An important part of starting your own business is to determine the types -- and ultimately the amount -- of your business tax obligations. You also need to be aware that business taxes are due at different times throughout the calendar year, so you need to know when to pay them. Unlike filing an individual income tax return at the same time each year (unless you file for an extension), businesses are required to deposit certain tax payments in addition to an annual return. Generally, businesses are required to deposit employment taxes, corporate income tax, certain excise taxes, and S corporation taxes before actually filing a return.
The following is a general summary about depositing business taxes. For more information related to this topic, please visit FindLaw's Business Taxes section.
Employment Taxes and Withholding
When you hire employees, you're required to withhold income taxes from their paychecks. These are collectively referred to as "payroll taxes." Upon starting employment, each employee should fill out an Employee's Withholding Allowance Certificate (Form W-4) to determine the amount that needs to be withheld. In addition to this, employers are also required to withhold each employee's share of Medicare and Social Security tax, and match each employee's contribution. Please remember that your obligation to pay employment taxes and withhold funds doesn't apply to independent contractors.
Most states have their own withholding and deposit requirements, which can include employees' state income tax. States can also impose other withholding requirements, such as State Disability Insurance, which employers in California are required to withhold. The procedure to withhold and deposit taxes will vary from state to state, so be sure to check your state's laws to find out your tax obligations.
How to Deposit Federal Business Taxes
Employers are required to make periodic deposits of certain taxes that they owe, such as withheld Medicare, Social Security, and income tax. The federal taxes that a business is required to deposit on a periodic basis must be deposited electronically. In the past there were other ways to deposit these taxes; however, starting in 2011, the only accepted method of depositing business taxes is through the Electronic Federal Tax Payment System (EFTPS). New businesses that apply for their EIN and indicate that they will likely have to make federal tax deposits are pre-enrolled into the system. For those who aren't pre-enrolled, they can enroll on the EFTPS website.
This system is simply a payment service; it doesn't determine the taxes you owe. In order to determine the types of taxes that you owe, the amount, and the due date, you will need to visit the IRS website. Please note that if you need to pay an amount on the same day that it is due, you need to contact your financial institution to find out if they offer same day wire transfers for federal tax payments.
Getting Legal Help
Taxes are often a difficult area for people to understand, and incorrectly filing or depositing business taxes can lead to problems with the IRS. An experienced business organizations attorney can help you figure out which taxes your business should be paying and which ones require periodic deposits. You can also contact an attorney for general questions about starting and running your own business.