About California Tax Lawyers
Tax law touches many aspects of your business. If you are engaging in a major transaction, such as a merger, acquisition or joint venture, you’ll need to hire a California tax lawyer. You may also need to consult a California tax lawyer when considering your financing or structuring your corporate entity. For these needs and more, Priori’s curated marketplace should be the first point of inquiry for excellent California tax lawyers on demand.
Minimizing Your Tax Burden in California
California companies may owe significant federal, state, and local taxes, not to mention taxes in other states where a company has ties or a “nexus.” This tax burden can quickly become unwieldily without proper tax planning and tax strategies. While companies must always pay the taxes that they owe, there are ways to minimize your California tax burden with the help of an experienced California tax lawyer. Your tax attorney can analyze the taxes you currently owe and develop custom strategies to legally lower what you owe.
Federal Business Taxes
In the United States, almost every business owes some kind of federal business tax to the IRS. Corporate income taxes are the most common. Businesses pay these taxes according to a percentage of how much money they earn in any given fiscal year. While common, corporate taxes are not paid by all businesses. LLCs, S-corps, partnerships, and sole proprietorships are all pass-through entities for taxes, not individual taxpayers. Owners are taxed only on the distributions from the business, not at the corporate level.
In addition, every company with employees must may social security and other related withholding taxes. These taxes come out of individual employees’ salaries, not company profits.
California Business Taxes
Business taxes at the California state level can be similarly complex. Most companies will owe several kinds of business taxes, even if they are relatively small operations. The following are the most common types of California business taxes, but there are others you may owe depending on your industry, business form, and operations. It may help to consult a California tax lawyer to determine exactly which ones.
Corporate Income Taxes
Corporations and LLCs that choose to be treated as corporations owe an 8.84% corporate income tax in California. This is one of the higher state corporate tax rates in the U.S. Corporate income taxes must be paid annually, and this percentage cannot be lowered dramatically through deductions, as California has an alternative minimum tax (AMT) of 6.65%.
Any companies not subject to corporate taxes in California owe franchise taxes. In addition, any companies who have operations out of the state my additionally owe franchise tax. The franchise tax rate in California is calculated either as a percentage of income or charged at a flat rate, depending on the type of business entity you chose during formation. Generally speaking, the percentage is set at 1.5% of all taxable income and applies to all types of corporations.
California Sales Tax
California imposes a sales tax on any retail items and certain services that are associated with tangible goods. The California Board of Equalization assesses these sales taxes. The current statewide sales tax rate stands at 7.5%. In most areas of California, local jurisdictions add additional district sales taxes from 0.10% to 2.00% for special purposes. Sales tax must be filed throughout the year, so it’s important to keep careful records and to consult with an accountant regularly.
No matter how carefully you file your taxes, you may face a tax audit by the Franchise Tax Board, California tax authorities, or the IRS. Audits are becoming more frequent in California, especially for small businesses. While these audits can make anyone nervous, they do not automatically mean that your company is suspected of breaking the law. Many audits are routine or triggered by standard business events, such as grants of stock. A California tax audit is no reason to panic. Your company should have well-kept records, and a California tax attorney can work with your accountant to minimize the impact on and inconvenience to your company.
How do I pay corporate taxes in California?
Corporate taxes are filed with the California Board of Equalization. To pay your business taxes, you’ll need an Employer Identification Number (EIN) or Federal Tax Identification Number with the IRS. This number allows you to file taxes both in California and federally.
How do I know which taxes I owe in California?
It is difficult to simply calculate the amount of taxes you will owe in California. There are many factors involved, and the California tax code changes regularly. You can find out which taxes you may owe through the California Employment Development Department, but the best way to ensure full tax compliance is to consult a qualified California tax lawyer about your specific tax situation.