Business Tax FAQs

What is income tax?

All individuals and business entities must pay income tax, which can vary based on the taxpayer’s income or profits. Filing a yearly income tax return is required by law to determine taxes owed or eligibility for a refund.

If you do not pay through tax withholding (or not enough), you will be required to make regular estimated tax payments throughout the year.

What are estimated taxes?

Estimated taxes are regular payments throughout the year for income and self-employment taxes. If you’re a sole proprietor, partner, S corporation shareholder, member of an LLC, or self-employed worker, you will need to make estimated tax payments if required. Though these payment deadlines are quarterly, you can pay as you go. Check with your state for instructions specific to your business.

What is excise tax?

Excise tax is different from sales tax in that it is collected from the producer or seller and incorporated into the product price. Goods with excise tax include gasoline and alcohol. Typically, a business would collect these taxes from the customer to pay the IRS using Form 720, the Quarterly Federal Excise Tax Return.

What is self-employment tax (SE tax)?

SE tax is a social security and Medicare tax, and your payments contribute to your coverage under the social security system.

 

Generally, if you are required to file a return, then you must pay estimated quarterly taxes which include self-employment tax and estimated income tax. This is because you’re not being paid on payroll and you don’t have an employer withholding these taxes from your paycheck for you.

Do I need to pay payroll taxes?

Do you have employees? Then you’ll need to deposit payroll taxes. This includes Federal Income Tax, Social Security, and Medicare taxes. As part of your employer obligation, you must file Form W-2 for reporting employee compensation. There are requirements for filing returns and making deposits, and the funds must be held in trust until paid to the IRS.

Do I need to pay Sales and Use Tax?

As a business, you may have requirements to pay sales and use tax if you sell goods. If you sell services, you typically don’t need to worry about sales and use tax, but it depends on the state rules. Some service providers (e.g. construction) may need to pay sales and use tax if an item (e.g. fabrication costs) is “sold” to the customer as part of the delivered service. Check with your state for specific regulations.

View More FAQs

Chat Now