The different taxes that you pay depend on who you are, what you do, and how much money you make among other variables. We all pay have to pay taxes in one way or another, however, when it comes to business taxes and personal taxes, there are some key differences to look out for when tax season comes around. While the same general principle applies to both cases, comparing business and personal taxes demonstrates just how different the two filings are. From deduction opportunities to different tax returns, filing deadlines and more, continue reading to learn the key differences between business taxes and personal taxes.
What Are Business Taxes?
If you are a business owner or operator, then the type of business you are running will determine what type of tax you will have to pay. This goes for owners of large corporations, as well as individual freelancers who are self-employed, with differences of the course in what specific taxes the two businesses are required to pay. Generally, the main types of business taxes are Income Tax, Employment Tax, Self-Employment Tax, and more.
Income tax is required for most businesses. The federal income tax is “pay-as-you-go,” meaning that a business must pay a tax on what it earns as it generates income throughout the year. There is also a personal income tax, which is paid by employees, usually by having the tax withheld from their regular paycheck.
Hiring employees for your business requires you to pay the Employment Taxes. These are the taxes that your business must pay to federal, state, and local agencies. Generally, these include social security and Medicare taxes, federal income tax withholding, and federal unemployment (FUTA) tax.
If you are self-employed, then you will have to pay the Self-Employment Tax. This is a social security and Medicare tax that contributes to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, and more.
What Are Personal Taxes?
There are a number of different personal taxes that individuals must pay such as, property tax, personal income tax, plus more.
Property tax is a tax that a homeowner or property owner is required to pay. The tax is usually based on the value of the property and land owned by the owner. This money is determined by the local government and goes back into funding improvements in the local community, law enforcement, and other variables deemed necessary.
Personal Income Tax
Personal income tax is the tax employees have to pay that is typically withheld from the paycheck they receive from their employer. Sole proprietors also have to pay federal personal income tax rates on money that they generate.
How Do Business Taxes and Personal Taxes Differ?
Business income tax returns can vary greatly. Business taxes have different filing deadlines and there are far more business tax deductions or write-offs when compared to personal tax filings. As described prior, these are just a few key differences between business and personal taxes. There are many more differences between the varieties and requirements of taxes that businesses and individuals have to pay.
Tax Professionals at RMG
The last thing that anyone wants to receive is a penalty from the IRS due to missed taxes, unpaid taxes, or simply not understanding your feelings as an individual taxpayer or business owner. So, whether you are an individual filer or a business owner that requires multiple filings, it is always recommended that you consult with an accounting professional to ensure that you make the most out of your money. If you are looking for accounting help today, contact the tax professionals at RMG today.