Pete Sabella

Ask your tax preparer to prepare a schedule reconciling the profit on your income statement to the taxable income on your tax return.  The starting point is your profit before income tax followed by the listing of each adjustment made to come to the resulting taxable income.  Take the time with your preparer to discuss each adjustment – to your understanding.  Over time these adjustments will become clearer to you.  Keep in mind, individually each adjustment will not be that difficult to understand.  This sit-down discussion can also effectively be the beginning of your tax planning for the following year.

Your relationship with your tax preparer is comparable to your relationship with your customers − you fall into a routine on how you believe they want their services provided.  Unless you hear otherwise from the customer, you assume he/she is satisfied.  Your tax preparer may believe you are receiving all the services you want or need unless you indicate otherwise.  Let him know you desire to be more knowledgeable on how your taxable income is computed and what decisions he made for you in preparing the tax return.

Pete Sabella is a Business Advisor with the Southwest ISBDC. Pete can be reached at psabella@isbdc.org.

Your home office may qualify as your principle place of business if you use it exclusively for administrative or management activities such as:

Common

Bob York – Small businesses in Indiana are subject to various taxes; sales tax, self-employment tax, income taxes, and property taxes, etc. In addition, there are various excise taxes that may apply to certain activities. Noncompliance with collecting, remitting, paying, and filing these taxes can result in the imposition of significant penalties being assessed by Federal and State governments. The best way to comply with these various responsibilities is to prepare and follow a tax calendar and to consult with an accountant.

Below is a summary of the most common taxes:

Sales Tax:

7% Indiana sales tax imposed on purchases of taxable products

7% Indiana sales tax collected from product sales

Payroll Taxes:

1. Employers share of Social Security tax: Paid to Internal Revenue Service
2. Employers share of Medicare tax: Paid to Internal Revenue Service
3. Employees share of Social Security*: Deducted from employees wages and paid to the Internal Revenue Service
4. Employees share of Medicare tax : Deducted from employees wages and paid to the Internal Revenue Service
5. Employee withholding of Indiana and Indiana county taxes: Deducted from employees wages and paid to the State ofIndiana
6. Unemployment tax on employers

(a)    Federal: Paid to Internal Revenue Service

(b)  Indiana: Paid toIndianaWorkforce Development

Self-employment tax*:

15.3% of net profit earned by sole proprietorships, LLC members, and partners of partnerships. Paid to the Internal Revenue Service

Income taxes:

1. Federal income taxes on profits earned by sole proprietorships, LLC members, and  partners of partnerships. Paid to the Internal Revenue Service
2. Indiana income taxes on profits earned by sole proprietorships, LLC members, and partners of partnerships. Paid to the State of Indiana
3. Indianacounty taxes on profits earned by sole proprietorships, LLC members, and partners of partnerships. Paid to the State of Indiana

Property taxes:

1. Business real property taxes assessed on land and buildings and paid to local jurisdictions.
2. Business personal property taxes assessed on machines, equipment, etc. and paid to local jurisdictions.

* Temporarily reduced by existing law

Bob York is a Business Advisor for the Northwest Indiana Small Business Development Center, an organization with the mission of having a positive and measurable impact on the formation, growth, and sustainability of small businesses in Indiana, and to develop a strong entrepreneurial community.  Bob can be reached at ryork@isbdc.org