Business activities are the determining factors. The business type will decide the type of taxes. The tax will vary depending on the types of business such as using equipment, being self-employed, owning the business property, selling taxable services and products, and making a profit.
We can take an example of an independent contractor, small business owner, or freelancer. In all these conditions, they will have to pay taxes on profits. If you have a start-up business, you should inquire about the taxes that you need to pay. The same is about changing your business or business location. The tax types and amount will vary depending on your business. In brief, we can say that each type of business will have to pay some distinct taxes.
Types of Business Taxes
As stated earlier, there are different types of business taxes. Businesses need to inquire about their specific types of businesses to know about the tax. However, there are five types of main taxes that businesses can go through.
- Employment withholding tax
Some industries that include insurance and mining might need to pay some additional taxes. Some taxes such as sales tax, property tax, and income tax are not specific to certain types of businesses. These are not considered as the business tax as well.
How to Calculate Business Taxes
Business owners need to understand the taxation process to differentiate between personal and business transactions. A better understanding will help you to avoid both minor and major complications. As a business owner, you will have many different ways to complete taxable transactions. It is worth mentioning that you can avoid taxes with smart decisions. However, you must not evade through deceit and concealment. Both these are considered illegal.
You can deduct business expenses when your business activity is involved with your livelihood. All the taxable incomes of a business will be calculated. All the incomes that occurred during that year will be recorded on the tax return of that year along with the payments accrued or paid.
Businesses need to report their accounting method to the Internal Revenue Service. Mostly, two basic methods are followed. These are accrual and cash methods. In rare conditions, businesses might be allowed to use hybrid. If you have the option to do so, you can combine both these methods. A few businesses can use some specific account methods as well.
Business taxes are a bit complex. You might not be able to know which taxes you need to pay for your specific business. If this is the case, talk to experts to get the much-needed help. They will enable you to pay your taxes on time and save wherever possible.