It's really easy to forget or to be unaware of all the tax laws affecting your business. When one of my friends started his own business, he did not know that his bookkeeper had failed to pay the payroll taxes on time. He owed a penalty. Slip-ups like these are easy to make. When you have employees, you need to withhold payroll taxes and pay them to the IRS on a regular basis. You can't just trust your accountant or your bookkeeper to do it. You need to check up on what's going on. Be aware of the laws and their consequences. It's your business and your responsibility.
You need to have a Tax I.D. You need to pay quarterly estimated taxes on your income. It doesn't matter if you're a sole proprietor, LLC, C- or S-Corporation or partnership.
All this may seem like a pain in the neck, but it's part of being a responsible business owner. So go to www.irs.gov, to www.sba.gov and to your state's revenue services pages and find out what you need to do. Then, have a talk with your finance folks, your accountant and/or your bookkeeper.
And if you do it all yourself, keep good books with Excel or QuickBooks. And use Turbo Tax. Turbo Tax is terrific.
One final word. Stay honest, but make sure you don't pay more taxes than you need to. Learn the rules and play by them.
Showing posts with label payroll taxes. Show all posts
Showing posts with label payroll taxes. Show all posts
Saturday, May 23, 2009
Tuesday, March 11, 2008
Ben Stein on Taxes
Our family have been fans of Ben Stein for a long time. We loved him as the monotone economics teacher in Ferris Bueller's Day Off and as the host of Win Ben Stein's Money on Comedy Central years ago. Ben is not just an actor. He's an economist, lawyer, writer and Republican. I'm a fan of his New York Times column in the Sunday Business section.
His March 9, 2008 column took the form of a letter to John McCain telling McCain what to do with taxes, if he became president.
http://www.nytimes.com/2008/03/09/business/09every.html?ex=1362805200&en=422ee5508ead7bc0&ei=5124&partner=permalink&exprod=permalink
Basically, Ben took the time to explain why we have a huge deficit and how to fix it. We're spending enormous amounts of money on entitlements, defense and other government-run programs. He went on to say that our nation can't afford to continue to run up deficits by keeping taxes so low. He says we need to tax the people most likely to be able to give up some of their income -- the top earners. He makes a pretty good rebuttal to the editorials in the Wall Street Journal which take the opposite point of view.
But the whole thing got me thinking about taxes. The most punitive, regressive taxes we have are payroll taxes. I mean, even teenagers in part-time or summer jobs or the poorest landscape workers or check-out clerks at Wal-Mart have to pay payroll taxes. They may not make enough to pay income taxes, but payroll taxes are withheld from everyone from the first dollar. Even worse, the employer has to match the tax. This means that employers pay far more than salary for each worker. Small business owners, sole proprietors and entrepreneurs have to pay both sides. Yet, once an salary has exceeded $97,500, the tax (both sides) disappears, giving workers and businesses a sudden boost. These Federal taxes include the Social Security Tax (6.2% from each person, and 6.2% from each business) and Medicare tax (1.45% each).
The way the system is set up creates distortions. It makes people hire workers off the books. It encourages the hiring of illegal immigrants. It hurts growing businesses and low-income workers and nonprofits, who have to pay far more than the minimum wage, once the tax is added in. If we could eliminate these taxes on the lowest-income workers (up to $25,000 in income) and take the income cap off, I believe we could free up a lot of capital that could go to paying off personal debt and funding health insurance. It would spur growth and hiring and reduce the incentive to hire undocumented workers. It would be a very creative way to increase taxes on the highest earners, while ensuring that Social Security and Medicare would remain solvent as the Baby Boomers enter retirement.
I hope that someone who reads this will help spread the word about this idea. Is anyone reading this and agreeing with my idea? Anyone?
His March 9, 2008 column took the form of a letter to John McCain telling McCain what to do with taxes, if he became president.
http://www.nytimes.com/2008/03/09/business/09every.html?ex=1362805200&en=422ee5508ead7bc0&ei=5124&partner=permalink&exprod=permalink
Basically, Ben took the time to explain why we have a huge deficit and how to fix it. We're spending enormous amounts of money on entitlements, defense and other government-run programs. He went on to say that our nation can't afford to continue to run up deficits by keeping taxes so low. He says we need to tax the people most likely to be able to give up some of their income -- the top earners. He makes a pretty good rebuttal to the editorials in the Wall Street Journal which take the opposite point of view.
But the whole thing got me thinking about taxes. The most punitive, regressive taxes we have are payroll taxes. I mean, even teenagers in part-time or summer jobs or the poorest landscape workers or check-out clerks at Wal-Mart have to pay payroll taxes. They may not make enough to pay income taxes, but payroll taxes are withheld from everyone from the first dollar. Even worse, the employer has to match the tax. This means that employers pay far more than salary for each worker. Small business owners, sole proprietors and entrepreneurs have to pay both sides. Yet, once an salary has exceeded $97,500, the tax (both sides) disappears, giving workers and businesses a sudden boost. These Federal taxes include the Social Security Tax (6.2% from each person, and 6.2% from each business) and Medicare tax (1.45% each).
The way the system is set up creates distortions. It makes people hire workers off the books. It encourages the hiring of illegal immigrants. It hurts growing businesses and low-income workers and nonprofits, who have to pay far more than the minimum wage, once the tax is added in. If we could eliminate these taxes on the lowest-income workers (up to $25,000 in income) and take the income cap off, I believe we could free up a lot of capital that could go to paying off personal debt and funding health insurance. It would spur growth and hiring and reduce the incentive to hire undocumented workers. It would be a very creative way to increase taxes on the highest earners, while ensuring that Social Security and Medicare would remain solvent as the Baby Boomers enter retirement.
I hope that someone who reads this will help spread the word about this idea. Is anyone reading this and agreeing with my idea? Anyone?
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