How to Write a Business Plan

132 | HOW TO WRITE A BUSINESS PLAN

Now, enter the dollar amount of credit

purchases you entered on line 4, but in

a later month, in a similar fashion to the

M & M Copy Shop.

6. Withholding Taxes. Most businesses
   must pay their employees’ taxes every
   month. That means that every month
   you send the IRS the amount of wages
   you’ve withheld from your employees’
   paychecks plus the amount you’re
   required to contribute to their Social
   Security. If you make these tax payments
   every month, they don’t affect your cash
   flow, so they won’t show up on your
   Cash Flow Forecast.
   Some businesses qualify to pay with-
   holding taxes every three months rather
   than every month. To qualify for the
   quarterly payment program, you must
   owe the IRS less than $2,50 0 every
   quarter. If you do not qualify for the
   quarterly option or wish to pay every
   month, skip ahead to line 8. If you wish
   to explore the quarterly option, read
   the following discussion of withholding
   taxes.
   When you completed the Profit and
   Loss Forecast, you added at least 14%
   to the total wages and salaries you pay
   each month as an additional expense
   (Profit and Loss Forecast, line 4b, With-
   holding Taxes). That’s your approximate
   mandatory contribution to your
   employees’ Social Security fund and
   federal unemployment insurance. You’ll
   write a check to the government to pay
   that amount.

RESOURCE

These are approximate tax figures,

for your planning purposes. Later, you’ll need

to learn more about the tax rules. Some good

information resources include Tax Savvy for

Small Business, by Frederick W. Daily (Nolo),

and IRS Publication 15 Circular E, Employer’s

Tax Guide, available, along with other publi-

cations, at the IRS website (www.irs.gov).

In addition, the government also

expects you to collect money from your

employees for their portion of income

and Social Security taxes and pay

the government directly. While every

employee is different because of their

individual tax situations, the average

employee has about 15% of their total

wages or salary withheld from every

paycheck for federal withholding. This is

money that belongs to the employee that

you must mail to the IRS.

If you will pay a total withholding

of less than $2,5 00     every quarter, you

may choose to pay taxes quarterly rather

than monthly. Make sure you verify your

employees’ actual withholding rates

before deciding on this option.

exAmple:

Let’s say that you plan to hire one

full-time sales clerk in your business

for a total salary of $1,500 per month

or $4,500 per quarter. Multiplying 29%

by the quarterly salary (0.29 × $4,500

= $1,300) gives an answer of $1,300,

which is less than $2,500. In that