Failing to pay your taxes on time will lead to massive penalties like having to pay 5% of the taxes you owe per month. That’s one of many fees that you could face if you do not report your earnings correctly.
That is why whether you are a new small business or someone who has been around for a while, you will need to understand tax compliance.
While reading through this guide, you’ll learn about the basics of tax compliance in addition to what other types of tax responsibilities you will need to understand when operating a small business.
What Is Tax Compliance?
Tax compliance is observing international, federal, and state requirements and laws that regard taxes. With personal taxes, for the most part, all you would need to worry about is whether you pay your taxes on time. Whereas with businesses, you will need to pay additional taxes like gross receipts and dividends.
Understand Small Business Tax Responsibilities
Throughout this section, you will find different types of tax situations that you may encounter when operating your small business. Each point will cover basic information and important information you should know to meet compliance.
International Taxes
When doing business in other countries, to adhere to international tax compliance, you will need to know each country’s regulations and rules. You will also need to understand the challenges that come with cross-border disputes that come with domestic and foreign tax laws.
Adhering to international tax compliance can be complex. In this scenario, you’ll need a Finvisor to help you ensure your bookkeeping is in order.
Sales Taxes
Sales tax compliance refers to when you will have to pay taxes to applicable local jurisdictions and states. Moreover, it includes accurately reporting sales transactions. To remain compliant when paying for use and sales tax, you will need to ensure you have the correct forms to meet your area’s sales tax nexus requirements.
Figuring out those requirements may turn into a difficult situation. The United States has many local tax and state jurisdictions. Thus, you will need to find tax compliance services to help you find the forms you need.
Payroll Taxes
Payroll tax compliance is when your business must adhere to all local, state, and federal regulations that govern how you pay your employees.
If you violate any of the many laws that protect employees, you could face steep fines, legal expenses, or the government shutting down your business.
To ensure your business complies with regulations, you will need to ensure that your business practices the following bookkeeping activities:
- Withhold the right amount of payroll taxes
- File payroll tax returns with each jurisdiction that you fall under
- Accurately calculate wages and overtime
In addition to the above points, you will also need to avoid violating various laws. One example is the Fair Labor Standards Act (FLSA). It requires you to pay non-FLSA-exempt employees the federal minimum wage.
You also must pay them overtime—one and a half times their regular pay—for each hour they work over 40 hours a week.
Find the Right Tax Compliance Services Today
Tax compliance has various layers to it. Here’s how you handle sales and use tax, how you pay for and manage employees’ taxes or the way you pay for taxes when dealing with businesses internationally.
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