Understanding business taxes

Entrepreneurs in Illinois may benefit from learning about common types of business taxes identified by the Internal Revenue Service. The scope and structure of the business operation typically determines the type and amount of taxes that are owed. Annual income tax returns are required from of all businesses, excluding partnerships. The IRS requires partnerships to file information returns.

According to the IRS, some of the general types of business taxes include employment tax, self-employment tax, estimated taxes and income tax. The agency describes estimated taxes as approximate payments towards income or self-employment tax throughout the year. The federal income tax is described by as pay-as-you-go because businesses are required to pay tax on the income earned or received throughout the year. Taxpayers either pay an estimated tax, are taxed through withholding or will have the tax due when filing the return. Income taxes are typically withheld from employees' regular pay.

Self-employment taxes are described as the Medicare and social security taxes for people that work for themselves. The social security coverage accounts for taxpayers' Medicare benefits, survivor benefits, disability benefits and retirement benefits. People are typically required to pay self-employment tax if net earnings exceed $400 or if the work was performed for a qualified church that filed for a Medicare or social security exemption. Employment tax responsibilities of employers include federal income tax withholding, Medicare and social security taxes and unemployment tax.

Entrepreneurs and business owners may benefit from employing a tax law attorney. Legal counsel may be able to help a client comply with the applicable tax laws, allowing the client to conduct his or her business without unnecessary tax penalties.

Source: IRS, "Business Taxes", October 01, 2014

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