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In the first part of this series we identified the types of taxes that,
according to the Internal Revenue Service, a business owner can expect to pay.
We first discussed income tax. Now we’ll take a look at self-employment tax,
employment tax and excise tax.
Self-employment tax. 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 benefits, disability benefits, survivor benefits, and hospital
insurance (Medicare) benefits. Generally, you must pay SE tax and file Schedule
SE (Form 1040) if your net earnings from self-employment were $400 or more.
There are other ways you will qualify for this type of tax, so check with your
tax professional.
Employment Tax. When you have employees, you as the employer
have certain employment tax responsibilities that you must pay and forms you
must file, which include: Social security and Medicare taxes; Federal income tax
withholding; and Federal unemployment (FUTA) tax.
Excise tax. This will be the type of tax you may have to pay
and the forms you have to file if you do any of the following:
- Manufacture or sell certain products.
- Operate certain kinds of businesses.
- Use various kinds of equipment, facilities, or products.
- Receive payment for certain services.
Paying taxes and talking about them are, unfortunately, a fact of life. As a
small business owner, additional responsibility comes in the form of knowing
what you are qualified to pay. In the final part of this series, we’ll take a
look at some tips to better understand home-office deductions.
Source: Internal Revenue Service
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