A Crash Course in Taxes for Small Businesses

4 min read · 4 months ago

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Small business owners have a lot of things to keep in mind throughout the year. Taxes may not be the first thing that comes to mind, but they may be the most essential.

There are several taxes you may have to pay, each with different deadlines. Here’s a crash course in taxes you may pay for your small business

Small Business Tax Overview

There are five small business taxes you may have to pay either quarterly or annually. These taxes serve different purposes, and some have different deadlines than others.

 

Depending on the business you operate, you may pay these taxes:

  • Employment taxes
  • Estimated taxes
  • Excise tax
  • Income tax
  • Self-employment tax

Employment Taxes

Employment taxes apply in certain situations. You’ll pay employment taxes as an employer if you have employees. There are three employment taxes: 

  • Federal Income Tax Withholding
  • Federal Unemployment Tax Act (FUTA)
  • Medicare and Social Security tax

If you need to file and pay employment taxes, you’ll use different forms. For federal income tax withholding, Medicare taxes, and Social Security taxes, you’ll use Form 941 or Form 944. The due dates for this tax are April 30, July 31, October 31, and January 31.

If you need to file and pay the Federal Unemployment Tax Act (FUTA), you’ll file using Form 940. You also have the option to e-file using this form. 

The due date for the FUTA tax is January 31 for most deadlines. However, there are different deadlines if you owe less than $500 in FUTA tax. These deadlines are January 31, April 30, July 31, and October 31.

If you need to file and pay Medicare and Social Security tax, you’ll file using Form 941 or Form 944. You have the option to e-file with these forms as well. These forms’ deadlines are quarterly: January 31, April 30, July 31, and October 31.

 

Estimated Taxes

Estimated taxes are another tax you may have to pay. You’ll pay estimated taxes if you earn income not subject to tax withholding. You’ll also pay estimated taxes if you don’t elect to withhold taxes voluntarily. 

If you need to pay estimated taxes, you’ll use Form 1040-ES. Estimated taxes are due quarterly.

Excise Tax

Excise taxes are taxes you’ll pay for the use of certain goods or services. You’ll pay excise taxes if your small business

  • Manufactures or sells certain products
  • Operates certain kinds of businesses 
  • Receives payment for specific services
  • Uses various kinds of equipment, facilities, or products

You may use two forms if you need to pay excise taxes: Form 720 and Form 2290.  You’ll use Form 720 to figure out and pay certain excise taxes. You’ll use Form 2290 to figure and pay highway vehicle use taxes. 

Form 2290 has alternating due dates. If you’ve used your truck in the current month, you’ll have until the end of the following month to file and pay taxes. 

If you don’t file and pay the Heavy Highway Vehicle Use Tax by the deadline, you’ll face additional interest and penalties.

Income Tax

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Income tax is another business tax. Employers will withhold federal income taxes by using Form W-4. 

All business entities except partnerships must file and pay income taxes. If you’re in a partnership, you’ll file an information return instead. For income tax, partners will use Form 965-A, Form 1040, Form 1040-SR, and Schedule E. 

If you need to file and pay federal income tax, you’ll use Form 1040 or Form 1040-SR and Schedule C. The due date for federal income tax is April 15. 

 

Self-Employment Tax

Finally, self-employment tax is a tax that those who work for themselves. The IRS considers the following business entities to have self-employed workers:

  • You’re a member of a partnership that carries on a trade or business.
  • You’re otherwise in business for yourself, including a part-time business.
  • You operate a business as an independent contractor or sole proprietor.

The self-employment tax rate is a total of 15.3%, comprising two parts: a 12.4% social security portion and 2.9% for Medicare. 

 

You must pay self-employment tax if: 

  • Your net earnings from self-employment were at least $400. 
  • You receive more than $108.28 in wages from a church or organization.

 

If you need to file and pay self-employment tax, you’ll use Schedule SE. When your taxes are due, you’ll file with either Form 1040 or Form 1040 SR.

Have A Professional Help You With Small Business Taxes

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Filing and paying small business taxes are two critical parts of properly operating a small business. Filing and paying taxes may seem stressful. However, if you use the resources at your disposal, such as small business tax software, consulting a professional accountant, and record keeping tools, you’ll be able to file your taxes with ease.