Tax Obligationsby Lester Bahr, CPA on 10/19/17
Tax obligations and the manner in which they get assessed vary depending on the legal structure of your business. For example, while a C corporation will have federal and state tax liabilities determined and paid at the entity level, that won’t be the case if you are a pass-through entity such as an S corporation or LLC.
Similarly, if you are a sole proprietorship, all taxes will be determined as part of your individual tax return filing. Many times when someone starts their own business as a self employed person they feel a bit overwhelmed when they learn all of the different taxes they will be responsible for.
These include federal, state and local income taxes, self-employment tax (which is Social Security and Medicare). Then, depending on the nature of what the business is and where it is located, there may also be obligations to collect and remit sales taxes and pay business privilege taxes. Now, add into the mix any employees the business owner might have and there are all the various tax withholdings, quarterly and annual fillings associated with payroll too.
So, before you get too far along in your business activity as a self employed person, make sure that you meet with your CPA to make sure that you are going to be compliant with all your tax filing obligations and that you are planning your cash reserves appropriately so that you are not paying any taxes late and thus incurring unnecessary penalties and interest on top of all those taxes. This may also necessitate needing to make estimated tax payments in advance each year.
In the event you have any questions, you can always contact me here to ask them.
In addition, here are some additional tax links for more information:
Tax Preparation Filing Services
Tax Services Lehigh Valley
Lester R. Bahr, CPA