What businesses in Maryland need to know about taxes
Entrepreneurs can benefit from a basic understanding of tax laws before beginning business in Maryland.
The Internal Revenue Service (IRS) and the Maryland Comptroller require businesses to begin paying taxes as soon as income is earned. Businesses generally have two options for making tax payments. They can either withhold the taxes from wages or other payments or they can make an estimated tax payment each quarter. [See Also: Legal Assistance with Tax Concerns]
Tax requirements for businesses in Maryland
Depending on the details of the business, the business may be responsible for various taxes. Some examples include:
- Business personal property tax. In Maryland, businesses are required to pay an annual tax on the “value of their business personal property.” This includes the value of furniture, fixtures, tools, machinery and other pieces of equipment. The valuation of this property is conducted by the Department of Assessments and Taxation based on the annual Maryland Personal Property Return filed by the business while the local jurisdiction in which the business is located collects the tax.
- Social Security and Medicare tax. This is a federal obligation. The employer contributes half and the employee contributes the other half, each generally paying 7.65 percent of the employee’s compensation for Social Security and Medicare.
- Business income tax and employee withholding. This is a federal tax. The IRS website provides withholding tables and tax guides designed to aid employers in determining the amount that should be withheld and where the deposits should be made.
Additional required state taxes apply and depend on the legal structure of the business. Corporations are generally required to pay a corporation income tax. This is true even if there is no taxable income or if the corporation is inactive. As of January 1, 2008, this tax is set at 8.25 percent of the Maryland taxable income.
S corporations, partnerships and limited liability companies file as pass-through entities. Sole proprietorships file as individuals, combining business profits or losses with other personal income and deductions.
Importance of legal counsel
These are just a few of the tax issues that can arise when beginning a business in Maryland. As a result, it is wise to seek the counsel of an experienced Maryland business tax attorney. This legal professional will guide you through the process, helping you to consider all available options and advocating for your business, working to better ensure your business assets, income and investments are maximized.
Our Legal Services
PAYCHECK PROTECTION PROGRAM
Please find this memo to be a summary of information that covers the new Paycheck Protection Program (PPP) that is part of the CARES ACT. This memo is by…