There are several types of federal taxes that small business owners need to know about when developing a business plan. The taxes that your small business will need will depend upon your business’s structure (i.e. C corporation, S corporation, LLC, etc.) and other factors.
The most common type of taxes businesses (and everyone else) need to know about are income taxes. For businesses, federal income taxes are pay-as-you-go—i.e. you pay them as you receive income throughout the year. Depending on how your business is structured, payments are made either through withholding or estimated tax – filing forms depend on the business structure.
Self-employment taxes are paid by those who work for themselves. These payments work like paying into Social Security and Medicare benefits and work like payroll taxes that are withheld from a normal worker’s paychecks.
Furthermore, these taxes are required by the IRS if your net earnings will exceed a pre-determined amount. This is also true if the earnings come from working for a church (except for members of the clergy).
Small Business Employment Taxes
The IRS requires small businesses to pay employment taxes for their employees. Employment taxes include payments for payroll taxes, withholding (income) taxes and federal unemployment insurance taxes.
Excise taxes are required if your business:
- Manufactures or sells certain products
- Operates a certain kind of business
- Uses various types of equipment, facilities or products
- Receives payment for certain kinds of services
The easiest way to determine whether your business is required to pay an excise tax is to check with the IRS. They will easily be able to tell you whether your business meets any of the specific requirements or meets the current conditions necessary. Moreover, as there are different kinds of excise taxes, different forms are required for the different types—be sure your business is filing the correct type.
Another thing to remember is that every state has different requirements for their tax structure and for filing requirements for small businesses. Before finalizing your business plan, you should check with a tax attorney, as it will save you time and frustration in the end.
While sales taxes are not like the above taxes, retail operations should be aware if they have to pay a sales tax to their state. These taxes must be collected from your customers based on sales. Your state’s tax authority then sends you forms every year (or every three months) that you must return with your payment. Before you can accept (or pay) sales tax, you must apply for a sales tax permit or a certificate of tax authority.
More information about federal business taxes can be found at IRS.org. In addition, MaxFilings can provide you with more information about forming a corporation. If you are just starting a new business or are looking to help your business flourish, do not hesitate to check out our Knowledge Center.