Call Now :(855) 549-7829
Se Habla Espanol

Must Know Tax Responsibilities for Starting a Business

Every business is required to fulfill certain tax duties. When starting a business, it is important to have a clear understanding of the taxes you need to pay. It helps to accurately estimate your expenses and determine the tax responsibilities for a business. Here are essential tax responsibilities that businesses need to consider.

Filing an Income Tax Return

starting a businessEvery type of business, except partnerships, must file a federal income tax return every year. Partnerships file an information return. Taxes are paid as you earn or receive income. If you do not have taxes withheld from your pay, you need to make estimated tax payments.

Estimated Tax

Generally, sole proprietors, partners, S corporation shareholders and the self-employed are required to make estimated tax payments if they owe $1,000 or more in taxes when they file their return. For corporations, the payment threshold is $500.

To avoid paying estimated taxes, you need to get taxes withheld from your paycheck. You may ask your employer to withhold more if you receive income that is not subject to withholding.

Sole proprietors, partners, S corporation shareholders and the self-employed can use Form 1040-ES, Estimated Tax for Individuals to determine and pay estimated tax. Corporations file Form 1120-W, Estimated Tax for Corporations. Corporations may use the Electronic Federal Tax Payment System (EFTPS) to pay estimated tax.

Employment Tax

Employers need to report and deposit employment taxes. They are also required to withhold income tax from their employees’ wages and deposit them with the IRS. To calculate how much to withhold, they may use Form W-4 or the withholding tables in IRS Publication 15, Employer’s Tax Guide.

Additionally, employers must also withhold a part of social security and Medicare taxes from their employee’s wages, and pay a part of it themselves. To deposit the taxes withheld, employers can use the electronic fund transfer (EFT) at the Department of Treasury’s service: EFTPS.

Excise Tax

Excise taxes are paid when you purchase a specific good, such as gasoline. Usually, excise taxes are included in the price of the product. However, certain businesses, such as manufacturers, may need to pay excise tax separately.

Federal excise taxes are reported on Form 720. For more information on who must file, you may review Instructions for Form 720.