How to file small business taxes
Small Business Taxes for Beginners & New LLC Owners
Timecodes:
all right so let's chart this out step
one I'm gonna go through the type of
taxes subject to sole proprietorship
single member LLCs partnership Locs S
corporation and C corporations when it
comes to individual income taxes
everyone pays it except for C
corporations with self-employment taxes
s corporations can avoid some of them
not all but some small business taxes
for beginners let's get into it because
there has been a record-breaking number
of llc's created in the last two years
according to U.S business formation
statistics and unfortunately a lot of
new business owners have no idea how
their taxes work because the game
changes once you become self-employed
because you no longer have an employer
who is paying and filing your taxes on
your behalf like your federal and state
taxes or your Social Security and
Medicare taxes now all those tax
payments fall on you but you're in luck
because if you watch watch this video
Until the End then you'll have a deep
understanding of small business taxes
for beginners I'll jump into topics like
the different types of small business
taxes how to pay taxes for LLC and other
entity owners and common tax deductions
and credits that you should know about
and much more so I hope you're excited
to learn now really quick before I dive
in I want you to know two things number
one I'm gonna go ahead and put the
timestamps for this video somewhere down
in the description below so at any point
in the video you can skip ahead or
reference something again if you need to
and number two it really would help me
out if you like this video for the
YouTube algorithm that way other new
small business owners like yourself can
find this video
foreign
let's go ahead and dive in with number
one the types of small business taxes so
remember as an entrepreneur you are
responsible for paying your taxes now so
then of course it makes sense to know
which taxes you need to pay and which
taxes you don't need to pay now almost
all taxes can be divided into three
buckets okay taxes on income you earn
taxes on what you buy and taxes on what
you own let's start off by first talking
about the type of taxes you pay on money
that you earn because these are your
biggest taxes and as soon as you make
some money Uncle Sam is going to be
looking for their cut since you made it
on U.S Turf so to speak all right now up
first is the individual income tax this
is the one that most people should be
familiar with it's where your tax rate
increases as your income increases
because here in the US we have what is
called a progressive tax system and so
every year the IRS release assist new
tax brackets which I'll put up on the
screen right now for 2022.
now as a business owner you are still
subject to these tax brackets and tax
rates if you have a pass-through
business entity like an LLC S Corp or
simply a sole proprietorship so it is
very important that you understand where
your income may fall as it helps you to
predict your tax liability now if you
want a deeper explanation on this then I
highly recommend you watch my video on
taxes for beginners where I break down
the progressive tax system with examples
and much more detail than I will in this
video also I'm going to break down how
to pay these taxes as a small business
owner and the next point but for now let
me keep going through the different
types okay the next common business tax
is the corporate income tax the only
type of business entity that is not
subject to individual income taxes are C
corporations and that's because C
corporations pay a flat federal tax rate
currently set at 21 for 2022 and pay a
flat state a corporate tax rate which
depends on the state that you do
business in now before you start
thinking well okay I want to see
Corporation hold on here's a quick Pro
tip Okay C corporations are subject to
double taxation because the profits that
are taxed must remain in the C
corporation and so if you as the
business owner decide that you want to
pay yourself then you still could be
subject to other tax rates so C Corps
can be a bit tricky and something you
should definitely consider talking to a
Tax Advisor about which by the way if
you need help with tax planning or tax
preparation we may be able to help go
ahead and click the first link down in
the description below to learn more
about how our services work okay so now
that you know about income tax and
corporate tax let's talk about another
popular tax for business owners payroll
taxes so if you have any employees you
must report and deposit federal income
tax withholdings Social Security and
Medicare taxes where you pay half and
your employee pays half and federal
unemployment taxes and sometimes people
ask me Sean should I look for a W-2
employee or a 1099 contractor and of
course number one always do what's best
for your business but as you can see you
can actually end up paying more taxes
when you hire W2 employees because some
of the tax payments fall on you as the
business now I'm not suggesting that
means you shouldn't hire employees
because there are a lot of fantastic
benefits of having someone who is solely
dedicated to your business but that's
just the tax consequence of it now
closely following payroll taxes you have
self-employment taxes this tax is
specifically for those who are taxed as
LLC owners General Partnerships and sole
Proprietors this is where the IRS is
basically telling you hey since you
don't have an employer who is paying
your share of Social Security and
Medicare taxes that you need to pay both
of them because once again when you are
employed you typically will pay half of
your your Social Security tax which is
6.2 percent and half of your Medicare
tax which is 1.45 but now you need to
handle all of it which brings the
self-employment tax rate to 15.3 percent
now here's another Pro tip once you
start to make enough income it could
make sense to elect to be taxed as an S
corporation because s Corps don't pay
self-employment taxes on their
distributions however becoming an S
corporation can be expensive and require
more from a business owner which is why
it makes sense to wait until you have a
considerable amount of net profit I
would say at least sixty thousand
dollars in net profit before you
consider electing to become one so those
are some of the biggest taxes when you
earn as a business owner now let's
quickly talk about some taxes on things
you buy now the two that I have don't
apply to every business so I won't go
into much detail all right so first up
you have sales tax you've probably seen
this before print it out at the bottom
of your store receipt after you purchase
a good or a service sales taxes are a
tax on retail sales and typically
something that the state wants to
collect now if you own a retail business
the good news is this tax is passed off
to the consumer and it's just something
that your business is responsible for
collecting okay another type of buy tax
is the excess tax this is a niche type
of tax that applies to certain types of
goods like tobacco alcohol soda gasoline
and so on so if you're thinking about
getting to that market make sure you
take note of the excess tax all right
shifting gears to taxes on things that
you own of course you have property
taxes this tax is applied to immovable
property like land and buildings and
states with property taxes and most
people have a good handle on this but it
is something I have to mention if you're
a business owner and you're thinking
about purchasing some real estate for
your company now another type of owner
tax is the tangible personal property
tax or TPP this is a state tax that
applies to property that can be moved or
touched like business equipment
machinery inventory furniture and
vehicles so if you own a vehicle then
you've probably seen something like an
avalorian tax assess when you renew your
registration now about 43 States
currently have TPP okay so those are the
main taxes you may encounter as a small
business owner depending on your
business or entity now let's move on to
the second part of this video and talk
about number two how to pay business
income taxes so there are only about
three to four basic steps you need to
follow step one figure out the taxes you
need to pay which I'll simplify step two
calculate how much you need to pay step
three pay your taxes and then step four
file your tax return simple all right so
let's chart this out step one I'm gonna
go through the type of taxes subject to
sole proprietorship single member LLCs
partnership Locs S corporation and C
corporations when it comes to individual
income taxes everyone pays it except for
C corporations with self-employment
taxes s corporations can avoid some of
them not all but some and corporations
avoid them all together the next type of
tax are payroll taxes and this applies
that every business that has W-2
employees and always applies to S
corporations since owners must pay
themselves a reasonable salary and the
corporate tax rate of course only
applies to C corporations and on the
chart I've listed what tax returns these
taxes are reported on for example single
member LLCs use 1040 individual tax
return and attached Schedule C whereas
multi-member llc's must file an
information return called the U.S 1065
return and then report their income on
U.S 1040 using a tax form called K wines
all right so that's step one figure out
where you fall and what income taxes you
need to pay once you have that then you
move on to step number two and calculate
how much you need to pay so here's the
thing since you are no longer an
employee instead of you withholding
taxes on every paycheck now you're going
to need to pay every quarter in what is
known as a quarterly estimated tax
payment which can be calculated by
simply taking the total taxes you owe
plus the total self-employment taxes you
owe which gives you your total estimated
taxes and then divide that by four to
figure out exactly what you need to pay
every quarter so if you need help
getting to those numbers then I would
suggest simply Googling and finding an
online calculator or simply pay 110 of
what you owed in the previous tax year
to avoid any penalties now I also will
put up on the screen the quarterly
estimated tax deadlines for 2023 and as
you can see you have roughly 15 days
after the typical calendar quarter ends
to pay your taxes now out it is
important to know that you don't have to
make quarterly tax payments or you fail
to do so on time then you can get hit
with what is called an estimated tax
penalty which is like the irs's late fee
if you will and this fee along with
others can be avoided if you simply pay
your taxes on time now once you know how
much tax you need to pay then you can
move on to step three and pay your taxes
which you can do by simply going to
irs.gov backslash payments log into your
account and select make a quarterly
payment from there you can choose to use
your bank account or any debit card
credit card or digital wallet like
PayPal to make your payment and then
finally step four is to file your tax
return so you report all your income and
all your payments to the IRS all right
now let's move on to the third part of
this video and talk about some of my
favorite things which is number three
business tax deductions because business
owners in my opinion have the best tax
advantages because as long as you place
smart you can significantly lower your
tax bill sometimes all the way down to
zero like the rich and wealthy if you
use the tax code to your advantage and
take certain business tax deductions a
business tax deduction is an expense a
business can claim in an effort to
reduce their taxable income and since
there are many unique types of
businesses that IRS considers a business
expense deductible as long as it is
ordinary and necessary to the company an
ordinary expense is something common and
accepted in your type of business in a
necessary expense is something that is
helpful and appropriate for your
business so if you use your imagination
that can be a lot of things but some tax
write-offs are very common like employee
expenses the cost of hiring wages
benefits and even writing off taxes like
payroll taxes travel expenses airfare
hotel stays meals office expenses rent
utilities supplies advertising you
equipment expenses purchasing certain
assets like machineries vehicles and
even planes just to name a few and since
businesses help stimulate the economy
many states offer specific business
credits which helps reduce business
owners tax liabilities dollar for dollar
popular credits are the research and
development tax credit credits for
hiring veterans and other employees
credits for developing your business in
a certain Zone city or county and so on
we have a lot of videos on this channel
that talk about tax write-offs and
credits so make sure you're subscribed
if you haven't already let's go ahead
and move on to the fourth part of this
video and talk about number four staying
compliant staying compliant with the
Internal Revenue Service the IRS means
following all applicable tax laws and
fulfilling your tax obligations as a
business owner and listen if you are not
found compliant with the IRS you could
cause yourself a lot of unnecessary pain
for example you may find yourself paying
a additional fees and penalties you
could find yourself getting and losing
tax audits you could lose your status as
an LLC owner which offers many legal
liability protections so how do you stay
compliant here are six tips number one
follow the rules of your LLC LLC is a
governor by state law and each state has
its own set of rules for llc's so make
sure you understand them and you follow
them which may include some requirements
like maintaining records holding
meetings or electing members and
managers number two keep accurate and
organized records AKA bookkeeping this
will make it easier for you to stay
compliant and helpful in the event if
you're ever audited number three fulfill
your tax obligations this includes
filing your tax returns paying your
taxes and sending the appropriate tax
forms when necessary number four follow
employment laws if you have employees it
is very important that you understand
and you comply with employment laws
including laws related to minimum wage
overtime and discrimination number five
protect consumer privacy if you collect
personal information from your customers
or clients it's very important that you
protect our privacy and you follow the
applicable laws related to data and
privacy protection in the number six
obtain any necessary licenses and
permits depending on the nature of your
business and the location of where you
operate you may need to obtain certain
licenses and permits in order to legally
conduct business so make sure you
understand what licenses and permits are
required for you and then make sure you
take the necessary steps to obtain them
and renew them all right so we covered a
lot here and if you understand all that
congratulations you are now in good
shape to understand and manage your
business taxes but there is one more
advanced topic I didn't get to cover
which is IRS receipt requirements and
how to substantiate any tax deduction
that you decide to take so you're
definitely going to want to watch this
video coming up next to get a clear
understanding of what is required from
you as a business owner and I'll see you
over there
Related queries:
how to file small business taxes online
how to file small business taxes canada
how to file small business taxes in texas
how to file small business taxes free
how to file small business taxes separate from personal
how to file small business taxes in virginia
how to file small business llc taxes
how to file your small business taxes
how to file small business quarterly taxes
![How to File Your Taxes as a LLC Owner in 2023 [Step-by-Step]](https://img.youtube.com/vi/vqsghJV1AbU/mqdefault.jpg)
![14 Biggest Tax Write Offs for Small Businesses! [What the Top 1% Write-Off]](https://img.youtube.com/vi/5YggWhLeckM/mqdefault.jpg)
