If you run your own business, you know that the taxes associated can be daunting. Even a basic understanding of businesses taxes can help you feel more confident in submitting reports, and filing your taxes correctly. In this article, we’ll briefly outline 4 taxes small businesses must pay attention to:
With the exception of partnerships, all businesses must file an income tax return. This can be a Form 1040 (for sole proprietors) or a Form 1120 (for corporations). Partnerships need to file an information return.
Throughout the year, you will pay your federal income tax, as well as your employees’ federal income tax.
If you anticipate owing $1,000 or more when you file your return, you should be making estimated payments. The majority of the time, these payments occur on a regular schedule at specific times of the year. Always remember to take income from self-employment into consideration – you must pay estimated taxes on this also!
Because you are the owner of the small business, you will have to pay self-employment tax. This tax is broken into two parts: Social Security taxes and Medicare taxes. In 2015, the self-employment tax rate is 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare).
Self-employment tax is calculated using Schedule SE (Form 1040). Remember, you should deduct the employer-equivalent portion when calculating your adjusted gross income>
If you have employees, you have also employment tax responsibilities for them. These include Social Security and Medicare taxes, federal income tax withholding, and federal unemployment (FUTA) tax.