Types of Business Taxes
Now that you have incorporated your business and have begun to conduct business, there are some other things that you need to keep in mind and follow for keeping your company in a good standing. Moreover, these obligations have to be followed so that you do not end up in court and encounter heavy fines that can cost you more than your company.
One such obligation is paying the taxes to the government. There are many types of business taxes out of which you might have to pay a few. The business structure of your company is what determines the taxes that you would have to pay and how you might have to pay them as well.
Here are the five general types of business taxes that almost every company might come across:
- Self-Employment Tax
- Estimated Taxes
- Income Tax
- Excise Tax
- Employment Taxes
Each tax type is explained in details below.
The SE tax, self-employment tax is a Medicare and social security tax that every individual has to pay for working for themselves. The payments that you would make for the SE tax is added to your coverage under the social security (SS) system. The SS coverage offers you the hospital insurance (Medicare) benefits, survivor benefits, disability benefits, and retirement benefits.
Normally, other than the other types of business taxes, you need to pay the self-employment tax and file the Schedule SE (Form 1040) if any of the following applies to you:
- In case your total earnings from the self-employment were $400 or more.
- In case you work for a qualified church-controlled organization or a church (other than a minister) which has chosen an exclusion from the social security and Medicare taxes, you’re subjected to the self-employment tax in case you get $108.28 or more in wages from the organization or church.
NOTE: Special laws and exceptions are there for the international organization employees, foreign government employees, state or local government employees, notary public, fishing crew members, or aliens. To know more about the details, it is better to consult a professional lawyer to help you out with these types of business taxes.
Normally, you need to pay the taxes on your income (discussed next), along with the self-employment tax, by giving regular payments of estimated tax during the year. There are different rules for different states and it is better to consult with your lawyer to know the details about these types of business taxes.
Income tax is the main type of tax that everyone has to pay. Any business except the partnerships (partnerships file the informal return), have to file an annual income tax return. The form that you file would be based on the type of business structure that you have and how your business is organized. For details on the forms you might need, it is recommended to take the help of a professional lawyer to avoid any mistakes.
This is one of the types of business taxes where you have to pay as you go, which means that you have to pay the tax when you receive the income or earn during that year. In case you do not pay enough tax or any tax through withholding, you might have to pay the estimated tax as mentioned above.
And since everyone is not eligible to pay estimated tax payments, you might not be eligible. In this case, you need to pay the due tax when you file your tax return. Again, to ensure that you are doing it right, consult an accountant or a lawyer to help you with the payment of the various types of business taxes.
Even though this is not a tax that everyone might have to pay for, many of you might have to pay at some point of your business cycle. The excise tax is normally paid by the businesses when any purchases have been made on a particular type of goods, like gasoline. Excise taxes are also placed on some activities like wagering or on highway usage by trucks.
In any such case, you might come across the following forms which you might need to fill and file with the respective government agency along with paying the applicable tax required:
- Receive payment for specific services.
- Use multiple types of products, equipment, or facilities.
- Operate specific types of businesses.
- Manufacture or sell specific products.
Here is a little more explanation of the forms that you might come across for paying the excise tax in any of the above cases which is one of the important types of business taxes:
This form is an Occupational Tax and Registration Return form for Wagering. It is used for the registration of any wagering activity and for paying the federal occupational tax on wagering.
In case you have a business where you conduct a wagering lottery or pool, or accept the wagers, you would have to pay the federal excise tax on wagering which is one of the most important types if business taxes. Here, you would need to use the Form 730 for determining the wagers tax that you have to pay.
For some of the buses, truck tractors, and trucks that move on the public highways, there is a federal excise tax that has to be paid. Basically, this tax is for those vehicles that have a total weight of 55,000 pounds or more. This form is used for reporting the tax payable as per the weight of the vehicle.
Form 720 is the primary form for reporting the federal excise taxes on, and it has many broad classes of taxes which includes the following:
- Manufacturers taxes on the use or sale of various different articles.
- Tax on the first retail sale of heavy tractors, trucks, and trailers.
- Fuel taxes.
- Communications and air transportation taxes.
- Environmental taxes.
In short, the excise tax has many universal excise tax programs and is one of the most important types of business taxes that has to be paid if applicable. And one of the principal elements of the excise program is motor fuel. To know more about this tax, take the help of a lawyer of the state in which you have incorporated your business in.
If you plan to have employees, you would have to comply with some specific employment tax responsibilities. This means that you would have to file and pay some types of business taxes in this case. The employment taxes include:
- Federal unemployment (FUTA) tax
- Federal income tax withholding
- Social security and Medicare taxes
For understanding these taxes better, consult a professional lawyer so that you know all the types of business taxes that you would have to pay.
Now that you are aware of the possible types of business taxes that you would have to pay for when you initiate your business. Ensure that you comply with the rules and pay the applicable taxes on time to avoid the liquidation of your company, a lawsuit against your business and heavy penalties.
And if you haven’t yet registered your business in a states, then consider incorporating your business in Nevada or Delaware. For details on incorporation and the costs, contact IncParadise.