There Are 5 Business Taxes You May Need to Pay This Tax Season
Every business owner, no matter the size of their team, must calculate taxes at the end of the year based on a variety of factors. Naturally, these depend on the type of business you operate. Read on to learn more about the taxes businesses may need to pay for the 2021 tax year.
1. Income Tax
The majority of business structures are required to pay a yearly income tax. This tax is calculated throughout the year, appearing on employee pay stubs. However, some businesses may owe more at the end of the year or not pay taxes through withholdings.1 Understanding your business structure will help you determine what type of taxes you will owe.
2. Self-Employment Tax
For an average employee, the wages withheld for social security and medicare are calculated and determined by the employer. Self-employed individuals still have to pay this withheld amount, but do so through self-employment tax. The current self-employment tax rate is 15.3 percent and consists of the following:2
- 12.4 percent tax for Social Security, up to $142,800 of your net earnings for 2021
- 2.9 percent tax for Medicare
3. Estimated Taxes
Estimated taxes are paid when income is acquired outside of standard pay, or when one does not withhold enough for income taxes. According to the IRS, these situations include interest, dividends, alimony, self-employment, capital gains and prizes and awards.3 Self-employed individuals will have to pay both estimated and self-employed taxes. Make sure to consult a tax specialist when calculating your estimated taxes, as improper estimates can result in unnecessary fines.
4. Employment Taxes
If you are a business owner with employees, then you are required to pay employment taxes. When reporting employment taxes you must include:4
- Federal income taxes
- Employer and employee Social Security tax
- Employer and employee Medicare Tax
- Your deposited taxes
- Any additional compensation paid to the employee
5. Excise Tax
Excise taxes are taxes you pay depending on the type of business you run, products and services you provide and equipment you provide and operate.1 Excise tax will ultimately depend on your exact business model and type, so consulting a tax professional is best when determining the excise taxes you will need to pay.
Whether you’ve been in business for a long time or are just starting out, understanding your business taxes is essential to long-term success. And, though this list may help with general business taxes, keep it in mind and always consult a tax professional when determining what taxes you may need to pay for the year.
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