As a business owner, it’s important to understand your federal, state, and local tax requirements. This will help you file your taxes accurately and make payments on time. The business structure you choose when starting a business will determine what taxes you’ll pay and how you pay them.
Employer Identification Number (EIN)
Most businesses need an Employer Identification Number (EIN). Your EIN is your federal tax ID number. You should get one right after you register your new business.
Find out from the IRS if you need an EIN, how to get one, what to do if you've lost or misplaced yours, and more.
All businesses, except partnerships, must file and pay taxes on any income earned or received during the year. Partnerships file an annual information return to report income, gains, losses, and other important tax information. Almost every state imposes a business or corporate income tax, though each state and locality has its own tax laws. Find out the business income tax requirements in your state or territory.
If you have employees, there are federal tax requirements for what you must pay and the forms you have to file. These employment taxes include Social Security and Medicare taxes, federal income tax withholding, and federal unemployment (FUTA) tax. In all states, businesses must pay state workers’ compensation insurance and unemployment insurance taxes.
The federal government taxes businesses that manufacture or sell certain products. You may also have to pay this tax in other situations, including if your business uses various types of equipment, facilities, or other products. Learn about federal excise tax requirements and the forms you must file.
Each state has a different definition of what property is taxable. Some states collect property tax from businesses in commercial real estate locations. Others also collect property tax for business assets, such as vehicles, computer equipment, and peripherals. The amount of tax you pay is calculated by the total value of the property or on a certain percentage of the value. Search for property tax requirements in your state.
Sales and Use Tax
States may tax the sale of goods and services. Check whether your business has to register to pay and/or collect sales tax in your state. Exclusions in sales tax often include food, clothing, medicine, newspapers, and utilities.
States may also tax your business on the use of goods and services when sales tax has not been collected. This typically applies to goods and services purchased outside of the state where you conduct business.
You must pay federal tax on income that is not subject to withholding or when the amount of your federal income tax being withheld is not enough. Find out if your business has to pay estimated taxes and the steps to follow.
When conducting your own business, you must pay Social Security and Medicare taxes to be covered under the Social Security system. Learn about who must pay self-employment tax and how to pay it.
Estimated tax is the method used to pay taxes on income that is not subject to withholding. This includes income from self-employment, interest, and dividends. You may also have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Who Has to Pay Estimated Taxes?
Individuals who conduct their own business typically have to make estimated tax payments. You may be charged a penalty if you do not pay enough through withholding or estimated tax payments.
Find out if you have to make estimated tax payments and how to pay.
When Are Estimated Taxes Due?
The year is divided into four periods to pay estimated tax. Each period has a specific payment deadline.
These are the 2019 Estimated Federal Tax due dates:
- April 15
- June 17
- Sept. 16
- Jan. 15 of the next year
Energy efficient appliances and energy-saving improvements can get you or your business tax credits and savings.
Find out if you qualify for state, local, utility, and federal incentives:
- Database of State Incentives for Renewables and Efficiency (DSIRE) - Find programs and policies in your state that support renewable energy and energy efficiency.
- Residential Renewal Energy Tax Credit - Qualify for tax credits for buying solar-electric, solar water heaters, wind turbines, geothermal heat pumps, and fuel-cell equipment for your primary residence. The credits have been extended through the end of 2021.
- The value of the credits for each technology will decrease by a certain percentage each year until they expire.
- Sales tax holidays - Find out if your state offers a sales tax holiday for buying energy-efficient appliances.
Tax Relief in Disaster Situations
The Internal Revenue Service (IRS) offers special tax help for individuals and businesses recovering from a major disaster or emergency.
Get Your Refund Faster
In a federally-declared disaster area, you can get a faster refund by filing an amended return. You will need to claim the disaster-related losses on your tax return for the previous year.
Get guidance from the IRS on amending a tax return or filing an extension after a disaster.
Tax Relief for Wildfires and Hurricanes
Learn about tax relief for victims of the California wildfires and for hurricanes
Donate to Charity as a Small Business
Many small businesses donate to charity in some form each year. Giving to a charitable cause is not only good for society, it can also be good for business.
Reasons Businesses Donate
Small businesses decide to support charitable causes for a variety of reasons:
- Help society - Businesses can use their size and influence to make a significant impact in a community, or on behalf of a cause.
- Increase customer satisfaction or brand awareness - Businesses can set themselves apart from the competition and become more likable and recognizable by publicly supporting a cause. Some businesses even choose to involve customers in their charitable campaigns, or support nonprofit organizations with missions that are relevant to the company’s product or service. For example, a technology firm may partner with a charity that teaches computer skills to underprivileged students.
- Tax deductions - Businesses can receive a tax deduction for qualifying charitable donations.
- Employee retention and satisfaction - Businesses can improve employee morale and create a more positive company culture by mobilizing in support of a cause. Some companies allow employees to nominate charities to partner with, or choose the way the company donates.
Types of Donations
Businesses can donate to a charitable cause in many ways:
- Money - Write a check, set aside a portion of revenue from sales, or collect donations from employees. Some companies may also offer to match employee donations, or choose to develop a specific product or service and donate the profits from its sale.
- Inventory - Give merchandise or products like food, clothing, toiletries, furniture, or building materials.
- Events - Organize food, clothing, supply, or blood drives. Companies can also sponsor sports teams, athletic competitions, arts productions, community projects, and fundraisers.
- Volunteer - Work for free. Nonprofit organizations may need tutors, drivers, servers, or warehouse staff, for example. Companies can schedule a time for employees to volunteer together or encourage staff to sign up in their free time. Some businesses may choose to offer paid time off for volunteering.
- Services - Donate professional skills. Nonprofit organizations may need help in the legal, policy, medical, dental, counseling, finance, technology, or administrative fields, among others. For example, beauticians may coordinate with a women’s shelter to style hair or give manicures, and artists may work with a community center to lead a children’s craft.
- Time - Establish a leave-based donation program. This allows employees to forego their paid leave days in exchange for the company making a monetary donation to a charity.
Federal Tax Deductions for Small Business Charitable Donations
Small businesses and individuals generally have the same requirements when filing to receive a tax deduction for charitable giving. But, there are some important issues companies should know about.
- Donated services are not deductible. Out-of-pocket expenses related to the donation, like travel or materials, may be deductible.
- Donated non-food inventory must be reported according to specific requirements. These requirements are different than those for donated vehicles.
- Donated food must be reported according to specific requirements.
- Donated intellectual property must be reported according to specific requirements.
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Last Updated: October 28, 2019