Find valuable information to help
new businesses get started.
Type of Taxes and Insurance
When you're in business, paying the right taxes at the right time is important, but it is hard to stay on top of everything in your business and also track rapidly changing tax and legislative rules and regulations. That's why so many small and medium size businesses turn to Perquest to help keep their payroll and payroll tax accurate and on track.
There are four general kinds of business taxes:
Employment taxes:
These consist of federal, state and local, income tax withholding and federal and state unemployment (FUTA, SUI) tax, Social Security and Medicare taxes.
- Federal income tax must be withheld from your employee's wages, determined by the employee's W-4 form and the methods described in IRS Publication 15, Circular E, Employer's Tax Guide.
- Social Security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Employers withhold part of these taxes from your employee's wages and the employer must pay a matching amount. To find out how much to withhold and pay, see IRS Publication 15.
- Federal Unemployment Tax Account (FUTA) is one of two taxes generally paid by employers to the IRS. FUTA finances the administrative costs of unemployment insurance and is reported and paid separately from Social Security and Medicare taxes and withheld income tax. Employers pay FUTA from the company funds.
- State and local jurisdictions also may have income taxes which must be withheld from your employee's wages. Most states have unemployment which is paid by employers.
Income taxes:
Businesses file an annual income tax return, and partnerships file information returns. Since federal income tax is a pay-as-you-go tax, you must pay it as you earn or receive income during the year. Employees have income taxes withheld from their pay. Generally, you pay taxes on income, including self-employment tax, by making regular payments of estimated tax during the year.
Self-employment Tax:
Self-employment tax (SE tax) is a Social Security and Medicare tax primarily for individuals who work for themselves. Contributions to SE tax contribute to your coverage under the Social Security system. Use IRS SE/Form 1040 to figure your SE tax.
Excise Taxes:
Depending on the type of products, business, equipment, payment and services you offer, you may have to pay excise taxes, which consists of several categories of taxes, including communications and air transportation taxes, fuel taxes and taxes on the first sale of some equipment. Review IRS Publication 510 for more information. Local authorities may also tax personal property such as machinery, furniture, equipment and supplies. It's best to investigate what's subject to taxes and what's not.
Corporate Taxes:
Corporate tax in the U.S. is levied on the taxable income of a business entity identified as a C-corporation. S-corporations and nonprofit organizations are subject to different tax rules. Corporate tax uses a tax schedule as its basis, taxing businesses based upon their earnings.
Alternative Minimum Tax can be levied in instances where a corporation’s tax under the corporate tax rate system falls below the alternative minimum tax. Accumulated Earnings Tax may also be levied for instances in which a corporation has accumulated excess earnings without paying them out to shareholders as dividends. The rules can certainly be confusing. For more information, the IRS has information on its website or make an appointment to speak to a tax advisor.
Business Insurance
Insurance is not only important to protect your company in the event of disaster or litigation, oftentimes it’s required by law. Some states require insurance for certain business types. You will probably need to do some research to understand what types and amounts of insurance are right for your business. Property insurance covers your business assets, including your building, furniture, office equipment and the like from things such as fire and theft.
Liability insurance covers you in the event your product causes harm to someone, you or your employees cause harm, or someone is otherwise injured on your property. Auto insurance may be required if you will be using company-owned vehicles for deliveries or providing company vehicles to employees. Business interruption insurance protects you in the event of tragedy.
Unemployment Insurance
Unemployment Insurance is a nationwide program created to provide partial wage replacement to unemployed workers while they search for new work.
Unemployment Insurance is a federal-state program, based on federal law, but executed through state law. Employers finance the program through tax contributions. Employers are subject to both state and federal unemployment taxes if they pay $1,500 or more in wages to employees in any quarter of a calendar year, or if they had at least one employee during any day of a week during 20 weeks in a calendar year.
Some state laws differ from the federal law—employers should contact their state agency to learn the exact requirements. The Federal Unemployment Tax Act authorizes the Internal Revenue Service to collect a federal employer tax used to fund state workforce agencies. Employers report this tax annually by filing IRS Form 940.
Workers' Compensation Insurance
Workers’ compensation insurance covers employees who are injured or become sick during work activities. Most states require businesses to have coverage. Because each state has different policies and procedures, it’s important to investigate requirements in every state in which your employees live, work or travel. Some states require you to buy coverage through state-operated funds, while others allow you to buy either from state funds or from independent operators. Workers’ compensation rates are rising faster than those for any other insurance coverage, but you can keep your costs down by shopping around to find the best coverage for your company and focusing on prevention to keep premiums down.
WORKFORCE SOLUTIONS
Perquest delivers exceptional value with innovative technology, superior service and exclusive time-saving features that benefit you and your business.
A BETTER CHOICE
We designed our solutions to match our clients’ needs—not our processes. We offer you a better alternative.
TECHNOLOGY & SERVICE
With intuitive navigation, easy 1- or 2-click access to most information, comprehensive tools and high-quality client service, Perquest offers real VALUE to your business.