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15 Valuable Tax Statistics for Small Business Owners to Know

Small business tax statistics to best prepare you for May 17th this year.

Bailey Keppel
Bailey Keppel
4 min read
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There's a new tax day this year. Mark your calendars for May 17th!

With extra time to file for 2021, we recommend pausing first to go over some of the basics—such as how your small business will be taxed and the types of taxes you can expect to pay.

If you’re unsure, don’t worry. We’re here to help you out.

How Are Small Businesses Taxed?

According to the National Federation of Independent Business, the majority of small businesses are “pass-through” entities that will pay various tax rates independently. This means that as a small business, you typically won’t pay the corporate rate for taxes when filing. Rather, you’ll pay the tax rate that coincides with your earnings as the owner.

If you need help figuring out which tax bracket you’re in, feel free to reference the list of 2020-2021 income tax brackets.

What Types of Taxes Do Small Businesses Pay?

No doubt, filing your taxes is a very involved process that can quickly get confusing. To make the process less overwhelming, brush up on the taxes you could be expected to pay as a business owner:

1. Income tax: Taxes directly associated with income.

2. Self-employment tax: Social security and Medicare taxes for self-employed individuals.

3. Payroll tax: Employment taxes paid on workers’ wages.

4. Sales tax: Taxes collected from consumers on goods and services.

5. Property tax: Taxes paid on homes, commercial buildings, and land.

6. Excise tax: Taxes that aren’t directly paid by the consumer.

7. Capital gains tax: Taxes associated with the investment or sale of assets.

The key here is to have a general understanding of federal tax laws, as well as a deeper knowledge of your state and county’s local tax requirements for small business owners.

Notable Tax Statistics

Get inspired with these 15 stats for May 17th!

1. The average tax rate of small business is held at about 19.8% (Small Business Administration)

2. Business owners who make less than $400 aren’t required to pay self-employment tax (IRS)

3. There are currently more than 23 million sole proprietorships in the United States (Small Business Administration)

4. Small businesses comprise 99.7% of U.S. employer firms (Small Business Administration)

5. The top income tax rate for 2021 is 37% (Tax Foundation)

6. 93% of American taxes are paid or remitted by businesses (Tax Foundation)

7. Federal corporate income tax is levied at 21% (Tax Foundation)

8. The average effective tax rate for small business partnerships is 23.6% (Small Business Administration)

9. The average effective tax rate for small business C-corporations is 17.5% (Small Business Administration)

10. The Tax Cuts and Jobs Act provides a 20% tax deduction for pass-through businesses (Tax Foundation)

11. In 2021, businesses may exclude up to $15,000 in gifts from taxes (Tax Foundation)

12. 42/50 states levy individual income taxes (Tax Foundation)

13. Corporate tax accounts for 19.7% of the ranking for each state’s business tax (Tax Foundation)

14. Small businesses spend 2.5 billion hours prepping for and answering questions about their tax return each year (National Taxpayer Advocate)

15. 70% of small businesses employ tax professionals to prepare and submit their tax returns each year (National Taxpayer Advocate)

How to Stay Ahead

In addition to filing your taxes on time, you can stay in the know about both federal and state tax deadlines, requirements, and rates.

As a small business owner, it’s up to you to be aware of which taxes you owe. If you have employees, keep in mind you’re required to send them their W-2 forms by January 31, either electronically or by mail—regardless of how much they’ve made in wages.

It’s okay if you don’t have all of the answers. Just take it one step at a time and lean on the following resources to stay up to date this year and beyond.

Additional Resources

1. Small Business Administration: Federal and local small business information and assistance.

2. GoSite: Small business resources, tips, and advice.

Stay in the know with those who know!

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Bailey Keppel
Bailey Keppel
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