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4 Reasons to Incorporate Your New Business as Early as Possible

Incorporating Early for New Business
Why should you incorporate your business as early as possible

4 Reasons to Incorporate Your New Business as Early as Possible

November 6, 2022

Incorporating Early for New Business

peakreliance

Accounting, CPA, Taxes

Entrepreneurs and small business owners often get caught up in making sure their start-up thrives and get engrossed in planning spot-on strategies to innovate and develop their business idea. Often, the notion of securing the idea and legally owning it gets ignored. 

Incorporating your start-up early is a very beneficial step that should be kept under consideration from the very beginning. In layman words, incorporating a new business means taking the legal ownership and turning the business into a formal company recognized by the related state of incorporation. In technical terms, it is turning your sole proprietorship or general partnership into legally and formally recognized corporation.  

Incorporating your business is simple contrary to popular belief and is not nearly as complex as it may appear to be. While people have these misconceptions that this step should be taken once the business has matured enough or is generating a specific amount of money, there are many reasons why incorporating your business can come in handy and here’s how. 

1. It will help avoid disputes among founders

Running a start-up may seem easy from afar but investing 60 hours a week into a business which doesn’t guarantee immediate rewards can be both tiring and frustrating. A considerable amount of business owners doesn’t even earn a salary while putting in tireless efforts.   

Many times, this may leave owners and founders exhausted and disappointed — possibly with each other as well. Keeping this under consideration, it’s best to create an equity split as early as possible. This will help prevent clashes among all founding parties as co-founder equity negotiations will work better. 

Incorporating early will make possession shares concrete so in case one co-founder decides to leave or sell their shares, incorporated businesses can handle that in an organized manner and with resilience, that would not affect the other parties which can prove an advantage if one co-founder wishes to sell their share within the first year or two.  

2. Provides protection against personal liability

Since an incorporated business is known as a legal entity, and its proprietors are protected from all personal liabilities for corporate debts that the business may ensue. 

So, in case your startup is sued and obliged to make a payment, your personal assets will generally remain secure. Even in worst cases like bankruptcy, the corporation will be held accountable not the founders. 

Incorporating your start-up as soon as possible can relieve you of some of the emotional strains and anxieties that founders may experience. 

3. It will help attract more investors and bank support

With a corporation, it’s generally easier to raise additional capital or secure a loan because of the sense of legitimacy it brings to the business. When you incorporate your start-up, it makes you eligible for opening up a bank account and you can start building a line of credit, which, for a small business owner, is a requirement. 

Any startup without a formal business entity defined is viewed as a mere hobby, and seldom interests investors or potential partners. Also, with changing trends and rapid advancements these days, you need to be ready to move quickly from an idea/hobby to a business. Successful startups are all about being equipped to move to accomplishment before the market and it’s need changes or new competitors appear. 

4. Tax benefits

Another noteworthy benefit of incorporating your business, and one of the most crucial to leverage, are the numerous tax deductions that are accessible to corporations only. When a start-up goes from being a sole proprietor or a general partnership to a corporate business structure such as an LLC, there are plentiful deductions at your disposal that were not available to individuals. Specifically, you may see tax benefits such as: 

  • The capacity to spread out your loss over a longer period of time  
  • The opportunity to deduct start-up and operational expenses  
  • The right to deduct employee benefits like pf and health insurance  

The local and state taxing authorities can offer multiple incentives to you more readily and more often if you are a corporation. Keep in mind, however, that tax laws are complex as they always have been and it’s a great idea to consult a certified accountant or CPA before claiming any deductions from the state. 

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What Are the Pros and Cons of Incorporating Your Business? 

What are the pros and cons of incorporating your business

What Are the Pros and Cons of Incorporating Your Business? 

November 5, 2022

What are the pros and cons of incorporating your business

peakreliance

Accounting, CPA, Taxes

Incorporating a business at some point is integral for its further growth and as the founders, business owners are often skeptical about the whole idea of turning their start-up into a corporation.  

In this blog we are aiming to help you make an informed decisions about incorporating your business by helping you figure out if it’s the right time to do so or not. But first, let’s elaborate a bit more on what it means to ‘incorporate a business’.  

Incorporating means to take the legal ownership and turning the business into a formal company recognized by the related state of incorporation. In technical terms, it is turning your sole proprietorship or general partnership into legally and formally recognized corporation.  

A corporation is an entity in itself and separate from its owners thus having its own assets and liabilities separate from the founders. There are many pros and cons when taking this decision but what you need to consider is that if the move is right for you and your business. 

 

Pros of Incorporation

  1. Independent legal entity 

    Perhaps one of the biggest benefits to becoming an incorporated company is its legal separation from its founders. As long as the business is not a corporation, the business and the owner is the same legal entity, so if anything goes wrong or if the business owes money, the owners will be personally liable for it. With a corporation, the risk stays with the company as an independent entity, and to the maximum extent, the directors aren’t liable. 

    The best example of this is, if a customer or client took the business to court, with a sole proprietorship, it would be the owners’ responsibility, whereas with a limited company it would be the company itself.  

  2. Tax 

    Tax rules are applied differently on start-ups and sole traders and on corporations. For a running sole trader business where the generated income is beginning to reach new highs, your accountant may suggest you to become a registered company to take advantage of your personal tax savings from the existing tax laws for corporations. While as a sole trader your profits are seen as your total income and you are taxed on it’s basis, a limited company is completely independent and the director is taxed as an employee eliminating all miscellaneous liabilities. 

  3. Raising Capital through Shares 

    A corporation has the advantage of selling its shares. If you’re looking to expand or branch out into a new area, or new to raise additional capital, you can sell the company’s shares to friends, family or other interested investors to help your business raise money. 

  4. Reliability 

    A start-up can be set up in no time at all, and there is no solid proof that they are even a legitimate or long-lasting business. Of course, this doesn’t mean that start-ups or sole traders do not qualify as businesses but when comparing a corporation with a business that has yet to be incorporated, the difference will definitely remain. The credibility of a state recognized business will always be more than the one not on this position. On that basis, some people and clients place more trust in limited companies. So incorporating your business will increase its standing and ultimately will ensure profitability in the future by eliminating doubts about the trustworthiness.  

 

Cons of Incorporation

  1. Additional complicated paperwork

    Incorporating your business can be both a time-consuming and a complex process due to all of the technical and elaborated paperwork involved. To maintain a corporation, you need to keep detailed records of your articles of incorporation and bylaws, including information about all meetings held as well as a register of directors, employees, and shareholders. 

    In addition to tracking meetings and other activities, it is essential to keep organized records of transactions. You need up-to-date records of each and every financial transaction so the corporation can file income tax returns correctly. 

    Since, each state also has its own guidelines on recordkeeping requirements for incorporated businesses, you must also adhere to the rules put forward by your state.  

    Hiring an accountant or a CPA can help you a great deal in this case. 

  2. Cost of the process

    One shortcoming of incorporating a business are the expenses that come with it. Because a corporation has a more complex structure than other forms of businesses, they generally tend to be more expensive to set up. 

    In order to form a corporation, you have to pay certain fees and after you establish your corporation these fees continue. They are ongoing and can be costly for small businesses who aren’t generating enough income. For instance, some states impose long term fees on corporations. Here are some other fees that you may have to pay: 

    • Set-up cost 
    • Legal fees 
    • Accountant fees 
    • State fees

     

  3. Double taxation 

    Another drawback of incorporating your business is double taxation. Double taxation is when a corporation has to pay the same amount of income tax twice on the same income. For a corporation, this means being taxed on both personal and business levels. 

    Corporations always pay taxes on their annual/yearly earnings. When a corporation pays dividends to its shareholders, the dividends have tax liabilities as well. Shareholders who receive these dividends must pay taxes on them too. 

    Business structures other than a legal company can dodge double taxation with pass-through taxation. Pass-through taxation refers to when taxes pass through the business and onto the owners or individuals simultaneously. 

    If you want to sidestep double taxation altogether, you may want to establish an S corporation or consider all possible outcomes and be prepared of all before incorporating your business. 

     

 

 

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What’s the Self Employment Tax Rate in Florida in 2022?

The Self Employment Tax in California in 2022_ All You Need to Know (2)

What’s the Self Employment Tax Rate in Florida in 2022?

October 18, 2022

The Self Employment Tax in California in 2022_ All You Need to Know (2)

peakreliance

Accounting, CPA, Taxes

Self-employment tax rates in the United States vary by state and can be complex. The self-employment tax is a Social Security tax that independent contractors and freelancers pay on their income from self-employment activities. Furthermore, the self-employment tax rate in Florida depends on your profession type, which is further broken down into three categories: sole proprietors, partners in a business, and incorporated businesses. Here’s more information about how much you could pay as an independent contractor or freelancer in Florida in 2022. 

How does the Self-Employment Tax work in Florida?

Anyone who earns income through self-employment is required to pay self-employment tax. Self-employment tax is 15.3% of your gross income earned through a self-employed business. If you are a sole proprietor, self-employment tax applies to your net profit. If you are a partner in a partnership or an employee, self-employment tax applies to both your net profit and your gross profit. Self-employment tax is assessed on your income from self-employment activities, not your net income. Self-employment income includes: – Income you earn as a sole proprietor. – Income you earn as a partner in a business. – Income you earn as an employee. 

Sole Proprietors 

Sole proprietors are individuals who are self-employed and have no employees. They are responsible for paying self-employment tax on their income, and are liable for paying the self-employment tax for all of their employees. Sole proprietors have one of the highest self-employment tax rates. In Florida, net self-employment income from sole proprietors is subject to an 8.95% self-employment tax, which includes a 3.9% employee contribution. If a sole proprietor has one or more employees, their self-employment income is subject to self-employment tax at a combined rate of 11.9%. 

Partners in a Business 

Partners in a business are responsible for paying self-employment tax on their income, and all of the business’s employees are required to pay self-employment tax on their share of income. This can be complicated, so talk to your accountant to see how this may affect your situation. In most cases, a partner’s share of a business’s self-employment tax liability is equal to the amount of self-employment income the partner would have been responsible for paying if they had not been a partner. If partners have different incomes, however, this rule may not apply. This situation gets more complicated if your business has multiple partners. If one partner is liable for paying most of the self-employment tax, the remaining partners may be able to claim a credit for their tax liability. 

Incorporated Businesses 

If you are the owner of an incorporated business, your share of the business’s self-employment tax is limited to your share of the business’s income. If another person owns a majority interest in the business, he or she is responsible for paying the entire business’s self-employment tax. If you are a sole proprietor or a partner in a partnership that owns an incorporated business, you may be liable for the entire amount of the business’s self-employment tax. It’s important to note that the IRS has a detailed article on this topic here: 

How to Lower Your Self-Employment Tax Rate in Florida 

Most independent contractors will need to file a Schedule SE with the Florida Department of Revenue, which will report your self-employment tax to the IRS. If you can lower your self-employment tax rate in Florida, you may be able to get away with filing Schedule SE only once per year instead of every quarter. You can lower your self-employment tax rate in Florida by filing Form 52- Wet. This form allows you to pay self-employment tax on less than the allowable amount while still taking advantage of the partial credit. Section 62(c) of the Internal Revenue Code allows you to pay self-employment tax on your net profit of up to $63,000. If you have income above this amount, you can make a reduced payment on Form 52- Wet, take a partial credit for the excess amount, and have the net profit remaining be liable for self-employment tax at 15.3% of gross income. 

Estimated self employment tax rate for sole proprietors in Florida 

The self-employment tax rate for sole proprietors in Florida is 8.95%. If you are a sole proprietor with income under $400,000, you may be eligible for a 0.9% credit for Florida residents. This credit is not available to sole proprietors with income over $400,000. For more information, see the Florida Department of Revenue’s instructions for filing Schedule SE. 

Estimated self employment tax rate for partners in a business in Florida 

The self-employment tax rate for partners in a business in Florida is 11.9%. If you have income from a business, you may be liable for self-employment tax on both your net profit and your gross profit. For example, if you have income of $100,000 as a partner and $200,000 as a shareholder in a business, you may be required to pay $150,000 in self-employment tax. 

Estimated self employment tax rate for incorporated businesses in Florida 

The self-employment tax rate for incorporated businesses in Florida is 15.3%. If you are an owner of an incorporated business, you may be liable for the entire amount of the business’s self-employment tax. It’s important to note that the IRS has a detailed article on this topic here: 

Bottom line 

Self-employment tax rates in Florida can be complicated. If you are an independent contractor or freelancer, you may be able to lower your self-employment tax rate by taking advantage of the credit for income below $400,000. If you own an incorporated business, you may be required to pay the entire amount of the business’s self-employment tax. However, the IRS has a detailed article on this topic here: Keep in mind that self-employment tax rates do change, so it’s important to check the current rates in Florida before filing a return. 

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The Self Employment Tax in California in 2022: All You Need to Know

The Self Employment Tax in California in 2022_ All You Need to Know

The Self Employment Tax in California in 2022: All You Need to Know

October 13, 2022

The Self Employment Tax in California in 2022_ All You Need to Know

peakreliance

Accounting, California, CPA, Taxes

You may love working for yourself, but it comes with its fair share of challenges. Self-employment taxes are just one of those challenges, but they’re not as scary as they sound. Self-employment tax is an optional tax that all self-employed workers in the U.S. must pay on their taxable income from self-employment activities. Self-employment tax is basically a combination of two different taxes: social security and Medicare taxes. Both these taxes are commonly referred to as “self- employment” or “SE” taxes. In addition to discussing the self-employment tax in California in the following article, we have also included information about the pros and cons of being self-employed so that you can make an informed decision before taking this career path. 

What Is the Self-Employment Tax? 

Self-employment tax is an optional tax on the income you earn from self-employment activities. Self-employment tax is basically a combination of two different taxes: social security and Medicare taxes. The social security tax rate is 12.4% (9.1% for employer and 3.3% for employee), and the Medicare tax is 2.9%. Just like wages earned from working for an employer, self-employed workers are required to pay the employee portion of these taxes out of their own pockets. Self-employed workers must pay the employer portion of these taxes as well. Self-employed workers are responsible for paying the entire self-employment tax themselves. An employer does not step in to pay the employer portion of these taxes as they do when you are an employee. 

How to Calculate Self-Employment Tax 

Calculating self-employment tax is relatively simple. To calculate the tax, multiply your self-employed net earnings by the following rates: 12.4% for social security and 2.9% for Medicare. Since you are both the employer and the employee, you will be responsible for paying the employer portion of the taxes, which is 12.4%. So you will multiply your self-employed net earnings by 12.4% and then subtract the result from the amount you actually earn from self-employment activities. Let’s look at an example to make sure you have a good grasp of the whole process. Say you earn $35,000 from self-employment activities. You will multiply the $35,000 by 12.4% and come up with a result of $4,700. Next, you will subtract the $4,700 from the total amount you earned from self-employment activities ($35,000), and you will have your taxable self-employed net earnings. 

When Are Self-Employment Taxes Due? 

You have to pay self-employment taxes when you file your annual return for self-employment activities on the 1040-SE form. The deadline to file this return is usually the same as the deadline for filing your 1040: April 15th. Keep in mind, however, that you can apply to have the deadline extended to June 15th if you aren’t able to file your 1040-SE by the due date, but you will have to pay a $100 late fee. 

How Much is the Self-Employment Tax? 

The amount of self-employment tax you will pay will depend on your net earnings from self-employment. As we’ve already discussed, the self-employment tax is calculated by multiplying your net earnings from self-employment by 12.4% for social security and 2.9% for Medicare. If your net earnings from self-employment are $37,000, for example, your self-employment tax will be $5,309 – $4,489 for social security and $820 for Medicare. Self-employed workers are allowed to deduct the employer portion of their self-employment tax when calculating their total income tax. For example, if you earn $37,000 on which you owe $5,309 in self- employment tax, the $5,309 will be subtracted from your taxable income, and you will only have to pay taxes on the remaining amount.

Pros of Being Self-Employed 

More Freedom: When you’re self-employed, you have the freedom to set your own hours, choose your own projects, and work from home. This flexibility allows you to have a more balanced life and spend more time with your loved ones. More Control: When you are self-employed, you have control over the projects you take on and the clients you choose to work with. You are also able to set your own rates, which means you can charge what you’re worth. More Money: Since you may be able to charge more as a self-employed worker than you would if you were an employee, you may be able to earn more as a self-employed worker. 

Cons of Being Self-Employed 

Higher Taxes: Since you have to pay the full amount of self-employment taxes yourself, you will end up paying more in taxes as a self-employed worker than you would as an employee. No Health Insurance: You will not be eligible to receive health insurance from an employer if you decide to go out on your own. And you will have to pay for your health insurance out of your own pocket. No Retirement Plan: Employees are offered retirement plans from their employers, but since you are self-employed, you won’t have this option. As a self-employed worker, you will have to save for retirement on your own. No Paid Vacation: When you are employed by an employer, you are entitled to paid vacation days. But as a self-employed worker, you will have to save money for vacation days. 

Final Words: Is Being Self-Employed Worth It? 

Being self-employed comes with its fair share of challenges, but it can also be extremely rewarding. In addition to being able to set your own hours, control your own projects, and charge what you’re worth, you will also have to pay higher taxes and take care of your own retirement savings. Being self-employed can be worth it if you are prepared for the extra challenges and sacrifices that come with this career path. 

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Self Employment Taxes in New York in 2022: What You Should Know

Self Employment Taxes in New York in 2022_ What You Should Know

Self Employment Taxes in New York in 2022: What You Should Know

October 6, 2022

Self Employment Taxes in New York in 2022_ What You Should Know

peakreliance

Accounting, CPA, Taxes

When you think of taxes, most people conjure up images of IRS agents and tax preparers. However, taxes are a vital necessity for a modern society. Without them, many businesses wouldn’t be able to function or customers would be left paying with their wallets when an unexpected expense strikes. Everyone knows that personal income taxes fall where your income comes from; however, not everyone is aware of all the other types of income taxes that exist in New York. Consider this your crash course on what income taxes are and what they mean for you as an individual – and whether or not you should consider becoming self-employed. 

What is Self-Employment Income Tax? 

If you’re like most people, you’re probably aware that you have to pay income taxes on both your income and self-employment income. However, you may not be aware of all the special rules that apply to your self-employment income. That’s where this guide will help. It’s important to note that taxes are a balancing act between the government and the individual. If you have too much income, you have to pay too much in taxes, or the government will take too much from the people who pay taxes. On the other hand, if you have too little income, the government has to take too much from the people who pay taxes, or nothing at all. The same can apply to your self-employment income. 

What is a Profit-Shifting Tax? 

A profit-shifting tax is one in which the government takes a cut of some of your income and then you pay it to the government as if it was your own income. This is the type of tax that most people think of when they hear the word “tax.” Some income comes from jobs that are not yours, some comes from investments, and some comes from operations. When you take profits from one source and shift them to another, you are taxed on it at your income tax rate. This can be a huge added tax on some of your earnings. 

What is an Investment Tax? 

Investment taxes are different from other types of taxes because they are based on what you earn. If you earn money by flipping coin rolls or investing money in stocks, you pay no taxes on these types of income. If, however, you make money by taking a salary or by receiving stock as an employee, you will pay taxes on it. This is because the government takes a cut of your income when you make that type of income. 

What else does New York have in store for me as an individual who is self-employed? 

You’re probably thinking that this guide is all about learning about your chances of getting hit by a lightning bolt from God, but there are other laws and taxes that can also affect your self-employment income. First and foremost, your rental income can be subject to New York’s tax code as can your interest and dividend income. If you have income of any type that isn’t subject to a specific tax, you must make sure to pay any applicable taxes on it. Beyond that, there are other laws and taxes that can affect your earnings as an independent contractor. For example, if you’re not required to pay Social Security or Medicare taxes, you won’t owe those benefits and, in turn, won’t owe taxes on those benefits either. However, if you are required to pay those taxes, you must pay them and report them on your income taxes as well. 

How to Stay Cover by Your Self-Employment Income 

There are a few different ways to stay covered by your self-employment income. The first is to make sure you get your taxes done before the due date. If you don’t, your self-employment income will be subject to a quarterly tax. Make sure you are aware of your income and expenses for the last three months so you don’t miss any deductions or credits. Once you have your tax returns for the current and prior quarters, use those documents to calculate your self-employment income and expenses. Once you have your income and deductions, subtract them from your pretax income to get your self-employment income. The last way to stay covered is to plan ahead and use the Tax Cut Savings Provision in the Tax Act of 2017. This will allow filers to switch to a simpler tax style that includes fewer categories so they can focus more on the actual taxes owed rather than the complex rules used to calculate them.  

Conclusion 

The income tax is a major tax that all countries use. It is a form of taxation that assesses the income you receive from certain activities and the taxes you pay on those earnings. The amount of income tax you will pay will depend on your income and the type of tax you choose to pay. Whether you choose the income tax or a different type of tax, you will have to pay it at some point in your life. The income tax is a crucial part of any country’s finances and its tax code is complicated and constantly changing. In order to understand how this affects your individual situation, you should consider speaking with a tax attorney. 

 

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Self-Employment Taxes in Pennsylvania in 2022 – What You Need to Know

Self Employment Taxes in Pennsylvania in 2022 - What You Need to Know

Self-Employment Taxes in Pennsylvania in 2022 – What You Need to Know

October 5, 2022

Self Employment Taxes in Pennsylvania in 2022 - What You Need to Know

peakreliance

Accounting, CPA, Taxes

Businesses that operate in Pennsylvania are required to pay a variety of taxes as a part of running their company. The main two types of corporate taxes that businesses need to worry about in the state are income tax and employment tax. Income tax is the most commonly-cited type of business tax in Pennsylvania, but this article will focus on employment tax. If your business owns property or has any other kind of assets, you’ll have to pay property taxes on those properties as well as income taxes on your earnings from them. This article will outline everything you need to know about self-employment taxes in Pennsylvania in 2022. 

What Are Self-Employment Taxes in Pennsylvania? 

When people think of corporate taxes, they usually think of income taxes. However, corporate taxes are only one part of a much broader tax system that includes property taxes, sales taxes, and tax on business income. The two types of taxes that businesses need to worry about in Pennsylvania are income tax and employment tax. Income tax is the most commonly-cited type of business tax in Pennsylvania, but this article will focus on employment tax. There are three income tax rates in Pennsylvania: 12%, 10%, and 5%. Other types of taxes, like employment and property taxes, are slapped on top of income tax. 

What Are the Types of Self-Employment Taxes in Pennsylvania? 

All state taxes are made up of different types of revenue. The most common type in Pennsylvania is income tax, but there are also property taxes, sales taxes, and a host of other taxes that businesses need to worry about. A business that operates in Pennsylvania must pay income tax or employment tax on the company’s total income for the year. There are three employment tax rates in Pennsylvania: 12%, 10%, and 5%. Other types of taxes, like income and property taxes, are slapped on top of employment tax. For the most part, the amount of these taxes will depend on the type of business. Most corporate income will be taxable at the standard income tax rate, while individuals who earn money as salaried employees will pay employment tax on their earnings. The other type of tax that businesses need to worry about is self-employment tax. Self-employment tax is the tax that employers charge on employees who work as self-employed people. The tax rate on self-employment income varies by state, but is generally higher than income tax. You’ll pay this tax if you make money as a self-employed person and choose to pay it on your own behalf. 

How Much Self-Employment Tax You Need to Pay in Pennsylvania 

The amount of self-employment tax that you need to pay in Pennsylvania depends on your income. The table below shows the amount of tax you must pay as a percentage of income that is determined by your income tax bracket. The higher your income tax bracket, the higher your percentage. 

How to Obtain a Tax Deduction for Self-Employment Taxes in Pennsylvania 

The first step in figuring out how much self-employment tax you will have to pay is to determine your income. Once you know your income, you can determine your self-employment tax rate. There are a few ways to get a tax deduction for your self-employment taxes. You can own property in Pennsylvania, for example, and pay property taxes on it. You can also take a business interest in a non-viable business and pay sales and property taxes on the assets. Another way to get a tax deduction is to have an employees’ trust, and have the trust pay taxes on the employees’ earnings. You can also claim the Human Resources Tax Credit, which is a tax credit for employer-provided benefits, and has different rules and limits. 

What Will Be Your Employees’ Earnings in 2022? 

Your employees will make money when they work for you. The key to figuring out how much income they will make is to look at what they are making now. If they are making a lot of money, it won’t matter how much you tax them; they will pay a higher percentage of their income to the state. If, however, your employees are making a small amount, and you only tax them on a percentage of their income, you can save a lot of money by paying their taxes on a entity-by-entity basis. This will allow you to avoid a large tax bill because a small business won’t have as much income to pay as a large one. Check out our article on optimizing your business for self-employment tax. 

Conclusion 

With the number of options for financing a business expansion, it can be challenging for businesses to determine which type of tax they will need to pay in 2022. With the amount of taxes increasing, it can be difficult to know where your company will fit in with regard to taxes. To make sure your business is prepared for self-employment taxes in 2022, calculate your income tax and employment tax now, and make sure you are in the correct tax bracket.

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How to Calculate Your Self-employment Taxes in Illinois in 2022 

How to Calculate Your Self-employment Taxes in Illinois in 2022

How to Calculate Your Self-employment Taxes in Illinois in 2022 

October 4, 2022

How to Calculate Your Self-employment Taxes in Illinois in 2022

peakreliance

Accounting, CPA, Taxes

Self-employment taxes are paid by the employer on behalf of its employees. But for those who choose to run their own business, they’re payments they need to take care of themselves. To find out how much self-employment tax you should pay in Illinois this year, you need to understand your business earnings and expenses. Here are a few steps to help you get started. 

What is self-employment tax? 

Self-employment tax is the portion of income tax that employers pay on behalf of their employees who are not associated with an employer. The corporate income tax is the most common form of self-employment tax. Other forms, including the unique medical and disability tax and the long-term care tax, are also imposed on some non-employee income. In addition, some states impose an additional tax on unincorporated businesses called the “add-on tax.” 

What does self-employment tax pay for? 

The revenue generated by the tax goes toward funding public programs that help employees, including: Social Security and Medicare – These are the mainstays of the federal and state tax codes, and they both rely on revenue from employment. Other taxes, such as the excise tax on carbon, fuel and other greenhouse gas emissions, are paid by businesses as well. 

What is an employer’s share of self-employment tax in Illinois? 

Employers are required to pay a portion of the income tax their employees pay to the IRS. In Illinois, that obligation is known as “providing the platform for employment.” 

How much should you pay in self-employment tax in Illinois this year? 

Self-employed individuals should pay the same amount they do for other taxpayers. The amount is set by law and varies depending on your income and filing status. The following percentages are used to determine your tax obligation.

Single or head of household: 11% Married person filing jointly: 12.5% Married person filing separately: 17% 

Married filing jointly: $250,000 
Married filing separate: $125,000 
Single :$200,00 
Head of household (with qualifying person) $200,000 
Qualifying widow(er) with dependent child $200,000 (Additional Medicare Taxes Threshold Amount) 

Final words: Should you pay self-employment tax in Illinois this year? 

For many American families, the decision to become self-employed is a crucial one. It allows people to put their own identity back into the workforce, and it allows them to pursue a new career while they build out their business. Business success can lead to medical advancements, a better financial future and a boost in the community. It’s very possible that success will lead to increased support for policies that support entrepreneurship, such as the creation of a National Self-Employment Tax Holiday. 

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Corporate Income Tax Filing Requirement in Texas

Corporate Income Tax Filing Requirement in Texas

Corporate Income Tax Filing Requirement in Texas

October 2, 2022

Corporate Income Tax Filing Requirement in Texas

peakreliance

Accounting, CPA, Taxes, Texas

As a small business owner in Texas, you’re responsible for filing a corporate income tax return every year. This post will outline the requirements for tax filing in 2022 and provide some tips to help make the process as easy as possible. 

Filing your corporate income tax return is a mandatory requirement in Texas, and it’s important to understand the filing deadlines and what taxes you’re responsible for. In this post, we’ll cover the most important things you need to know about corporate income tax in Texas. 

What Is the Corporate Income Tax?

Let’s start with the basics. The corporate income tax is a tax levied on the income of corporations. In Texas, the corporate income tax rate is 0.75%. 

That might not sound like a lot, but if your business generates a lot of income, it can add up quickly. And that’s why it’s important to file your corporate income tax return on time. If you don’t, you could face penalties and interest charges. 

Do All Businesses Have to Pay the Corporate Income Tax?

Not all businesses have to pay the corporate income tax. The tax applies to businesses that are organized as corporations, and it’s calculated using the taxable income of the corporation. 

There are a few exceptions, however. The first is a business that’s organized as a sole proprietorship or partnership. These businesses don’t pay the corporate income tax— instead, the owners report the business income on their personal tax returns. 

The second exception is a company that’s considered to be an S corporation. An S corporation is a special kind of corporation that’s taxed like a partnership. This means that the income and losses of the company are passed through to the shareholders, and they report it on their personal tax returns. 

There are a few other exceptions, but these are the most common ones. If you’re not sure whether your business has to pay the corporate income tax, you should consult with a tax professional or a CPA. 

How Is the Corporate Income Tax Calculated?

The corporate income tax in Texas is a flat rate of 0.75%. & 0.375% for retailers & wholesalers That means that all businesses in Texas pay the same percentage, regardless of their size or profits. 

To figure out how much you owe, you’ll need to calculate your taxable income. This is your total income minus any deductible expenses. There are quite a few of these, so it’s a good idea to speak to an accountant to get a clear idea of what you can and can’t claim. 

How Often Is the Corporate Income Tax Paid?

Do you know how often your company is required to file a corporate income tax return in Texas? In most cases, it’s every year. The deadline is usually May 15, and you can find more information on the Texas comptroller’s website. 

But it’s important to note that there are some exceptions. For example, if your company has been in business for less than 12 months, or if it has zero income for the year, you may not need to file a return. So be sure to check the rules carefully to make sure you’re in compliance. 

And if you’re not sure what to do, don’t worry—our team can help you out. We’re experts when it comes to corporate income tax filing in Texas, and we’ll make sure everything is done correctly and on time. 

 

What Are the Penalties for Not Paying the Corporate Income Tax?

So what happens if you don’t pay your corporate income tax? Well, the penalties can be pretty harsh. The state can levy a penalty of up to 20 percent of the unpaid tax, and they can also impose interest and late payment fees. 

In addition, the state can seize your assets and put a lien on your property. They can also bring criminal charges against you, and you could end up going to jail. Yikes! 

As you can see, it’s important to stay on top of your corporate income tax obligations and file your return on time. The penalties for not doing so can be costly and damaging to your business. 

Are There Any Exceptions to the Corporate Income Tax?

You may be wondering if there are any exceptions to the corporate income tax. The good news is that there are a few. Here are just a few: 

  • Religious organizations are exempt from corporate taxes.
  • Charitable organizations are exempt from corporate taxes.
  • Social welfare organizations are exempt from corporate taxes.
  • Labor unions are exempt from corporate taxes.
  • Farmers’ cooperatives are exempt from corporate taxes.
  • Homeowners’ associations are exempt from corporate taxes.

As a small business owner in Texas, it’s important to stay up to date on the corporate income tax filing requirements. The deadline for filing your corporate income tax return is April 15, and you can file online or by mail. 

If you have any questions about corporate income tax in Texas, or need help filing your return, our team of experts is here to help. We can take the hassle out of tax season and make sure your return is filed on time and accurately. 

Contact us today to learn more about corporate income tax in Texas and how we can help you file your return. 

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What You Need to Know About California’s Corporate Income Tax in 2022 

California Corporate Income Tax 2022
California's Corporate Income Tax in 2022

What You Need to Know About California’s Corporate Income Tax in 2022 

October 1, 2022

California Corporate Income Tax 2022

peakreliance

Accounting, California, CPA, Taxes

As a business owner in California, it’s important to stay up-to-date on the latest corporate income tax rates and requirements. In 2022, the corporate income tax rate in California will be 8.84%. This is the rate you’ll be charged on your taxable income, which is calculated after subtracting any deductions or exemptions you may qualify for. 

There are also a number of tax credits and incentives available to California businesses. To learn more about these, and to find out if you qualify, visit the website of the California Franchise Tax Board. 

In this article, we’ll provide a brief overview of corporate income tax in California for businesses in 2022. We’ll also list some of the most important things you need to know, including the tax rate and exemptions. 

Corporate Income Tax Rates 

Here’s what you need to know about California’s Corporate Income Tax rates in 2022. The tax is levied on the taxable income of corporations, and there are three rates: 8.84 percent, 10.84 percent, and 12.84 percent. 

There are also a number of deductions and credits that can be taken into account when calculating your corporate income tax, so it’s important to consult with a tax professional to make sure you’re taking advantage of everything you’re entitled to. 

Filing Requirements 

So you’re a business owner in California? Here’s what you need to know about the state’s corporate income tax. 

Taxable income is calculated by subtracting deductible expenses from gross income. And there are a few different ways to file: you can file using the calendar year, the fiscal year, or the weighted average basis. 

You’ll also need to decide whether to file your return electronically or through the mail. If you choose to file electronically, you’ll need to use certified software that’s been approved by the California Franchise Tax Board. 

And don’t forget—the deadline for filing is April 15! 

Payment Options 

When it comes to paying your corporate income tax, you have a few different payment options. You can pay online, by phone, or by mail. But whatever you do, make sure you submit your payment on time! 

If you’re paying online, you can use the California Franchise Tax Board’s (FTB) My FTB portal. Just make sure you have your account information ready. You can also pay by phone by dialing 800-852-5711. 

And if you’re mailing in your payment, just make sure you send it to the right address. Here it is: 

California Franchise Tax Board 

PO Box 942867 

Sacramento, CA 94267-0001 

Other Considerations 

There are a few other things you’ll need to consider when it comes to California’s corporate income tax in 2022. For starters, the tax is based on a percentage of your taxable income. That means you’ll need to keep track of all your business expenses so that you can accurately calculate your taxable income. 

Another thing to keep in mind is that the tax applies to both resident and nonresident corporations. So, if you’re a business owner who operates in California but is based in another state, you’ll need to pay the corporate income tax. 

The good news is that there are a number of deductions and exemptions that you can claim to reduce your taxable income. Make sure to speak with an accountant or tax specialist to learn more about what these are and how they might apply to your business. 

Conclusion 

As of right now, California’s corporate income tax rate is 8.84%. This is the rate that all corporations within the state must pay on their taxable income. The deadline for filing your corporate income tax return is the same as your personal income tax return – April 15. 

Make sure you are aware of these rates and deadlines so that you can file your taxes correctly and on time. 

 

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Accounting, California taxes, cpa, Online CPA, tax, Taxes in California 2022

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