Income Taxes 101: Why are business taxes complicated?
Watch this video to learn how income taxes are different for an employee, business entity and owner.
0:27 As an employee, income taxes are withheld for you. So, it is easy to know how much money you have to spend without worrying about surprises at tax time.
1:48 Most business entities are considered to be a pass-through entity. The net income “passes through” to the owner.
3:24 Income taxes are more complicated for owners, because the business receives the full payment from customers before taxes are paid. There are a lot of steps between the time you deposit a customer’s payment and when you pay your income taxes. Owners are required to…
- Manage cash flow
- Create accurate financial reports, so your tax accountant can calculate how much you owe
- Reserve cash to help the owners pay their income taxes
- Pay quarterly estimated tax payments on time
Bottom Line
Income taxes were easier as an employee. The good news is income taxes can be easy for your business too. Simply set up a few key systems to help you manage cash flow. You’ll generate financial reports with a click of the print button.
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