Federal Taxes
Federal income tax for businesses is based on your net profits (i.e., your revenue minus your expenses). If you’re a sole proprietorship, partnership, most LLCs or an S-corporation, your profits are reported through your personal tax returns as income. Taxes on these profits are collected quarterly by the IRS using Form 1040-ES.
If you are an S-corp, you are also an employee who receives standard paychecks. You may not need to make estimated tax payments if you have enough income tax withheld from your other paycheck(s).
S-corporations are generally required to make estimated quarterly payments on the 15th day on the 4th, 6th, 9th and 12th months of each fiscal year (which is not to be confused with the calendar year). If you want your corporation to be treated as an S-corporation, complete Form 2553 – Election by a Small Business Corporation – within 75 days of forming your business or within 75 days of the beginning of a tax year.
Limited Liability Companies (LLCs) are taxed like sole proprietorships if there is only a single owner. If there is more than one owner, LLCs are taxed like partnerships. However, LLCs can elect to be treated as S-corporations for federal tax purposes by filling out IRS Form 8832. You may want to contact your tax professional for more information.
If you’re the only player on your team, you need to pay self-employment taxes, which includes Social Security and Medicare taxes. These are paid by owners of a sole proprietorship, independent contractors or members of a partnership that are engaged in a livelihood (a trade) or in good faith effort to make a profit (a business). Making a profit is important but secondary to the desire to make a profit, as it’s impossible to guarantee that any business enterprise will make money. You can have a full-time job and still be required to pay self-employment taxes on the money you make from your side business or trade.
The following table lists the key forms to file and the applicable due dates:
| IF you are liable for . . . | THEN use . . . | DUE by . . . |
| Income tax | Form 1040 and Schedule C | 15th day of 4th month after end of tax year |
| Self-employment tax | Schedule SE | File with Form 1040 |
| Estimated tax | Form 1040-ES | 15th day of 4th, 6th, and 9th months of tax year, and 15th day of 1st month after the end of tax year |
| Social Security and Medicare taxes and income tax withholding | Form 941 or 944 | April 30, July 31, October 31, and January 31See Publication 15 |
| Providing information on Social Security and Medicare taxes and income tax withholding | Form W-2 (to employee)Forms W-2 and W-3 (to the Social Security Administration) | January 31January 31 |
| Federal unemployment (FUTA) tax | Form 940 | January 31April 30, July 31, October 31, and January 31, but only if the liability for unpaid tax is more than $500 |