Magazine article Black Enterprise

The Tax Man Cometh: The IRS Wants a Piece of Your New Business

Magazine article Black Enterprise

The Tax Man Cometh: The IRS Wants a Piece of Your New Business

Article excerpt

Ah, the glamorous life. No more punching the clock. No more annoying co-workers. And as for money--well, it's yours for the taking. As many would say, life for the self-employed is "all good." The Internal Revenue Service even has a welcoming committee that specifically addresses the fiscal needs of the budding business owner. Its first gift--a luxurious 15.3% self-employment tax.

Unlike the little drummer boy, the IRS has a plethora of gifts to bring. If you're starting a business, you need to be especially aware of its offerings. For starters, there's payroll tax. Say you hire someone in New York State for $8 an hour, Social Security tax at .0765% and unemployment insurance tax at 4.4% on earnings up to $7,000 will be affixed. In addition, you'll have to pay premiums on workmen's compensation and disability insurance. If you factor that you'll be spending between 12% and 15% on taxes and benefits, what you're actually paying employees is $9.20 an hour.

Sales tax is another offering from the state. As the owner of a retail business, you would be required to collect taxes on items sold. As a business owner, you should immediately record sales tax and place the funds in a separate account, advises Randy Blaustein, an attorney and senior tax partner at the New York City accounting firm of Blaustein, Greenberg & Co.

Too often business owners make the mistake of depositing money from sales tax into their business checking account, using it to pay bills. …

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