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Tax Tips
Posted on 02-07-2013

Do You Know How to Handle Your Small Business’ Taxes?

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Small Business
Small businesses must withhold federal income taxes from their employee’s wages and pay them directly to the IRS. The amount depends on the size of the payments, the number of exemptions claimed by each employee, their marital status, and the frequency of the payments. Each employee must complete a W-4 form to determine withholding exemptions.

Employers must also withhold 6.2% of each employee’s income for Social Security and 1.45% of each employee’s income for Medicare, in addition to the matching contribution that the employer makes.

Most employers are also required to pay federal and state unemployment taxes under the Federal Unemployment Tax Act.

An excise tax is a tax paid for the sale or manufacture of certain commodities. For example, environmental taxes, communications taxes, or fuel taxes could be excise taxes levied on a particular business. Depending on what the business manufactures or sells, some businesses might not be required to pay these at all.

Sole proprietorship A sole proprietorship is a company with only one owner that is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he/she reports business income or losses on his/her individual income tax return. The owner is inseparable from the sole proprietorship, so he/she is liable for any business debts.
Self-employed or sole proprietors report their taxes through Form 1040 and Schedule C for net profit and loss from their business. Employers are also required to make quarterly estimated tax payments if they expect their business to earn more than $1,000.

Partnerships A partnership is a business, which has one or more owners and that is not a limited liability company or corporation. Partners share equal responsibility for the company’s profits and losses, ...
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