5 Types of Business Tax for Small Business Owners

5 Types of Business Tax

Like businesses themselves, business taxes come in all shapes and sizes. One size does not fit all.

Below are five types, and while some of those business taxes may not be relevant to small business owners now, they could be in the future.

Let’s say, for example, your business is booming, and you want to hire two employees. Shouldn’t you first consider the tax implications?

As a small business owner, regardless of your business type, you’ll probably pay some combination of the following taxes:

  1. Income tax (pay as you go)

All business structures—except partnerships—will file a yearly income tax return. Partnerships do not pay income tax, but they do file an annual “information return.”

Even though most business structures file a yearly income tax return, not all businesses use the same forms when filing. The form you file depends on your business structure, which is officially established during your business start-up phase.

Partnerships and S-Corporations are considered “pass-through” entities…earnings and deductions ‘pass through’ the business entities, and each partner (or shareholder, in the case of an S-Corporation) receives a form called a ‘K-1’ which is then entered on each taxpayer’s income tax return.

  1. Estimated taxes (pay in installments)

If you don’t have taxes withheld each paycheck, or if you don’t have enough taxes withheld, you may need to pay estimated taxes.

Estimated taxes are paid in regular installments, usually four equal payments, throughout the year.

Use the worksheet in Form 1040-ES (Estimated Tax for Individuals) or Form 1120-W, Estimated Tax for Corporations, to see if you’re required to pay estimated taxes.

  1. Self-employment taxes (Social Security and Medicare tax)

Generally, if you work for yourself, you’re responsible for self-employment taxes.

When you pay self-employment taxes, you’re contributing to certain benefits to which you’re entitled, such as Medicare, retirement, disability, and survivor benefits.

First, see if you’re required to pay self-employment taxes, and then use Schedule SE (Form 1040) to determine the amount.

  1. Employment taxes

If you’re a business owner with employees, you’ll probably pay employment taxes. Employment taxes fall into three categories: Social Security and Medicare taxes, federal income tax withholding, and federal unemployment tax.

  1. Excise taxes

Businesses that produce or sell certain items (for example, gasoline, tobacco, and alcohol) may be required to pay excise tax. Similarly, businesses that use certain equipment, facilities, or commodities or collect payments for specific services may also be responsible for excise taxes.

For more information about excise taxes, see the complete list of excise forms and publications.

Tax resources for small businesses

Navigating your taxes as a small business owner may seem daunting, but resources are available. Many of these resources are FREE—you just have to know where to look.

For example, the IRS’s Small Business Taxes: The Virtual Workshop is divided into nine lessons. Watch all nine, or jump to the topic relevant to your business.

The IRS has also developed the Small Business and Self-Employed Tax Center, your one-stop shop for all tax-related topics.

If in-person help is more your style, you can search by state for local meetings and seminars for small business owners.

TaxSlayer can help

If you can manage your own business, you can conquer tax season, with a little help from TaxSlayer. Self-Employed is our most comprehensive e-filing solution for business owners who can’t wait to slay their taxes.

Further reading

Be sure to stock your small business library with these IRS publications, and check the IRS website frequently for changes and updates.

Last updated on 03/01/2018. 

This article is intended to provide general information to the public and does not provide personalized tax, investment, legal, or business advice. You should seek the assistance of a professional for advice on taxes, investments, and any other financial, legal, or business matter pertinent to your individual situation.