Business Taxes: Exploring Different Taxes Businesses Have to Pay

Not only do the businesses in Georgia and other states in the United States have to be tax compliant, but they also have to pay the applicable taxes promptly. The problem many small businesses and startups face is that they do not know what taxes they are supposed to pay and how to do it correctly.

Therefore, outsourcing all the tax and accounting-related work to a CFO services in Atlanta, GA, can be a great stress reliever for small businesses. Nonetheless, knowing the taxes a business may have to pay can help the owners ensure smoother operations and better financial planning.

Different types of taxes businesses pay

Businesses have to pay different taxes based on their forms and operations. However, the following five types of business taxes are the most common ones:

Income Tax

  • All types of businesses, except partnerships, must file annual income tax returns.
  • Partnership businesses have to file the information return.
  • Businesses use Form-1120, 1120-s, 1065, 1040, 1041, etc. to report the various incomes.
  • Since federal income taxes are considered pay-as-you-go, you must pay the tax during the same year as receiving the income.

Estimated Taxes

  • Businesses with income that is not subject to withholding pay an estimated tax based on their anticipated income for the year.
  • Businesses pay estimated tax every quarter throughout the year.
  • Businesses expecting to owe more than $1000 may have to file an estimated tax, whereas the amount for corporations is $500.
  • The IRS provides Form-1120-W for reporting estimated tax.

Self-Employment Tax

  • Self-employment tax is primarily a Medicare and Social Security tax for self-employed individuals.
  • Self-employment tax is a contribution towards coverage for a self-employed individual under the Social Security system, which provides coverage for disability benefits, retirement benefits, Medicare benefits, and more.
  • If you earn more than $400 or more as a self-employed individual or receive more than $108.28 in wages from a church or an organization, you have to report your earnings using form 1040 or 1040-SR.

Employment Taxes

  • Businesses, as employers, have to pay employment taxes, which include social security and Medicare taxes, federal income tax withholding, and federal unemployment tax.
  • In addition to the federal unemployment tax, businesses may have to pay state unemployment tax, depending on the state.
  • Businesses can file employment taxes using Form-940, 941, or 944.

Excise Tax

  • Businesses involved in manufacturing and selling certain products, services, or activities related to alcohol, tobacco, fuel, firearms, air transportation, luxury items, etc., have to pay excise taxes using different forms.
  • Form 720 is meant for filing environmental, air transportation, fuel, and other taxes.
  • Form 2290 is used for filing excise duty on trucks, tractors, and buses that weigh more than 55,000 lbs and are used on public highways.
  • The federal excise tax applies to wagering pools, and the lottery is reported using Form 730.
  • Form 11-C is used to register for any wagering-related activity and occupational tax on wagering. 
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Tobias Steindl