Taxes for US businesses
The type of business you operate determines what taxes you must pay and how you pay them. Below are five general types of business taxes:
Income Tax
All businesses, except from partnerships, must file an annual income tax return- partnerships file an information return.
Federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. Employees usually have income tax withheld from his/her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return.
Estimated Tax
If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments.
Who must pay estimated tax?
Individuals, which include sole proprietors, partners and S corporation shareholders, normally 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.
You can avoid paying estimated tax if you receive a salary or wages if you ask your employer to withhold more from your tax earnings. This is done through a new Form W-4 with your employer.
You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.
· You had no tax liability for the prior year.
· You were a U.S. citizen or resident for the whole year
· Your prior tax year covered a 12-month period
When to pay estimated taxes
For estimated tax purposes, the year is divided into four payment periods.
Self-Employment Tax
Self-employment tax (SE tax) is a social security an Medicare tax primarily individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
Generally, you must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.
If your net earnings from self-employment were $400 or more.
If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization.
Employment Tax
As an employer you have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following:
· Social security and Medicare taxes
· Federal income tax withholding
· Federal unemployment (FUTA) tax
Excise Tax
There a number of excise taxes you may have to pay you work in any of the following industries:
· Manufacture or sell certain products
· Operate certain kinds of businesses
· Use various kinds of equipment, facilities, or products.
· Receive payments for certain services.
Federal excise taxes are reported on the Form 720. The form consists of several broad categories of taxes:
· 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