Federal Business Taxes: Introduction
Federal Business Taxes Defined
As a small business owner, you'll need to become familiar with federal business taxes. While you may not like paying them, they are a requirement and largely dependent on the structure of your business. These are taxes imposed upon a business in additional to any state or local obligations.
As noted, the form of the business (i.e. sole proprietorship, partnership, corporation) you operate determines what federal taxes you must pay and how you pay them. The following are the four general types of federal taxes related to business:
For more information and to conduct additional research, see FindLaw's Small Business section.
All businesses must pay federal income taxes. Some businesses are taxed as separate entities for income purposes, such as corporations or limited liability companies (LLCs). Other business's incomes are not taxed separately from the income(s) of their principal owner(s). For example, a sole proprietorship's income and expenses are included on the personal income tax return of the sole proprietor himself or herself.
Business income tax is a pay-as-you-go tax -- businesses usually must pay the tax as income is earned during the year. To compare, an employee usually has income tax withheld from his or her pay. As a business, you may be required to make estimated tax payments throughout the year (i.e. every three months). If you are not required to make estimated tax payments, you may pay any tax due when you file your return at the end of the tax year. For additional information refer to Publication 583, Starting a Business and Keeping Records.
When you have employees, you as the employer 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;
Self-employment tax (SE tax) is a social security and Medicare tax primarily for 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.
Excise taxes are taxes paid when purchases are made on a specific good, such as gasoline. Excise taxes are often included in the price of the product. There are also excise taxes on activities, such as on wagering or on highway usage by trucks. Excise Tax has several general excise tax programs. One of the major components of the excise program is motor fuel.
Federal Business Taxes and Speaking to a Lawyer
Now that you'll familiarized yourself with federal business taxes, consider speaking with an attorney about your specific situation. A skilled business and commercial law attorney will be able to help you sort through everything from income taxes to excise taxes. He or she will also discuss ways in which you might be able to you will lower your small business profit and minimize your taxes.