Your bakery should always file all necessary taxes on time in order to stay on good terms with the Internal Revenue Services, or IRS as not doing so could cause your bakery to be heavily fined or you to go to jail. How you will file your bakery's taxes will depend on the type of business structure you filed under with the IRS. Sole proprietorships, partnerships, LLCs, and corporations all have slightly differing ways they must file their taxes, however, there are four main types of business taxes that your bakery will most likely be required to file by the IRS. They are as follows:
- Income Tax
Income tax is the tax placed on all the income generated by your bakery during the year. Important information about income tax includes:
- Your bakery must file an annual income tax return unless is was formed as a partnership
- If your bakery is a sole proprietorship, your bakery’s income taxes must be filed under your personal tax return.
- If your bakery is an LLC, your bakery’s income taxes are divided amongst members by amount of investment or as listed in the operating agreement, and then filed on each individual member’s tax return.
- If your bakery is a S-corporation, your bakery’s income taxes will be given to shareholders, and no income tax will be paid by the corporation itself
- If your bakery is a C-corporation, your bakery will have to pay income taxes at the corporate level, and then again at the shareholder level if dividends were distributed.
- Self-Employment Tax
The filing of self-employment tax is required by you, the bakery owner, so that you adequately contribute to social security. This tax secures your social security benefits such as retirement benefits, disability benefits, survivor benefits, and Medicare. To file these taxes you must file a Form 1040.
- Employment Taxes
If your bakery has employees, you will have to pay employment taxes. Your bakery will pay these taxes to help protect your employees in the chance that they are unable to work by no fault of their own. Employment taxes include:
- Social security and Medicare taxes
- Federal income tax
- Federal unemployment tax
- Excise Tax
Depending on the type of bakery you own and the type of products your bakery serves, you may or may not have to pay certain excise taxes. Excise taxes are paid is your bakery:
- Manufactures or sell certain products
- Uses certain types of equipment, facilities, or products
- Receives payment for certain services
When initially filing your bakery’s taxes it is best to ask your bakery’s accountant for advice to make sure that you are not missing any needing forms. You can also get on the IRS’ website to review any business taxes your bakery may need to file.