Small business taxes

Staying in business requires paying your federal, state and local sales taxes.
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Small business taxes FAQs

Everyone has to pay taxes, including small businesses. Your business may need to pay sales, employment, business taxes, and more. If you are just starting out, you may benefit from working with an accountant to help you determine your tax obligations.

Do I need to pay quarterly estimated business taxes?

Knowing what taxes you'll need to pay and when can be confusing. Generally, yes, you do need to pay quarterly estimated business taxes. If you don't pay or underpay, you may end up paying penalties and a large tax bill when you file your yearly taxes. The general guideline is that if you expect to owe over $1000 in taxes by the end of the year, you should pay estimated quarterly taxes. Corporations are expected to make quarterly tax payments if they only expect to owe $500 or more in taxes at year end. Additionally, if you paid more than zero the year before, you may also be expected to pay quarterly taxes.

To be on the safe side, you should pay quarterly taxes unless it is your first year of business and you do not expect to make a profit. You can pay your estimated taxes online or by mail.

  • To configure your estimated taxes, use Form 1040-ES
  • Corporations can configure estimated taxes using Form 1120-W

How do I pay sales tax?

If your state requires sales tax and you sell taxable items, you'll need to pay the collected sales tax. Many tax experts recommend that you pay these taxes quarterly. The task is easier if you use sales technologies that will configure and track collected taxes for you. If you sell products to other states, you may be required to collect their sales tax as well.

Steps for collecting sales tax

  • Determine what taxes you may need to collect (usually your state tax agency has that information available)
  • Apply for a sales tax permit if required
  • Discover which products or services that you offer are taxable
  • Collect taxes
  • Keep meticulous tax records and make quarterly tax payments

Collecting the proper amount of taxes is easier than it has ever been. Often point-of-sale systems can be used to collect and track your sales records for you. If you sell online, often the e-commerce service can configure and collect sales taxes for you.

Do I need to pay employment taxes?

If your company has employees, you need to pay their employment taxes. If you are self-employed, you need to pay your own employment taxes. Employers should make these payments monthly or semi-weekly. Self-employed people should pay estimated quarterly taxes.

Employers pay these taxes:

  • Federal income
  • Social security
  • Medicare
  • Federal unemployment

Self-employed persons pay these taxes:

  • Social security
  • Medicare
  • Suggested: estimated quarterly income payments