5 Business Taxes You Should Know About

11/9/2021

If you're running a business, you're on the hook for a variety of taxes. Let's take a look at the main categories:

Income tax

All businesses except partnerships must file an annual income tax return. (Partnerships file an information return.) However, which form you use depends on how your business is organized, so you'll need to keep that in mind as you prepare taxes and work with financial professionals.

Estimated tax

While not a separate tax it is it's own tax responsibility. If you don't pay enough

tax by having income tax withheld from your pay, you might have to pay estimated tax. Individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.

Self-employment tax

When you work for yourself and don't have social security and Medicare taxes withheld from your salary by a full- or part-time job, you must pay taxes on income by making regular payments of estimated tax during the year. These payments contribute to your coverage under the social security system. Generally, you must pay self-employment tax and file Schedule SE if:

Your net earnings from self-employment are $400 or more.
You work for a church or qualified church-controlled organization that elected an exemption from social security and Medicare taxes, but you receive $108.28 or more in wages from the church or organization.

There are other rules and exceptions.

Employment taxes

If you have employees, you have employment tax responsibilities. You must pay them and there are forms you must file. Employment taxes include:

Social security and Medicare taxes.
Federal income tax withholding.
Federal unemployment, or FUTA, tax.

The rules about withholding and remitting employment taxes are both complicated and stringent, so it's best to work with a payroll professional.

Excise tax

You must pay excise tax and file forms if you:

Manufacture or sell certain products.
Operate certain kinds of businesses.
Use various kinds of equipment, facilities or products.
Receive payment for certain services.

Excise taxes include several broad categories:

Environmental taxes.
Communications and air transportation taxes.
Fuel taxes.
Tax on the first retail sale of heavy trucks, trailers and tractors.
Manufacturers' taxes on the sale or use of a variety of different articles.

These are just the federal taxes. You may also have to work with state taxing authorities. Also, most states have a state sales tax and even local sales taxes within states, and correctly calculating those can be a chore. As a business owner, understanding your tax requirements will help you file your taxes and make payments on time. Your best bet is to work closely with a qualified professional.

Link to the original article: ramlcpa.link/uyv