Tax requirements can be one of the most intimidating aspects of being an entrepreneur. Small business taxes differ somewhat from regular taxes, and you might fear that the IRS will come knocking on your door to demand an audit and more money. While small business taxes can appear overwhelming at first, it’s fairly straightforward to understand the basics and keep your business in the clear. Here's what you need to know.

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Quarterly Estimated Taxes

Many new business owners are surprised to learn that they need to make estimated quarterly business payments. This requirement can seem confusing, particularly when you're first starting out. The term “estimated quarterly business payments” can actually be something of a misnomer. You can either pay the estimated amount or you can pay the actual amount. The key though is that the IRS wants those payments made evenly at each quarter, starting on April 15 and then again on the 15th of June, September, and January. Estimated tax payments allow you to make those payments evenly. But in the first year of your business, you have no way of knowing what you're going to be bringing in. So you can either pay the taxes as evenly as you can or you can actually skip it entirely the first year and pay the penalty. Most of the time, the penalty is about an 8 percent increase on your taxes owed, although the IRS determines this on a case by case basis. You won't have to pay it at all if your tax liability is less than $1,000.

Also remember that the quarterly business payments may have to be adjusted. The IRS will not penalize you for overpaying, but if you underpay by more than 10 percent, you will receive that penalty. Your estimated tax payments are considered underpaid if they are less than 90 percent of your actual reported income for the business year. Your estimated tax payments should include income tax, sales tax, and self-employment tax, unless you aren't required to pay self-employment tax because you are incorporated.

Set the Taxes Aside at Once

For many businesses, the fastest route to bankruptcy is to ignore taxes. As painful as it may be to take those taxes out of your income, do it sooner rather than later. Depending on your industry, income level, and a number of other factors, your total small business taxes will be anywhere from 22 percent to 35 percent. New York and California have some of the highest tax rates for small business owners, so get a rough estimate of your state taxes to figure out what you need to set aside. Then, once you know what you will have to pay, remove that money and set it aside in a completely separate account. Don't touch that tax money under any circumstances. This way when tax payments come due, you have what you need.

Independent Contractors Don't Get Payroll Taxes

Independent contractors are distinct from employees. In fact, a number of small businesses prefer to hire independent contractors rather than employees due to the tax responsibilities that crop up. Independent contractors are actually considered self-employed. Just bear in mind that you can't just classify everyone as an independent contractor. Independent contractors must have sufficient latitude to make their own decisions. Otherwise, they may become de facto employees, which would add payroll taxes to your small business taxes.

Get started Incorporate Your Business Answer a few questions. We'll take care of the rest.

Get started Incorporate Your Business Answer a few questions. We'll take care of the rest.