Do I Pay My Income Tax Bill From My Business? December 6, 2009Posted by Julie Duriga, CPA in Uncategorized.
Tags: accountants, accounting, accounting for small business, entrepreneur, entrepreneurship, how do I pay myself, Small Business, small business management, small business taxes, sole proprietor, Starting a small business, taxation, taxes
Income taxes are held from your own income and need to be paid from your salary bucket inside your business. If your paycheck says that you took home 700.00, then 300.00 is really taxes. In t heory your paycheck should be 1,000.00 to cover taxes which is normally around 300.00 to be safe. To be safe means you are not stuck with an enormous tax bill at the end of the year.
If you are a sole proprietor or a partnership then your taxes are paid from the guaranteed payments or from your owner’s draw. This draw can take place through a physical check written from your business or through a bank transfer from your business account to your personal account. It is then your responsibility to remit quarterly your income taxes and your social security taxes to the IRS and to the state agencies. Those taxes are paid from the money that was transferred to your business account. Some business gross up their partner’s draws and guaranteed payments to cove the cost of the taxes. Instead of bringing home $1,000.00, they might bring home $1,300.00 to cover the taxes.
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