1. Employee Taxes
Taxes must be withheld from employee salaries. These vary sometimes so check with your local IRS to make sure. Taxes commonly withheld from employees include:
Social Security (FICA), Medicare and federal and state income taxes must be withheld from employees’ pay
Businesses must match the FICA and Medicare taxes and pay them along with employees
Businesses must pay federal and state unemployment taxes
2. Quarterly Estimated
Quarterly estimated is tricky for small and home-based businesses. If you don’t keep up with estimated tax, those bills can create serious cash flow problems and potentially devastating IRS penalties. Make sure you understand:
Who pays? You should probably pay quarterly estimated taxes if your total tax bill in a given year will exceed $500
How much should you pay? By the end of the year, either 90% of the tax that is owed or 100 percent of last year’s tax must be paid (the figure is 110% if a business’s income exceeds $150,000). You can subtract business expenses from income each quarter and apply their income tax rate and any self-employment tax rate to the resulting figure
3. Sales Taxes
While most services remain exempt from sales tax, most products are taxable. If you sell a product or service that is subject to sales tax, you must register with your state’s tax department. Make sure to check your state requirements and state tax departments.
The IRS has specific rules governing taxes for businesses conducted online, or based on where physical property is located. Check your state for more information.
The IRS small business Web Site that offers information to small businesses. There’s a section for businesses getting off the ground that includes a useful checklist and advice on choosing business structure. Also offered is information on employee taxes and business tax deductions and a list of small business resources with links to other government resources for small businesses.