TAS Tax Tip: Small Business Tax Highlights

Gustavo Lopez


TAS Tax Tip: Small Business Tax Highlights

The form of business you operate determines what taxes you have to pay and how you pay them. There are four general types of corporate taxes:

  • Entry
  • Self-employment
  • Occupation
  • Special tax

Income tax:

All companies are required to file annual tax returns, with the exception of corporations that file annual information returns. The module you use depends on the structure of your company; see publication 583, Starting a Business and Record Keeping, to decide which forms to file to report business income. Publication 509, Tax Calendars, explains when to file returns and make tax payments.

Self-employment tax:

The self-employment (SE) tax is a Social Security and Medicare tax primarily for people who are self-employed. It's like Social Security and Medicare taxes withheld from most employees' wages by their employers. SE tax payments contribute to the coverage of the social security system. This coverage provides retirement, disability, survivor, and hospital insurance (Medicare) benefits.

You must file Schedule SE, Self-Employment Tax, with the Federal Income Tax Return, Form 1040 or Form 1040-SR, and pay the SE tax if any of the following apply:


  • Your net income from self-employment was $400 or more; either
  • Had a church employee income of $108.28 or more.

The instructions for Schedule SE are a good resource for understanding who must pay SE Tax.

Self-employed workers in Puerto Rico use Form 1040-PR to calculate the self-employment tax.

Note: Self-employed workers generally have to pay SE tax and income tax.

Labor tax:

When you have employees, you have certain employment taxes to pay and forms to file. Labor taxes include the following:

  • Social security and Medicare taxes;
  • Federal income tax withholding; Y
  • Federal Unemployment Tax (FUTA).

You must also withhold additional Medicare taxes from wages paid to an employee of more than $200,000 in a calendar year.

If you pay wages that are subject to federal income withholding or Social Security and Medicare taxes, you generally must file Form 941 quarterly; however, some employers use Form 944, Form 1040 (Schedule H), or Form 943 instead of Form 941. Generally, you must use Form 940 to report annual FUTA tax.

For more information, see Small Business Employment Taxes and Publication 15, (Circular E), Employer's Tax Guide.


You may be subject to excise taxes if you do any of the following:

Manufacture or sell certain products;

Manage certain types of businesses;

Use various types of equipment, facilities or products; either

Receive payment for certain services.

Excise taxes can be imposed on the producer, the retailer or the consumer, depending on the specific tax.

These are the most used forms to declare special taxes:

Form 720, Quarterly Federal Excise Tax Return, is used to report your IRS number liability. and pay the special taxes indicated on the form. If you report a liability in Part I or Part II, you may be eligible to use Schedule C to claim a credit.

Form 2290, Heavy Highway Vehicle Use Tax Return, is used to report federal excise taxes on certain trucks, highway tractors, and buses used on public highways. This tax applies to vehicles with a gross taxable weight of 55,000 pounds or more.

Note: The weight declared to register a vehicle in a state may affect the taxable gross weight used to calculate the tax.

Form 730, Monthly Wagering Statement, is used by taxpayers in the business of accepting wagers, operating a betting pool or lottery, or required to register and receive wagers on behalf of another person but did not report that person's name and address .

Form 11-C, Gambling and Employment Tax Registration Statement, is used to register for certain gambling activities with the IRS and to pay federal tax on professional gambling.

Form 6627, Environmental Taxes, is used to report environmental taxes on imported oil and petroleum products, and on certain imported chemicals and chemical products. Find the tax rates for 121 taxable substances here.

For more information, see publication 510, Excise Taxes.

Estimated tax:

Taxes must be paid as you earn or receive income during the year, through estimated withholding or payment of taxes. Estimated taxes are used to pay not only income tax, but also other taxes, such as self-employment tax.

Individuals, including sole proprietors, partners, and shareholders of S corporations, generally must make estimated tax payments if they expect to be required to pay at least $1,000 in taxes after subtracting withholding and tax credits. Use the worksheet on Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.

Corporations generally need to make estimated tax payments if they expect to pay at least $500 in taxes. Use Form 1120-W, Estimated Corporate Tax, to figure your business's estimated tax. Payments must be submitted using the electronic federal tax payment system. For more information, see Publication 542, Society.

Note: S corporations are also required to make estimated tax payments for certain taxes, but must instead use the instructions for Form 1120-S, United States Tax Return for S Corporation, to calculate their estimated tax.

If you pay too little or pay late, you may have to pay an estimated tax penalty, even if you're entitled to a refund when you file your taxes. For more information, see Publication 505, Tax Withholding and Estimated Tax.

Payment options:

In general, it is necessary to declare certain special taxes, corporate tax and corporate tax S before submitting the declaration. You must use an electronic funds transfer (EFT) to file all federal income tax returns (FTD). Generally, an EFT is done using the Federal Electronic Tax Payment System (EFTPS). If you don't want to use EFTPS, you can have your tax collector, financial institution, payroll service, or trusted third party perform EFT on your behalf.

For estimated tax purposes, the year is divided into four payment periods. It is important to remember that pay periods are not spread evenly throughout the year. Estimated payments are generally due on April 15, June 15, September 15, and January 15 of the following year. You can submit your estimated tax payments with Form 1040-ES, pay online, or pay by phone or from your mobile device using the IRS2Go app. Visit IRS.gov/payments to see all payment options.

Ten Federal Tax Tips to Help Small Business Owners

April shouldn't be the only time you think about taxes. Keep these tax tips in mind throughout the year so you're ready to maximize your deductions and credits.

.Know your limitations and know when you need to seek professional help: There are many online education and learning products available to help you learn about taxes. For example, the IRS tax calendar has important tax dates for businesses. However, if you choose to hire a professional, it is important to choose carefully because you are trusting them with your personal information and you trust that they will have the knowledge to help you file an accurate tax return. You are responsible for all the information on your tax returns, regardless of who prepares them. TAS Tax Tip: Choosing the right tax return preparer for you can help.
Note: ALL tax return publishers MUST sign their name and include the publisher's tax identification number on the tax return. For your protection, please verify that they do so before submitting any documents.

  • Keep Proper Records: Accurate recordkeeping throughout the year will save you time and help ensure your tax return is correct. Establish a receipt system. It can be a paper file or you can use an app to scan and file them; just make sure you save them somehow.
  • Separate your personal and business finances: Create a separate bank account and credit card for your business and only manage business expenses through those accounts. See publication 583, Starting a Business and Keeping Records.
  • Classify your business correctly: Some business structures enjoy greater tax advantages than others. It is important to choose the business structure that best suits your business. If you're not sure which one to choose, a tax attorney or certified accountant can help.
  • Manage payroll – You can take an online course to learn how to manage payroll. But if you don't have the time, desire, or knowledge to manage payroll, hire someone to do it for you. To make sure the company is reputable, check out Third-Party Payroll and Payroll Outsourcing.
  • Subscribe to Small Business e-News: The IRS e-News for Small Business is a free email service that provides tax information for small business owners and self-employed individuals, including reminders, tips and special announcements.
  • Research Small Business Tax Deductions – There is a long list of tax deductions for small business owners. See publication 535, Business Expenses. A tax deduction is something you can subtract from your gross income to reduce the amount of tax you owe.
  • Self-employment tax deduction: You can deduct half (50%) of your SE tax as income adjustment on your federal income tax return. For tax years after 2017, you will also need to report the amount on Form 1040, Schedule 1, Part II.
  • Make your tax payment in a timely manner – Anyone who files federal tax returns and expects to pay more than $1,000 must pay estimated taxes. If you don't pay enough taxes through withholding and paying estimated taxes, you could be charged a penalty. . You may also be charged a penalty if your estimated tax payments are due, even if a refund is due at the time you file your tax return.
  • For faster processing, file your returns electronically: Electronic Filing Options for Corporate and Self-Employed Taxpayers.