A small business owner who owns and operates his or her own business, whether it is a sole proprietorship or a partnership, may be called a self-employed individual. In most states, the tax laws for self-employment are different from those of other forms of employment.

Income Taxes

Most states do not have income taxes on self-employment earnings, but they do have payroll taxes and self-employment taxes. These taxes can vary from state to state.

Self-employment taxes

Self-employment taxes are usually paid by the business owner through quarterly estimated payments, but these payments are often late or non-existent. This can lead to penalties and interest being charged against the business. The self-employment tax rates vary from state to state. For example, in California, the rate is 7.25%, while in Georgia, the rate is 8%.

The self-employment tax rate is not paid until the end of the year when the tax return is filed with the IRS. If the tax rate is not paid, the self-employed individual will have to pay penalties and interest charges for the unpaid portion of the tax.

Social Security tax

In addition to the self-employment tax, there is also an additional Social Security tax which is calculated based on the number of employees that the business has. This tax is paid at a flat rate of 12.4% for the first $106,800 of wages and salaries paid to employees. There is no limit to the number of employees that can be employed, but the tax rate will increase to 15.3% if the wages exceed $250,000 per year.

If you are a small business owner, you should make sure that you are aware of all the tax issues related to your business. You should seek out professional advice from a tax attorney who specializes in this area. He or she can help you determine what your tax obligations are and how best to meet them.

If you would like to see what small incremental changes can do for your business, be sure to check out our free Simulator at https://impelonline.com/sim.