Small Biz Tax Bites
Spring of 2022 wafts in with fresh breezes and new commerce. A number of new businesses are surfacing, and with them come a few surprises for the unwary. The Chamber offers several courses and opportunities to help you! The best way to avoid unhappy surprises at the end of the tax year is to educate yourself on what is expected of you. Ask yourself a simple question: Who gets the biggest nibbles of your hard-earned cash? Not exactly a comforting question, is it?
I know. Starting a business is exciting and it’s a time of great promise. Learning the nitty gritty details of how Uncle Sam plans on thwarting you feels negative and it just messes with your mindset. I get that. But tax burdens are just as much a part of owning a business as creating appealing displays and engaging the public. Ignoring the sharks swimming around your little island of success may prove problematic for you later.
One of those nasty little surprises which may bite you is the penalty for not paying that 15.3% self-employment tax on your projected net income. When I first heard about that one, I was appalled at the idea that I would be taxed just for being in business for myself. Seriously? After realizing its purpose, I felt a little better about it. It may seem like an exercise in futility since Social Security is on its way to becoming a relic and Medicare rests on a shaky surface, but it’s the law. Just grit your teeth and pay it.
Another head scratcher for me was paying a penalty for not filing quarterly estimated taxes. When I started my first business, I was just hoping to come out in the black. I wore all the hats and even thinking about quarterly taxes jettisoned me into panic attacks. You may pay dearly for ignoring this one! What are your quarterly tax deadlines?
· 1st Payment on income earned 1/1 to 3/31 due April 18th
· 2nd Payment on income earned 41/-5/31 due June 15th
· 3rd Payment on income earned 6/1-8/31 due September 15
· 4th Payment on income earned 9/1-12/31 due January 17, 2023
You don’ owe any taxes if you haven’t made any money, so if the balance of your income revolves around holiday sales, you won’t owe estimated income until later in the year. But be aware…you have a very narrow margin of error. If you are off by more than $1000 on estimated income, you will pay a penalty. It seems like an unfair burden to be placed on someone just struggling to keep the doors open…but this is where your Chamber membership can really come into play. Find someone to mentor you and help you get used to those new tax bites!
Beware of failing to report cash income or padding business expenses. The only thing worse than an audit is finding you owe a ton of extra money at the end of an audit. Hiring a tax advisor or bookkeeper may feel like a luxury, but in this economic climate, nothing could be further from the case. You need an ally, one who knows the ropes and can guide you through these dangerous waters.
Now is the time to be figuring out the maze of taxes and charting a course to success. If you don’t deal with this until it’s time to file in April of 2023, you’ll find it’s too late to strategize a course for success. The sharks will be swimming ever closer to your little business, and you’ll feel like your island of security is shrinking. Get help now! The Chamber is here for you!