Typically, small business owners are required to pay quarterly estimated taxes. This means you’ll be paying your federal and state taxes in quarterly installments (four times a year). If this is your first year paying estimated taxes, check out our estimated tax guide to figure out how to calculate them.
How to pay your business taxes online
To pay taxes online with e-file, you can either use a credit or debit card, or elect to have the money automatically withdrawn from your account by the IRS. There are pros and cons to each method, but overall either form of e-file is much more convenient than paying by mail or in person.
Paying your business taxes with a credit or debit card
The IRS has a number of approved providers who will process your debit or credit card payment online. These providers charge a fee, typically around 2% of your tax payment.
There are a few limitations to filing taxes with credit and debit cards. You can’t use this method to pay taxes on:
- Partnership income, as reported on Form 1065
- C corporation income, as reported on Form 1120
- S corporation income, as reported on Form 1120S
However, tax on income you earn as a salary or dividends from these businesses can be paid online.
Paying your business taxes with EFTPS
The Electronic Funds Tax Payment System (EFTPS) lets you transfer tax payments directly from your bank account to the IRS. In order to use EFTPS, you’ll need to enroll in the program. You can do that online, but first make sure you have your
- Tax ID number
- Bank account and routing numbers (as found on a void check)
- Your name and address as they’re printed on your IRS tax documents
Once you’re enrolled, you can pay your taxes immediately, or schedule payments up to one year in advance. This is especially useful for paying quarterly estimated taxes.
EFTPS lets you go back and view receipts for past transactions, and will send you email notifications for every withdrawal from your bank account. So it’s easy to stay on top of what you’ve paid, and what you owe.
How to pay your taxes by check or money order
To pay your taxes the old fashioned way, mail a check or money order to your nearest IRS office, along with Form 1040 (sole proprietorships, single member LLCs, partnerships, and S corporations) or Form 1120 (corporations).
Paying small business taxes with help from an accountant
An accountant can’t legally pay your taxes for you—the money needs to go from your business to the IRS, without an intermediary. But hiring an accountant makes paying taxes much easier.
Accountants are up to date on the latest changes to tax law. And you can be sure they’ll look for every deductible expense on the books and apply tax credits—so your jaw is less likely to hit the floor when you get your tax bill.
Bottom line: Accurate filing means accurate payment. And if you use Bench, you’re in luck: You may not need to hire an accountant come tax season. Not only will we handle your bookkeeping throughout the year, but we’ll get your taxes filed as well. Learn more about Bench’s tax filing services.
What taxes does my business have to pay?
Your business is taxed at three levels: Federal, state, and local. Most of what you’ll pay will be federal tax.
Naturally, state taxes and local taxes vary by state and municipality. Sales tax is collected by your state, not the federal government.
Visit your Secretary of State’s website to learn about state taxes, and check in with city hall or your country clerk’s office to sort out what you need to pay in local taxes.
When it comes to federal taxes, there are four main taxes small business owners need to be familiar with:
- Income tax is paid on your business income. How your federal income tax is calculated depends on your type of business.
- Self-employment tax covers social security and Medicare tax. When you work for someone else, some of these are automatically deducted from your paycheck, and your employer pays the rest. When you’re self-employed, you’re on the line for all of them.
- Federal excise tax gets charged on revenue from certain products, like gasoline, alcohol, and tobacco.
- Payroll taxes (sometimes referred to as FICA) are only necessary if you have employees. They include multiple types of payments—Medicare tax, income tax withholding, social security taxes—that you automatically withhold from employee paychecks.
How these taxes are applied, and how you pay them, vary according to the types of businesses they’re applied to. We’ll cover each business structure below.
Further reading: How Much Are Taxes for a Small Business?
Business taxes for sole proprietorships
If you’re an independent contractor and you haven’t elected a business structure, then you’re operating as a sole proprietorship by default.
If you have a sole proprietorship, you reported your business income and expenses on your personal tax return using Form 1040. The amount you owe in income tax will depend on how much you made; income tax for individuals and sole proprietors is bracketed.
Further reading: Sole Prop Taxes (A Simple Guide)
Business taxes for partnerships
Partnerships are pass-through entities, meaning each partner reports income they earn from the partnership on their personal income tax return. If you have a partnership, you would have filed tax forms reporting its income. But you don’t pay taxes for the partnership—only the income you earned through it and reported on your individual tax filing.
Business taxes for C corporations
C corporations are subject to double taxation. First, the corporation itself must pay an income tax of 21%. Then, each shareholder pays income tax on their salary. Any dividends you earn as a shareholder also get taxed, but not as heavily as salary—you don’t need to pay self-employment tax on dividends.
You can pay both corporate taxes and personal income tax online through the IRS website.
Business taxes for S corporations
S corporations are taxed similarly to partnerships. While the S corporation reports its income, the corporation itself doesn’t get taxed. Only the shareholders pay taxes. If you earn a salary from your S corporation, you’ll have to pay income tax on it. But you aren’t required to pay any taxes at all on dividends.
Further reading: S Corp Taxes (A Simple Guide)
Business taxes for limited liability companies (LLCs)
LLCs exist under their own type of business structure, but they can elect to file taxes either as a partnership, S corporation, or C corporation. You’ll pay taxes on one of those entity types.
Paying your taxes is just one part of the tax filing process. To get a birds eye view, check out Small Business Taxes (A Simple Guide)