Business taxes 101

- [Instructor] As a business owner, you need to know about the taxes and filing requirements you face. Business taxes come in three varieties and at three levels, monthly, quarterly, and annual are the time periods that you're going to have tax filings, and then at three different levels, the federal level, the state level, and the individual level. Our focus is on the business taxes, that is at the federal and state level, but we will mention some individual taxes that you face as well. Now, you need to make sure that you adhere to filing requirements. If you don't, bad things will happen. At a minimum, the government will start to fine you, and potentially, if you're a really egregious violator, they may eventually show up and actually shut down your business, so you want to make sure that you're adhering to those filing requirements. This is not optional for any business owner in the US. The primary monthly taxes that you have to deal with are sales taxes and 941 deposits. Even if you're primarily selling a service, for example, a hair salon, you're still going to have to pay sales taxes if you sell any products at all to the public, for example, fancy shampoos that might get sold to customers of your hair salon, so you may not think that sales taxes are an issue for you, but in many cases, they are. Now, the other reason why you're going to care about sales taxes is that many of your suppliers will need and require a sales tax ID number for you, so if you're selling a product to the public, and you have suppliers, this is not an optional requirement. In addition to sales taxes, though, the issue that all businesses are going to face is what are called 941 deposits. 941 deposits apply to any business with employees, so if you're a one-man band, if you will, if you don't have any employees, then you won't have to worry about the 941 deposits, but for the vast majority of firms that are out there, this is an issue, your 941 deposits involve filing the income tax portion, the Social Security portion, and the Medicare portion of the tax payments made by you and your employees. Now, taxes are a headache for individuals once a year, but for businesses, in addition to your monthly filings, they're also going to be a major headache every quarter. The monthly tax filings don't take too long, they're not a big paperwork burden. The quarterly taxes, unfortunately, are a major paperwork burden. When it comes to quarterly taxes, probably the biggest ones that you need to worry about are your 941s and your FUTA taxes, that's the federal unemployment taxes. You're also going to have SUTA taxes, that's your state taxes, so you not only have your federal level taxes on a quarterly basis, but you also have state level taxes on a quarterly basis. SUTA is probably the biggest tax hit for a firm outside of your regular business income taxes, and your 941 deposits. Because most states have the unemployment insurance set up at fairly generous levels, at the state level, SUTA taxes, which fund that unemployment insurance, are pretty hefty, they can amount to several thousand dollars per quarter, even for relatively small businesses, so 941s and SUTA will be a big hit to your cashflow every quarter. Now, you're probably also going to need to pay IRS taxes at the corporate or individual level on your business profits, depending on whether you're set up as a C corp or an LLC, but that's a separate issue. Finally, at the annual level, you're going to have the variety of taxes. At the end of every year, in addition to all of your quarterly filings that have to have been done and your monthly filings that have to have been done, and you'll have to make any up that you missed in arrears, you're also going to have to go through and create 1099s for employees, create your W3s, issue your W2s, reconcile all your 941s and make any of the end-of-year payments, you've got to pay your 940s, maybe you have to make SEP contributions for the business owner and potentially the employees, and of course, you've got to pay your individual taxes, so as you can probably see, business taxes are not a simple issue, they're not an issue where you're going to suddenly be done with them in 30 minutes every year. This is a major area that you, as a business owner, need to be paying attention to.