Keep the IRS at Bay: Know Your Business Tax
Share with social media :
To learn everything you need to know, refer to Publication 583 (1/2007), Starting a Business and Keeping Records. This can be found on the Internal Revenue Service- United States Department of the Treasure website, to be found at http://www.irs.gov/
The running of a business requires that the small business owner pay business tax that could take many forms. The four types of tax imposed on businesses include income tax, self-employment tax, employment taxes and excise tax. If you are required to pay excise tax then you will need special forms. These include Form 720, Form 2290, Form 730 and/or Form 11-C.
The type of small business you have is the determining factor of the taxes you are required by law to pay to the Internal Revenue Service (IRS). This is also the determining factor in how you must go about paying your taxes.
In general, there are four types of business taxes that you need to acquaint yourself with when you go into business for yourself. There is income tax, self-employment tax, employment taxes and excise tax.
Income Tax
Unless you form a partnership with someone else, if you run a business you are required to file an income tax return on a yearly basis. There are different forms for income tax depending on the kind of business model you have. The five types of business models include sole proprietorships, partnerships, corporations, S. corporations, and a limited liability company (LLC). For more information on business structures and which forms are right for you, visit the IRS website at http://www.irs.gov/businesses/small/article/0,,id=98240,00.html.
Federal income tax is basically a “pay-as-you-go” or “pay-as-you-work” tax. In other words you pay this type of tax as you earn money. As an employee working for someone else you would have had tax taken off every pay check. If you did not have enough tax taken off you would have had to pay it when tax time rolled around. Some businesses have estimated tax payments while others pay the tax when they file their tax return.
Self-Employment Tax
Self-employment tax (SE tax) is geared towards people who work for themselves and is a combination social security and Medicare tax. Paying this tax allows you to be covered under the social security system which means that you are entitled to hospital insurance (Medicare) benefits, as well as disability benefits, retirement benefits and survivor benefits.
You must pay this tax and file Schedule SE (form 1040) if your net earnings from your business were $400 or more annually. You must also pay it if you work for a church or church organization and earned $108.28 or more in wages and the organization chose to exempt themselves from paying social security and Medicare taxes. This does not include ministers or other members of any type of religious order.
Employment Taxes
If you have hired employees to help run your small business, then as the employer you are responsible to fill out forms and file a return based on this. Employment taxes for a business include social security and Medicare taxes, federal income tax withholding and federal unemployment tax (FUTA). To learn more about this refer to the Employment Taxes for Small Businesses on the IRS website.
Excise Tax
Excise tax involves different forms depending on the type of business you conduct. If you are a part of any of the following then you will need to pay excise tax:
-Manufacture or sell goods
-Operate certain types of businesses
-Use a variety of kinds of substances, equipment, vehicles or facilities
-Receive payments based on select services
Form 720
Form 720 is the Quarterly Federal Excise Tax Return and this takes into account a broad range of tax areas including:
-Environmental taxes
-Fuel taxes
-Air transportation and communication taxes
-Tax paid on the first retail sale of vehicles such as trucks, tractors and trailers
-Manufacturers tax applied to the sale or use of a number of different items.
Form 2290
Form 2290 is a Heavy Highway Vehicle Use Tax and is a federal excise tax imposed upon certain kinds of trucks, buses and truck tractors that are operated on public highways. Any vehicle of this sort that has a taxable gross weight of 55,000 pounds of more would fall into this category.
Form 730
Form 730 is the Monthly Tax Return for Wagers and is for those who accept wagers, conduct wagering pools or run lotteries. You are liable for this tax if you do any of these things.
Form 11-C
Form 11-C is the Occupational Tax and registration Return for Wagering. This tax has a number of general excise tax programs (such as one fro motor fuel) and is in place for those wishing to register for wagering activity. It is also in place to pay the federal occupational tax that is imposed on wagers.
Share with social media :
Disclaimer: Ideawala.com does not recommend or endorse the products or services mentioned by the authors. We have not verified authors' credentials. We do not guarantee the accuracy of the information in the article or the earnings claims. Nothing in this article should be construed as business, legal or tax advice. Please consult a professional business advisor, an attorney or an account for specific advice in your situation.
Please take a moment to rate the Quality of this Article
Add your own Comments