 Employment Taxes
Income Tax
Self-Employment Tax
Excise Taxes
When you're in business, T is definitely for taxes. There's no shortage of taxes that you must pay, and you need to be mindful of their changing rules and regulations. It's no wonder many small businesses are turning to ADP's expertise to relieve them of the administrative burden.
There are four general kinds of business taxes that right now may be foreign to you, but will soon be all too familiar. They are employment taxes, income tax, self-employment tax and excise taxes.
When you're talking employment taxes, think Federal income tax withholding and Federal unemployment (FUTA) tax, Social security and Medicare taxes.
Let's look at Federal Income tax withholding first. You generally must withhold federal income tax from your employee's wages. To figure out how much to withhold from each payment, use the employee's W-4 and the methods described in IRS Publication 15, Circular E, Employer's Tax Guide.
Social security and Medicare taxes pays 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 matching amount yourself. To find out how much social security and Medicare tax to withhold and to pay, see IRS Publication 15. As part of your Payroll Service ADP can help you figure out how much to withhold and file Form 941 for you.
You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. You pay FUTA from your own funds. Employees do not pay this tax or have it withheld from their pay. Again, as part of your Payroll Service, ADP will assist you with FUTA, including filing Form 940 for you.
Unless you're a partnership, you have to 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 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. Generally, you must pay taxes on income, including self-employment tax, by making regular payments of estimated tax during the year. If you expect to owe tax of $1,000 or more when you file your return, estimating taxes is in your future.
You love working for yourself, but one aspect that is decidedly less appealing is the tax you have to pay for that luxury. 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, disability and survivor benefits, and hospital insurance (Medicare) benefits.
Who's likely to pay SE and filing SE/Form 1040? You -- if your net earnings from self-employment were $400 or more or you had church employee income of $108.28 or more. Use SE/Form 1040 to figure your SE tax.
Know too that you can deduct one-half of your SE tax as an adjustment to income on your Form 1040. The SSA will give you credit only for self-employment income reported on a tax return filed within three years, three 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 amount of time, the SSA may change its records, but only to remove or reduce the amount. That's as generous as they will be. The SSA will not change its records to increase your self-employment income.
If you manufacture or sell certain products, operate certain kinds of businesses, use various kinds of equipment, facilities or products and receive payment for certain services you may have to pay excise taxes and file the required forms.
If you want to figure out if you're in this category, check out IRS Publication 510. The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, such as: environmental taxes; communications and air transportation taxes; fuel taxes; tax on the first retail sale of heavy trucks, trailer and tractors, manufacturers taxes on the sale or use of a variety of different articles.
Local Tax
Not only do you have to worry about what the federal and state governments might hit you with tax-wise, but your local authorities may tax personal property like machinery, equipment, furniture, supplies, leased equipment and even movable machinery used in business. Find out what's subject to taxes and what's not.
Keep in mind
Know too, that usually you must deposit employment taxes, certain excise taxes, corporate income tax and S corporation taxes before you file your return.
You can call ADP at 877-623-7729 if you need help with
filing any payroll taxes.
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