Finance for Small Business: How Much Do You Save for Taxes?
Have you started a small business within the last year? If so, and if you’ve brought in any income, you’re going to have to pay taxes on it.
What you might not realize, however, is that small business taxes are a little different from what you have to pay as a salaried employee. In short, finance for a small business can be complicated.
Interested in learning more about how much you should save for taxes? Then read on. We’re going to get into the details below.
Find Out Which Taxes You Have to Pay
There are all sorts of taxes that a small business might have to pay. It’s dependent on your business designation, whether or not you have employees, and whether or not you’re required to collect sales tax, in addition to some other things. As a rule of thumb, it’s wise to save 30% of your profit every year for taxes.
Self-employment Tax
If you’re self-employed, you’ll have to pay FICA tax twice. Why? Because you’ll need to cover both the employer’s and the employee’s portions.
The FICA tax rate for one side is 7.65%. For the two sides, it’s 15.3%. So, if you’re self-employed, be sure to hold aside 15.3% for the federal government.
Sales Tax
If you’re selling products, you’ll need to collect sales tax from your customers. Your exact sales tax rate is dependent on the state in which you live.
Holding Onto Tax Payments
Now, you might be wondering what you should do with the taxes that you’re holding onto. Generally speaking, you should keep them in a separate bank account. This way, you won’t accidentally spend them on other matters.
It’s wise to send a portion of every week’s revenue to the designated bank account. This ensures that you’re keeping up and not misplacing your money. To help you with this endeavor, you might want to utilize the services of an accounting organization.
Pay By the Appropriate Deadlines
Each tax you pay has to be paid by a specific deadline. Failure to pay by this deadline will result in a late fee, which usually increases as more days pass.
For example, federal taxes need to be made in quarterly estimated payments throughout the year. If you ever fail to pay your fair share by the end of the quarterly deadlines, you’ll be met with a small fine come tax season.
Look up the specifics on all of the taxes you need to pay. Your mileage will vary for each.
Finance for a Small Business Carries a World of Difference
In short, finance for a small business carried a world of difference. When you’re an employee, your employer handles most of your tax responsibilities for you. When you own your own business, you have to tend to them yourself.
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Samantha Gaines wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.
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