Many companies looking to establish and operate a business in the United States soon discover that the local tax system is complex and requires in-depth understanding. In addition to federal taxes, there are also state and local taxes that must be reported on time to avoid penalties and business delays. In the following lines, we will clarify the U.S. tax system so you can grasp its principles if you are considering opening a company in the United States.
Who Do You Need to Pay Taxes to in the U.S.?
From a financial standpoint (and in many other respects), the United States is more complex than other countries. This is because multiple entities require tax reporting and payment from businesses operating in the U.S. Here are the main ones:
- Federal Income Tax – This refers to the tax paid to the federal government, which oversees the entire United States. The federal income tax applies to companies depending on their type of incorporation (C-Corp, LLC, S-Corp).
- State Taxes – The U.S. is composed of 50 states, each operating relatively independent financial systems (while still interconnected). Registering a business in the U.S. requires associating it with a specific state, most of which impose corporate taxes.
- Sales Tax – Applies to the sale of certain goods and services and requires periodic reporting and tax payments. It is somewhat similar to VAT in Israel.
- Payroll Taxes – Includes Social Security, Medicare, and federal unemployment tax for employees.
Establishing and managing a company in the U.S. requires careful tracking of these tax types and annual reporting to the IRS and other relevant authorities. Failure to report accurately and on time can lead to fines, penalties, and even legal consequences for the company’s executives.
U.S. Tax Reporting: Doing It Right with Danoy
A significant part of our work at Danoy is dedicated to managing the taxes of our clients who have incorporated businesses in the United States. Beyond assisting with company registration, we provide tax planning, periodic report submissions to all relevant authorities, and ongoing accounting management.
Meeting tax requirements in the U.S. is crucial for business success. Proper management saves time and money while preventing fines. Danoy’s financial guidance helps our clients operate in an organized manner, avoid pitfalls and penalties, and maximize their success in the U.S. market.
If you are considering opening a company in the United States and want to handle your tax obligations accurately—contact us today.