Taxes are an inevitable part of conducting business. For those that are self employed or who own their own business, the task of calculating and remitting taxes may be a little more confusing. When you don’t have an employer collecting and remitting taxes on your behalf, you are responsible for doing it yourself. Add in the self employed tax, estimated taxes, payroll tax, sales tax, and state and local taxes, and you have a real recipe for disaster if you don’t get it right. Which is why taxes are such a sore subject for many taxpayers. Fortunately it doesn’t have to be that complicated, here we hope to shed some light on how to pay your taxes.
If you are looking for information on how to pay the taxes in your state, scroll down.
Calculating The Taxes You Owe
Calculating the taxes you owe is probably the most challenging part of paying taxes. The taxes you owe depends on several things. Here are some questions to ask yourself when calculating the taxes you owe:
Do You Have Multiple Streams of Income?
Do you have a full time job where you receive a W2 but also have a side hustle where you receive 1099 income? For example, if you have an online store or work as a freelancer, this income has not been subject to tax. You are responsible for calculating and remitting taxes on this income. If it is only a part time hustle, you may be able to get away with increasing your withholdings on your W2 to cover the additional taxes you owe.
Are You Self Employed?
If you run your own business, you are responsible for paying taxes on your income, but also paying self employed taxes. These taxes account for your portion and the employer contribution to your social security and medicare. The self employed tax rate is 15.3%.
Do You Have Employees?
If you have employees you will have to pay payroll taxes. Payroll taxes are made up of deductions from an employee’s wages and taxes paid by the employer based on the employees wages.
Are You Expecting To Owe More Than $1,000 In Taxes?
If you expect to owe more than $1,000 in taxes, even if you are only operating part time, you may be liable for estimated taxes. Estimated taxes are quarterly tax payments made in April, June, Sept, and Jan. Estimated taxes represent the amount of taxes your employer would have withheld, but since these taxes were not withheld and remitted on your behalf, you are responsible for them. If you are unsure of whether you owe estimated taxes or not, consult your tax advisor. A tax advisor can help you determine if you owe estimated taxes and also help you calculate and remit them.
Do You Conduct Business In Other States And Localities?
State and local taxes are partially what make taxes so confusing for many. For example if you have an online store and sell goods in other states and localities, you will be responsible for paying the taxes imposed in those areas. Taxes vary from state to state and city to city, so it is really important to know where you have nexus come tax time. Nexus can be any other state where you have a lot of transactions, or any state where you are storing goods.
If you have a presence or connection in another state, it is important to research the taxes in that state. Most states levy a sales tax, however a few do not. The states that impose no sales tax include: Alaska, Montana, Delaware, New Hampshire, and Oregon. It is important to be aware, that if you purchase goods from these states, and consume or store them in your home state, these goods could be subject to a use tax, which is usually the same rate as the sales tax. A few states also impose no income tax. These states include: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Consulting A SALT Accounting Specialist
When it comes to state and local taxes, it may be a good idea to seek out the advice of a SALT accountant. They specialize in state and local taxes, and can help you navigate your tax situation, ensuring that you are in compliance with each state and locality you conduct business in.
How To Pay Your Taxes To The IRS
Now the fun part of paying your taxes! Throughout all the headache of calculating how much you owe, there is a light at the end of the tunnel, and that is that the IRS has made it really easy to send them your money by paying your taxes online. Give it up to the technological era and the internet for making this all possible! You can direct pay the IRS from your checking or savings accounts, pay by credit card, or set up an installment agreement all from the IRS website.
How To Pay Your Taxes In Your State
Like we mentioned above each state has their own set of guidelines when it comes to taxes. Most states (with the exception of the ones mentioned above) impose an income tax, which is separate from your federal taxes that you pay to the IRS. Click on your state to learn more about the tax rate and how to pay your taxes.
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- West Virginia
Again the states of Alaska, Florida, Nevada,Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. While these states do not have an income tax, some of them do tax investment income and dividends. In addition to income tax, it is important to also research the sales tax in each state as most states levy a sales tax with the exception of: Alaska, Delaware, New Hampshire, Montana, and Oregon.
When it comes to paying taxes, each tax situation is different. Working with a tax advisor is the best way to ensure that your tax obligations are met. Timeliness and accuracy are everything when it comes to taxes. For more questions on how to pay your taxes contact the tax and accounting experts at The Tax Hack Accounting Group. To learn more subscribe to our newsletter.