As a business owner, it’s important to understand your federal, state, and local tax requirements. This will help you file your taxes accurately and make payments on time. The business structure you choose when starting a business will determine what taxes you must pay and how you pay them.
If you have employees, there are federal tax requirements for what you must pay and the forms you have to file. These employment taxes include Social Security and Medicare taxes, federal income tax withholding, and federal unemployment (FUTA) tax. In all states, businesses must pay state workers’ compensation insurance and unemployment insurance taxes.
Each of the 50 states have different definitions of what property is taxable. Some states collect property tax from businesses in commercial real estate locations. Certain states also collect property tax for business assets, such as vehicles, computer equipment, and peripherals. The amount of tax you pay is calculated by the total value of the property or on a certain percentage of the value. Search for property tax requirements in your state.
States may also tax your business on the use of goods and services when sales tax has not been collected. This typically applies to goods and services purchased outside of the state where you conduct business.
Energy efficient appliances and energy-saving improvements don’t just cut your energy bills. They can also get you or your business tax credits, rebates, and savings during sales tax holidays. Tax credits reduce the amount of tax you owe, and rebates give you cash back on your purchase.
Find out if you qualify for state, local, utility, and federal incentives:
Residential Renewal Energy Tax Credit - Qualify for tax credits for buying solar-electric, solar water heaters, wind turbines, geothermal heat pumps, and fuel-cell equipment for your primary residence. The credits have been extended through the end of 2021.
The value of the credits for each technology will decrease by a certain percentage each year until they expire.
Sales tax holidays - Find out if your state offers a sales tax holiday for buying energy-efficient appliances.
Tax Relief in Disaster Situations
The Internal Revenue Service (IRS) offers special tax help for individuals and businesses recovering from a major disaster or emergency. In a federally-declared disaster area, you can get a faster refund by filing an amended return. You will need to claim the disaster-related losses on your tax return for the previous year.
You can also contact the IRS for more information on tax relief in disaster situations. Wait times to speak with a representative may be long.
Estimated tax is the method used to pay taxes on income that is not subject to withholding. This includes income from self-employment, interest, and dividends. You may also have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Who Has to Pay Estimated Taxes?
Individuals who conduct their own business typically have to make estimated tax payments. You may be charged a penalty if you do not pay enough through withholding or estimated tax payments.
The year is divided into four periods to pay estimated tax. Each period has a specific payment deadline.
These are the 2019 Estimated Federal Tax due dates:
Jan. 15 of the next year
Donate to Charity as a Small Business
Many small businesses donate to charity in some form each year. Giving to a charitable cause is not only good for society, it can also be good for business.
Reasons Businesses Donate
Small businesses decide to support charitable causes for a variety of reasons:
Help society - Businesses can use their size and influence to make a significant impact in a community, or on behalf of a cause.
Increase customer satisfaction or brand awareness - Businesses can set themselves apart from the competition and become more likable and recognizable by publicly supporting a cause. Some businesses even choose to involve customers in their charitable campaigns, or support nonprofit organizations with missions that are relevant to the company’s product or service. For example, a technology firm may partner with a charity that teaches computer skills to underprivileged students.
Employee retention and satisfaction - Businesses can improve employee morale and create a more positive company culture by mobilizing in support of a cause. Some companies allow employees to nominate charities to partner with, or choose the way the company donates.
Types of Donations
Businesses can donate to a charitable cause in many ways:
Money - Write a check, set aside a portion of revenue from sales, or collect donations from employees. Some companies may also offer to match employee donations, or choose to develop a specific product or service and donate the profits from its sale.
Inventory - Give merchandise or products like food, clothing, toiletries, furniture, or building materials.
Events - Organize food, clothing, supply, or blood drives. Companies can also sponsor sports teams, athletic competitions, arts productions, community projects, and fundraisers.
Volunteer - Work for free. Nonprofit organizations may need tutors, drivers, servers, or warehouse staff, for example. Companies can schedule a time for employees to volunteer together or encourage staff to sign up in their free time. Some businesses may choose to offer paid time off for volunteering.
Services - Donate professional skills. Nonprofit organizations may need help in the legal, policy, medical, dental, counseling, finance, technology, or administrative fields, among others. For example, beauticians may coordinate with a women’s shelter to style hair or give manicures, and artists may work with a community center to lead a children’s craft.
Time - Establish a leave-based donation program. This allows employees to forego their paid leave days in exchange for the company making a monetary donation to a charity.
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