Running a small business means needing to fill a lot of different roles at a company. An owner who manages an organization might be its marketing professional and staff manager as well as its accountant.
Unfortunately, that can mean that entrepreneurs and small business owners end up overwhelmed or overlooking important tasks that a professional who specializes in one of those areas would know to address. Tax obligations are a perfect example. It is much more common than people realize for small business owners to make mistakes about their tax responsibilities and to end up struggling financially. These are some of the common tax obligations that small business owners tend to overlook.
Self-employment taxes
If the business is owner operated, the person who runs the company may have to make sizable tax contributions on their own behalf and file quarterly estimated tax payments with the Internal Revenue Service (IRS) and the state government. Failing to withhold enough funds for self-employment taxes and send in quarterly estimated taxes very often leads to tax debt and financial challenges for small business owners.
Payroll taxes
Even if an individual only employs one or two other people, they will need to calculate and withhold payroll taxes for those workers. There will be federal withholdings that they must keep back when issuing employee paychecks. There are also Federal Insurance Contribution Act taxes that the business itself must cover. It is very easy for employers to overlook their tax liability based on what their workers earn.
Capital gains taxes
Small businesses often make investments that they may later sell. For example, a business owner might purchase premises for their startup and then sell those facilities when they upgrade to a bigger location. When a business conducts a successful sale that results in profit, there will be tax due on the revenue generated beyond the initial investment. Mistakes when calculating taxes or retaining funds to pay them can lead to financial and legal headaches for a business in the future.
Learning about and addressing the tax responsibilities that can cause financial quagmires for small businesses may help owners and entrepreneurs make more informed financial moves given their circumstances.
