What Are The Differences Between Direct vs. Indirect Taxes?
Every working individual files their taxes every year like a model citizen, but many of them are unaware of the fact that there’s a split between direct taxes and indirect taxes. What’s the difference, and which one applies to you? Trust your local tax professionals at A. Roberts & Associates to explain everything you need to know before reaching out to us for a consultation!
Explaining Direct Tax – The One You’re Familiar With
When most taxpayers file their yearly taxes, that falls under what’s considered “direct tax”. Direct tax is a tax that is one person’s sole responsibility which can’t be transferred to anyone else. Federal income tax is the prime example of direct tax because the taxpayer to whom it applies is the only person it pertains. Other examples include corporate tax and property tax as they can apply to both people and entities. You can think of direct tax as the standard since it’s the most common and it’s very straightforward.
| Direct Tax Is: Tailored to the individual Non-transferrable The standard form of tax |
If you’re a small business owner, you’re almost guaranteed to have more tax responsibilities and a more complex agenda. In that case, continue reading to learn more about what indirect taxes are and how they may affect you:
How Indirect Taxes Work And When They Apply
Indirect tax isn’t tied to a single individual which means that they are transferrable. How do you end up with indirect taxes? Business owners are responsible for more than just meeting tax deadlines, they also have more tax obligations to meet. This is where indirect taxes come in, giving businesses the ability to fulfill these obligations by other means. This can be done in a number of ways, including:
- Raising the cost of goods and services
- Lowering wages for employees
- Pulling the required funds from profits
As you can see, only businesses are granted the opportunity to be flexible in the way that they pay their taxes. Individual taxpayers don’t have employee wages to alter or products to inflate the pricing on to cover their direct taxes.
| More About Tax Shifting The practice of transferring tax obligations to customers and employees is sometimes referred to as tax shifting. The name is very straightforward, as the tax obligations are basically redirected to those who interact with the entity in question. |
As a business owner who is new to implementing the method of shifting taxes, the best thing you can do is consult a tax professional. A. Roberts & Associates has decades of experience in assisting small businesses in the realm of taxes, and so we encourage you to seek our expertise before you get started.
Learn more > 5 Things To Look For When Hiring A Tax Accountant For Your Small Business
Need Help Navigating Taxes? Call A. Roberts & Associates!
Whether you’re an individual taxpayer with direct tax duties or a small business owner in need of assistance navigating indirect tax obligations, A. Roberts & Associates carries the knowledge, skills, and expertise to set you on the path to success. Reach out to us today to schedule your consultation so we can discuss a financial plan tailored to you!