Question

Please explain types of taxes paid by a business organisation. 500 words (Minimum)

Answer 1

Answer)

There are different forms of business organisations which are somewhat structured completely different from each other and which has different advantages and disadvantages which can be seen while establishing a new business. Types of different organisations are Sole Proprietorship, Partnership, Corporations, Limited Liabilty Company, There are different types of taxes levied on Businesss Organisations such as Federal,State andLocal Income Tax, Property Tax, Excise Tax, Sales Tax, Social Securtiy Tax, Payroll Taxes, Capital Gain Taxes, gift tax, User fees, Sin taxes, Luxury Tax, etc. The federal government levy taxes on personal revenue, business income, interest income. Income tax brackets are generally progressive which means greater the income, the higher the rate of taxation. In case of Individual, many allowances/credits/deductions are given to trim their tax burdens. Sin Taxes are levied on alcohol, liquor, cigarettes, etc. Payroll Taxes (also called Federal Insurance Contribution Act Tax) are levied on factory workers which is 7.65% of Income. Some portion goes of it to funding in National Social Security System, some to medicare fund, etc. Capital gain Taxes are those paid on any profits made from the sale of an asset including real estate and are usually applied to stock and bond transactions. Estate taxes are imposed on the transfer of property upon the death of the owner. Individual income taxes are generally paid in three ways, each with its own deadline:

•Withholding taxes: Money that is taken out of a person’s paycheck each pay period that must be paid to the government by an employer, on a quarterly basis.

•Estimated tax payments: Money that must be paid quarterly, generally by self-employed individuals whose taxes are not withheld by an employer.

•Income tax return: Money that must be paid by an individual by Tax Day (normally April 15) of each year, on income from the preceding year, along with the filing of all individual income tax return forms.

Now, while calculating tax on income, the word credit/deductions/allowances comes to our mind. A tax credit is a dollar-for-dollar reduction in your tax bill. Though many taxpayers regard it as the same thing as a tax deduction, it is very much not the equal. Tax credits are far more valuable. They directly reduce the amount you pay in taxes and are not dependent on the tax bracket you fall into.The most coveted tax credits are those that are refundable — that is, filers are rewarded with money from Treasury even if they have zero tax liabilities.

Let also check some deductions which individual get while calculating tax liability are

•Local and state sales tax is deductible if you don’t claim a deduction for state and local income taxes.

•Property taxes are still deductible, up to a point.

•Mortgage interest: This homeowner perk is still available, but there are new, lower caps. You can deduct interest paid on loans up to $750,000, or $375,000 if you’re filing as an individual.

•Mortgage points: Itemizers can deduct the points (prepaid interest) paid to purchase or build your primary dwelling.

•Home sale: Joint filers can exclude up to $500,000 in profits (that is, the amount paid for their home, plus what they spent on improvements — but not maintenance) from sale of their home; individual filers can exclude up to $250,000.

•Medical and dental expenses: You can deduct the amount of medical and dental expenses incurred by you, your spouse, and your dependents above 7.5 % of your adjusted gross

•Health savings account deposits made by you or someone other than your employer are deductible. HSA contributions will be limited to $3,500 for individuals, and $7,000 for families.

•Health insurance premiums for self-employed filers: If you worked for yourself, your premiums for medical and dental insurance, plus qualified long-term care insurance, is deductible.

•Traditional IRA contributions are deductible for filers who don’t have an employer-based retirement account. Deduct up to $5,500 in deposits, or $6,500 if you’re 50 or over.

•Tax preparation fees. The deduction is available only to those who are self-employed.

•Cash donations to IRS-approved are deductible, up to 50% of your adjusted gross income.

•Noncash donations — household items, clothing, appliances, vehicles, electronics and so on — to qualified nonprofits also are deductible, up to the item’s fair-market value.

• A deduction, up to $4,000 (subject to income limits), is available who is making qualifying higher education tuition or fee payments.