Owning a business comes with many responsibilities. One of your duties is to withhold, file, and deposit taxes. You must know how to pay small business taxes in order to correctly submit payments to the IRS.
There are a few different ways to make small business tax payments. To avoid late fees and penalties, learn about your tax payment options.
Types of business taxes
As a business owner, you need to know what types of taxes you are responsible for paying to the IRS. Take a look at some of the taxes you might pay:
Payroll and income taxes
When you have employees, withhold the employee portion of FICA (Federal Insurance Contributions Act) tax. FICA taxes are made up of Social Security tax and Medicare tax. You must pay the matching employer portion of FICA tax.
If you have employees, you also need to pay FUTA tax (federal unemployment). Your employees do not contribute to FUTA tax — only you pay FUTA. FUTA is a percentage of the first $7,000 each employee makes.
You also need to pay SUTA (state unemployment) tax, but you send SUTA taxes to your state, not the IRS.
Withhold federal income taxes from employee wages and deposit to the IRS.
Federal tax deposits must be made by an electronic funds transfer (EFT).
Estimated tax
Every working individual must pay federal income taxes to the IRS. It is the employer’s responsibility to take care of federal income tax withholding for each employee. Unless you receive wages, nobody withholds taxes from your income. So, you must pay estimated tax in place of withheld taxes.
Estimated tax is income that you do not pay withholding tax on. You must pay estimated taxes if you are a sole proprietor or partner, or an S corporation shareholder in some cases. Estimated tax covers self-employment and income taxes, among other types of tax.
Self-employment tax
Self-employment tax is made up of Social Security and Medicare taxes. You must pay 15.3% (12.4% to Social Security and 2.9% to Medicare) on the first $147,000 you earn in 2022.
If you earn wages beyond $200,000 ($250,000 married filing jointly, $125,000 married filing separate), your wages are subject to an additional Medicare tax.
Excise tax
Depending on your business, you might need to make excise tax payments to the IRS. There are certain kinds of items that have excise tax, like alcohol, fuel, indoor tanning services, and sport fishing equipment.
Excise tax is a pass-through tax, meaning you do not pay it out of your own pocket. Instead, you include excise tax in the total amount of your sales item and the customer pays the tax. You are responsible for sending the excise tax to the IRS.
How to pay taxes for small business
You can make electronic payments via Electronic Federal Tax Payment System (EFTPS), a debit or credit card, electronic funds withdrawal, bank wire, check or money order, or cash.
EFTPS
With EFTPS, you can pay federal taxes online or over the phone. It is a free system that lets individuals, businesses, federal agencies, tax professionals, and payroll services pay federal taxes electronically. Learning how to pay small business taxes online can save you a lot of time in the long run.
You must enroll to use EFTPS. To enroll, you need your Taxpayer Identification Number (TIN), bank account and routing number, and name and address. Your TIN can be your Employer Identification Number (EIN) or Social Security number if you are a sole proprietor.
According to the IRS, EFTPS is the best payment option for businesses or anyone making large payments.
Debit or credit card
With a debit or credit card payment, you can pay online. There is a processing fee for paying small business taxes with debit or credit card, but the fees might be tax deductible.
Electronic Funds Withdrawal
An Electronic Funds Withdrawal (EFW) is only an option if you file your federal taxes with tax preparation software or through a tax professional. You must e-file, or electronically file, your taxes. You can pay from your bank account.
Bank wire
The IRS accepts same-day wires from your financial institution. You will need to contact your bank for more information, like fees and availability.
Check or money order
You can pay the IRS by check or money order, made payable to the U.S. Treasury. The address you will mail to can be found on your IRS notice.
Include your name and address, phone number, employer identification number (EIN), tax year, and related tax form or notice number when you send the payment.
Cash
You can make cash payments at 7-Elevens, and they are only located in 34 states. You can only make payments up to $1,000 per day, and there is a fee of $3.99 per cash payment.
To make a cash payment, you need to go to the Official Payments website and create an account. Your information will then be passed onto the IRS for verification, which is a process that takes two-three days. You will need a payment code and instructions to make the cash payment. After the IRS confirms your information, PayNearMe emails you a link to the code.
When you make the payment at a 7-Eleven, bring the payment code either on printed paper or your smart phone. To process your payment, it takes five-seven business days. Cash payments are not ideal for businesses or someone in a time crunch.
Visit the IRS website for more information on how to pay business taxes.
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This article is updated from its original publication date of May 2, 2017.
This is not intended as legal advice; for more information, please click here.
