Like businesses themselves, business taxes come in all shapes and sizes. One size does not fit all.
Below are five types, and while some of those business taxes may not be relevant to small business owners now, they could be in the future.
Let’s say, for example, your business is booming, and you want to hire two employees. Shouldn’t you first consider the tax implications?
As a small business owner, regardless of your business type, you’ll probably pay some combination of the following taxes:
Income tax (pay as you go)
All business structures—except partnerships—will file a yearly income tax return. Partnerships do not pay income tax, but they do file an annual “information return.”
Even though most business structures file a yearly income tax return, not all businesses use the same forms when filing. The form you file depends on your business structure, which is officially established during your business start-up phase.
Partnerships and S-Corporations are considered “pass-through” entities…earnings and deductions ‘pass through’ the business entities, and each partner (or shareholder, in the case of an S-Corporation) receives a form called a ‘K-1’ which is then entered on each taxpayer’s income tax return.
Estimated taxes (pay in installments)
If you don’t have taxes withheld each paycheck, or if you don’t have enough taxes withheld, you may need to pay estimated taxes.
Estimated taxes are paid in regular installments, usually four equal payments, throughout the year.
If you’re a business owner with employees, you’ll probably pay employment taxes. Employment taxes fall into three categories: Social Security and Medicare taxes, federal income tax withholding, and federal unemployment tax.
Businesses that produce or sell certain items (for example, gasoline, tobacco, and alcohol) may be required to pay excise tax. Similarly, businesses that use certain equipment, facilities, or commodities or collect payments for specific services may also be responsible for excise taxes.
If you can manage your own business, you can conquer tax season, with a little help from TaxSlayer. Self-Employed is our most comprehensive e-filing solution for business owners who can’t wait to slay their taxes.
Be sure to stock your small business library with these IRS publications, and check the IRS website frequently for changes and updates.