Can anyone direct me toward information on how small businesses are taxed?

[JAbuchan08]

Every time I run into someone who argues that the highest income tax bracket should not have their taxes raised they cite the effect on small businesses. How can I refute this?

[CrackpotAmerica]

1. Depends on type of business.

Sole Propriatorship?
Partnership?
LLC?
Incorporated?

[JAbuchan08]

2. Let's go with sole proprietership?

what do you have for that?

[CrackpotAmerica]

3. You fill out a 1040 A

www.irs.gov

download the file, do the math and then divide the tax by the income and multiply it by 100.

That is your %

[sybylla]

4. Same with LLC and partnerships

after the net profits are divided amongst the owners. I'm one of two members of an LLC. The business does not pay taxes, I do. So my business' income is essentially taxed at the same rate as personal income.

Seems to me increasing the upper brackets would encourage small business owners to spend more money on their business, thereby increasing their expenses and reducing their net profit/taxable income.

On edit: It really shouldn't hurt small business if the business reinvests the profit in the year it was incurred. It's all hooey. If the small business owners put any thought into planning for taxes, they would never get hurt by this until they make so much it shouldn't matter.

[JAbuchan08]

6. Do you think this is fair

do you believe you should pay taxes at the personal rate?

[sybylla]

9. Of course, it was my choice.

Corporate rates are higher, believe it or not. And there are more hoops to jump through. Sure, there are also more tax loopholes but what small business owner wants to deal with all that crap.

I never complain about paying taxes. I'd love to make enough money to pay the highest rate for a change.

For some small businesses that have a hard time with cash flow, increasing the upper rates might make negotiating the quarterly estimated tax payments difficult. In a tight year or two, I've had problems getting enough money together for an estimated tax payment myself. But that doesn't affect my business. If it did, I wouldn't be a very effective business manager.

I'm still waiting for all these complaining business owners to explain to me how raising taxes hurts their small business when it is net profit that is taxed, not gross profit. Investing in their business reduces their tax burden. It doesn't work the other way around.

[JAbuchan08]

5. To clarify

I'm not trying to fill out a tax form. I just want to know if their is a special dispensation in the tax code for people who own small businesses.
My brother in-law is trying to tell me that the current tax rate on the top 1% of earners is unfair because this also represents most small businesses.
I'd like to refute him without having to fill out a tax form. If anyone could shed some light on this I would appreciate it.

[napi21]

7. Your BIL is wrong! If a sole proprietorship reaches a level

big enough to have income in the top 1%, they would have tax accountants work things out in a different structure. More than likely, a Corporation, so it could take advantage of all the loopholes created specifically for Corps.

[CrackpotAmerica]

8. You Must Consider it This Way

A Couple Thousand to you is probably a big deal and is often prohibitive to you reaching a higher economic echelon. And so, you are "burdened" by your taxes in a direct way.

However, to 1%ers, even a couple million doesn't make much difference. How rich does one need to be?

They have no burden. So why reward them with breaks?

[CrackpotAmerica]

10. It is hard to put an exact number on it.

It all depends on the income.

In a Propriatorship, your taxable income is:

assets-liabilities

if you made 10.00, and it cost you 4 dollars to make the 10, you are taxed on 6.

From there, it all depends on how much income you have actually made.

[applegrove]

11. Lower the taxes on small business since they are the only ones

creating jobs. Big business isn't creating jobs in the U.S.A. If they decide to - then maybe they can get a break.

Ask the person who complains about their taxes if they will create any jobs in the USA if their taxes or cut.

That should be the the test.

Small business - creating jobs
Medium business - disappearing ever since deregulation - all jobs gone (think medium sized business in retail, airlines, computer software, financial, etc. - all going, going gone).
Big Business - not creating jobs in the USA.

[tsuki]

12. My taxes are minimal when compared to the ride the insurance

companies take on my back.

Unfortunately, since most insurance is required by government, I tend to lump it together as governmental costs.