Types of business taxes, which to pay, and requisite forms
The form of business you operate determines what taxes you must pay and how you pay them. There are four general kinds of business taxes:
• Income tax
• Self-employment tax
• Employment taxes
• Excise taxes
First, here is an overview of which forms to file. Details on the different kinds of business taxes and their forms follow afterward.
Which Forms Must I File?
| If you are a... | Then you may have to pay... | File form... |
| Sole proprietor | Income tax |
1040 or 1040-SR, and Schedule C (Schedule F for farm business) |
| Self-employment tax | 1040 or 1040-SR, and Schedule SE | |
| Estimated tax | 1040-ES | |
| Employment taxes: • Social security and Medicare taxes and income tax withholding • Federal unemployment (FUTA) tax |
|
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| Excise taxes | See Excite Taxes section | |
| Partnership | Annual return of income | 1065 |
| Employment taxes | Same as sole proprietor | |
| Excise taxes | See Excite Taxes section | |
| Partner in a partnership (individual) | Income tax | 1040 or 1040-SR, and Schedule E |
| Self-employment tax | 1040 or 1040-SR, and Schedule SE | |
| Estimated tax | 1040-ES | |
| C corporation | Income tax | 1120 (C corporation) 1120-S (S corporation) |
| Estimated tax | 1120-W (corporation only) | |
| Employment taxes | Same as sole proprietor | |
| Excise taxes | See Excite Taxes section | |
| S corporation shareholder | Income tax | 1040 or 1040-SR, and Schedule E |
| Estimated tax | 1040-ES |
Income Tax
All businesses except partnerships must file an annual income tax return. Partnerships file an information return. Which form you use depends on how your business is organized.
The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return.
LLCsIf your business is an LLC, how you elected to have the LLC treated for tax purposes (either as a corporation, partnership, or as part of the LLC owner's tax return) will determine what taxes you must pay and what forms you should use to pay your taxes.
Estimated TaxGenerally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year.
Sole proprietors, partners, and S corporation shareholdersYou generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.
For more information, see IRS Pub. 505.
CorporationsYou generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. You must deposit the payments as explained later in the Depositing Taxes section.
For more information, see IRS Pub. 542.
Self-employment Tax
Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies:
1. Your net earnings from self-employment were $400 or more.
2. You had church employee income of $108.28 or more.
Use Schedule SE (Form 1040) to figure your SE tax. For more information, see IRS Pub. 334.
The Social Security Administration (SSA) time limit for posting self-employment incomeGenerally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. The SSA will not change its records to increase your self-employment income.
Employment Taxes
Employment taxes include the following.
• Social security and Medicare taxes.
• Federal income tax withholding.
• Federal unemployment (FUTA) tax.
If you have employees, you must review Pub. 15 (Circular E), Employer's Tax Guide. This now includes agricultural employees. These publications explain your tax responsibilities as an employer.
If you are not sure whether the people working for you are your employees, see Pub. 15-A, Employer's Supplemental Tax Guide. That publication has information to help you determine whether an individual is an employee or an independent contractor.
Also, people who provide a service generally associated with the sharing (or on-demand, gig, or access) economy are, under certain circumstances, independent contractors. An independent contractor is someone who is self-employed. Generally, you do not have to withhold or pay any taxes on payments to an independent contractor.
If you wrongly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty.
Federal Income, Social Security, and Medicare Taxes
You generally must withhold federal income tax from your employee's wages. To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Information Returns) and the methods described in Publication 15-T, Federal Income Tax Withholding Methods. Pub. 15-T provides instructions about how to apply Form W-4 to calculate withholding on the employee.
Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Medicare tax pays for benefits under the hospital insurance part of FICA. You withhold part of these taxes from your employee's wages and you pay a
part yourself. To find out how much social security and Medicare tax to withhold and to pay, see Pub. 15-T.
Which form do I file?
Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees.)
Federal Unemployment (FUTA) Tax
The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay.
Which form do I file?
Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. See Pub. 15 to find out if you can use this form or for further information. For instructions on Form 940, see here.
Excise Taxes
This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following:
• Manufacture or sell certain products.
• Operate certain kinds of businesses.
• Use various kinds of equipment, facilities, or products.
• Receive payment for certain services.
For more information on excise taxes, see Pub. 510, Excise Taxes.
Form 720
The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following:
• Environmental taxes.
• Communications and air transportation taxes.
• Fuel taxes.
• Tax on the first retail sale of heavy trucks, trailers, and
tractors.
• Manufacturers taxes on the sale or use of a variety of
different articles.
Form 2290
There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. For more information, see the Instructions for Form 2290.
Form 730
If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive.
Form 11-C
Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering.
Depositing Taxes
You generally have to deposit federal employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return.
You must use an electronic funds transfer (EFT) to make all federal tax deposits. Generally, an EFT is made using the Electronic Federal Tax Payment System
(EFTPS). If you don't want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf.
Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS
enrollment.