Business Plan for Starting a Business

Business Taxes
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Business Taxes

The form of business you operate determines what taxes you must pay and how you pay them. The following are the four general types of business taxes.

  • Income Tax
  • Self-Employment Tax
  • Employment Taxes  
  • Excise Tax

Income Tax

All business except partnerships must file an annual income tax return.  Partnerships file an information return.  The form you use depends on how your business is organized. 

The federal income tax is a pay-as-you-go tax.  You must pay the tax as you earn or receive income during the year.  An employee usually has income tax withheld from his or her pay.  If you do no pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax.  If you are not required to make estimated tax payments, you may pay any tax due when you file your return.  For additional information refer to Publication 583, Starting a Business and Keeping Records.

Self-Employment Tax

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.

You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. 

  1. Your net earnings from self-employment were $400 or more.
  2. You had church employee income of $108.28 or more.

For additional information, refer to Self-Employment Tax

Employment Taxes

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
  • Federal unemployment (FUTA) tax

For additional information, refer to Employment Taxes for Small Businesses

Excise Tax

Excise taxes generally are taxes levied on you if your business does any of the following:

  • Manufacture or sell certain products.
  • Operate certain kinds of businesses.
  • Use various kinds of equipment, facilities, or products.
  • Receive payment for certain services.

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.  For additional information, refer to Excise Taxes 

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