What kinds of federal taxes will I have to pay?

The types of taxes you have to pay depend on the form of business you are operating. Generally, there are four kinds of business taxes: income tax, self-employment tax, employment taxes and excise taxes.

What kinds of tax forms will I have to file?

All businesses except partnerships file an annual income tax return. Partnerships file an annual information return. Which form you file depends on how your business is organized. In addition to income tax forms, you will be required to file payroll tax returns if you have employees, and excise tax returns if you work in certain industries. You may also be required to file information returns (such as Forms 1099) if you make certain types of payments from your business.

What is self-employment tax?

Self-employment tax (SE tax) is a Social Security and Medicare tax primarily for individuals who work for themselves. Payments of SE tax contribute to your coverage under the Social Security system, which provides you with retirements benefits, disability benefits, survivor benefits and hospital insurance benefits (Medicare).

How can I minimize my business’s tax bill?

There are many ways to reduce your business’s taxes. First, be sure you are taking all the business deductions you are entitled to. You can also look for tax credits that may be applicable to your business. You can set up a retirement plan for your business and deduct contributions you make to your plan for your employees.

What are estimated tax payments, and do they apply to me?

Taxes must be paid as you earn or receive income during the year. If you are in business for yourself, your form of entity may require that you make estimated tax payments. Individuals generally have to pay federal estimated tax payments if they expect to owe tax or $1,000 or more (in addition to any payroll withholding) when they file their tax return. Corporations generally have to make federal estimated tax payments if they expect to owe $500 or more when their tax return is filed.

What happens if I don’t file my tax return or pay my taxes on time?

Taxpayers who miss the filing and payment deadline should file a tax return as soon as possible and pay as much as they can to reduce penalties and interest. Late-filing and late-payment penalties add up quickly. Some taxpayers may qualify for penalty relief, depending on their filing history and the reasons for filing and paying late.

What should I do if I get a notice or letter from the IRS?

If you receive a notice from the IRS (or from your state tax authority), the most important thing is to respond promptly. The IRS notice or letter will explain the reason for the contact and will give you instructions on how to handle the issue. Typically, notices will require a response by a specific date. Read your notice carefully and be sure you understand what is being requested of you. In many cases, the help of an accountant or tax professional will be essential.

Should I hire a CPA to handle my small business taxes?

Hiring a professional tax advisor or accountant can provide expertise, ensure compliance with tax laws and regulations, and help you maximize tax deductions and credits. They can also assist with tax planning and representing you in case of a tax audit.