Small business may have to pay a variety of federal, and state and or local taxes. Avoid harsh penalties by learning how to pay them.
Step 1: Make estimated tax payments Make quarterly estimated tax payments to the IRS if your total tax bill in a given year will exceed $500. Estimated tax payments are due 4 times a year on April 15, June 15, September 15, and January 15.
TIP: Pay self-employment tax if your annual net earnings will be $400 or more.
Step 2: File a tax return File an annual income tax return. The form you use will depend on how your business is organized -- whether it is a sole proprietorship, partnership, corporation, or limited liability corporation.
TIP: Keep tax-related documents for a minimum of 7 years.
Step 3: Pay excise tax Pay excise tax if your business engages in qualified activities. For example, excise taxes are levied on certain trucks and buses used on public highways.
Step 4: Withhold employment taxes Withhold employment taxes from the salaries of your employees. Employment taxes include withholding, employer matching, and unemployment taxes. Depending on the size of your payroll, employment taxes are due weekly, monthly, or quarterly.
Step 5: Pay sales tax Register with your state's tax department and pay sales tax if your business makes a taxable product. Sales taxes are due quarterly or monthly, depending on the rules in your state. Most services are exempt from paying sales taxes.
Step 6: Pay additional state and local taxes Pay additional state and local taxes that are applicable to your business. Consult your local government offices or a tax attorney to determine whether you are responsible for additional taxes.
FACT: In 2008, tax revenues in the United States represented 26.9 percent of the total gross domestic product.