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Controlling Your Taxes

One of the biggest hurdles you'll face in running your own business is to stay on top of your numerous obligations to federal, state, and local tax agencies. A tax headache is only one mistake away, be it a missed payment or filing deadline, an improperly claimed deduction, or incomplete records. And, you can safely assume that a tax auditor presenting an assessment of additional taxes, penalties, and interest will not look kindly on an "I didn't know I was required to do that" claim. The old legal saying that "ignorance of the law is no excuse" is perhaps most often applied in tax settings.

Although retaining a good accountant or other tax professional may prove to be invaluable in avoiding tax troubles, possessing a working knowledge of how the tax systems work is also beneficial. After all, even if you delegate your tax obligations to someone else, you'll still bear the ultimate responsibility for seeing that those obligations are met.

Did You Know?

Did You Know?

A study by Ernst & Young LLP prepared for the Council On State Taxation finds that businesses paid $619 billion in total state and local taxes in fiscal year (FY) 2010. This equals 44.1 percent of total taxes collected by all state and local governments in FY2008, a percentage that has risen from 43.4 percent since FY2002. Total state and local business taxes decreased just 0.3 percent over FY2009.

The study examines the following categories of state and local business taxes. Following each category in parentheses is the percentage it represented of total state and local business taxes in FY2010.

  • $249.5 billion in property taxes on business property (40.3 percent)
  • $124.4 billion in general sales taxes on business inputs (20.1 percent)
  • $44.1 billion in corporate income tax and other license taxes (7.1 percent)
  • $32.4 billion in unemployment insurance taxes (5.2 percent)
  • $30.4 billion in excise taxes on business purchases (4.9 percent)
  • $37 billion in business and corporation licenses (6 percent)
  • $33 billion in individual income tax on pass-through business income (5.3 percent)
  • $23 billion in other business taxes (3.7 percent)

We cover each of the major taxes that you or your business may have to pay. We'll include tips for avoiding problem areas and for saving your tax dollars. Even if you're not interested in doing everything yourself, you'll find the information useful for resolving a specific tax question or for identifying issues you may want to raise with your tax pro. Our coverage of business taxes encompasses the following topics:

  • Your payroll tax obligations covers those federal, state, and local taxes that you're required to collect or pay whenever you hire your own employees.
  • Your federal income tax obligations addresses the role that income tax planning plays in your daily business operations.
  • Your sales tax obligations examines the state and local taxes that you are required to pay on your purchases and to collect on your sales of merchandise or other tangible personal property and certain services.
  • Your state tax obligations contains the information you need to give you a working knowledge of your own state and local taxes, as well as the necessary licensing and initial business formation fees and filings on a state-by-state basis.