payroll taxes

FAQs About Business Taxes

Filing business taxes can get confusing. Here are some answers to frequently asked questions that can help set you straight so you can get the job done quickly.

What Type of Taxes Are There?

If you’ve filed personal taxes before, you probably have a basic understanding of what’s happening. However, business tax filing involves more than just income and expenses. You’ll first report income, valid for all businesses except partnerships. Partnerships file an information return. Your structure determines if this is done separately or as part of your personal taxes. You’ll probably have to make estimated tax payments on these quarterly. If you over or underpay, the difference will be fixed when you file your taxes.

Sole proprietorships, partnerships, and LLCs must pay self-employment taxes. If you have employees, you have to pay taxes on them. You will also need to turn in your sales tax collection.

What Are the Requirements for Each Structure?

Business structure determines what forms you need for filing and paying your taxes. Each one is unique. A sole proprietorship does its taxes on a Schedule C attachment on your personal taxes. Often, a tax professional can help make this process easier. Partnerships don’t pay direct taxes. Instead, a Schedule K-1 passes the tax burden to the partners who each pay their share.

The other structures are separate legal entities. C-corps pay estimated taxes and submit an 1120 form. Meanwhile, an s-corp pays no direct taxes on profits because they are passed to the owner and shareholders via a Schedule K-1. That said, they must pay employment taxes for each employee. An LLC is where things get complicated. You can decide whether you want to be considered a sole proprietorship, partnership, s-corp, or c-corp and file your taxes appropriately.

What Do You Need To Know About Payroll Taxes?

You’ll also have to pay payroll taxes if you have employees. You’ll have to withhold taxes from paychecks, send that to the IRS, and pay other taxes based on wages. You may also have to pay payroll taxes on yourself. Here are some questions you may have regarding this process:

Who’s a Taxable Employee?

Not every type of employee is subject to payroll taxes. If you direct them and control the way they work, they are subject to payroll taxes. Even part-time employees are subjected to payroll taxes. Otherwise, they can be considered a contractor and not subject to payroll taxes. However, misclassifying employees as contractors can cause you penalties.

What Taxes Are In This Category?

There are several types of taxes that fall under payroll taxes. The various taxes include federal income, Federal Insurance Contributions Act, Unemployment, and state and local payroll taxes. Each employee who has filled out a W-4 will have these taxes applied to them. However, each one will owe different amounts depending on their situation.

There’s quite a bit more to business taxes than personal taxes. Knowing this information should help you get the job done, or it can encourage you to find the right professional to help you with the task.