Types of Business Taxes and Tax Responsibilities:

 

Income Tax:

 

• All businesses, except partnerships, must submit annual income reports.
• Income tax is a pay-as-you-go tax, requiring timely payments throughout the year for income earned or received. Employees typically have income tax withheld from their salaries.
• If not withheld or insufficiently withheld, estimated taxes may need to be paid.

 

Estimated Tax:

• Generally, regular payments of various income taxes, including self-employment tax, are required throughout the year.

 

Self-Employment Tax:

• Imposed for self-employed individuals, covering social security and Medicare taxes.
• Individuals usually need to pay self-employment tax if their net profit is $400 or more or if they work for a church and receive wages of $108.28 or more.

 

Employment Tax:

• Employers are responsible for paying employment taxes when hiring employees. This includes social security and Medicare taxes, federal income tax withholding, and federal unemployment tax (FUTA).
• For more information, see employment taxes for small businesses.

 

Business Tax:

• This section outlines business taxes and required forms for actiat to double taxation, with the corporation paying federal income tax on net income and shareholders paying federal income tax on dividends.
• The Tax Cuts and Jobs Act of 2017 reduced the C Corp tax rate to 21%, but individual income tax rates can go up to 37%.

 

S Corporations (S Corps) and Partnerships:

• Pass-through entities that do not pay taxes. Profits flow tax-free to owners via K-1 forms, and owners pay income tax at individual rates.
• S Corp employee-shareholders pay FICA tax, while actively participating partners in a partnership pay self-employment tax.
• The 2017 Tax Cuts and Jobs Act allows S Corp owners to potentially deduct 20% of business income, a benefit not available to C Corp owners.