Running a business comes with a long list of responsibilities, and staying on top of taxes is one of the most important. The taxes your business must file and pay depend on factors such as your business structure, whether you have employees, and the products or services you provide. Understanding the most common federal business taxes can help you plan ahead, meet important deadlines, and avoid unexpected penalties.
Income and estimated taxes
Most businesses must file an annual income tax return, although how income is reported depends on the business structure. Partnerships generally file an information return, while sole proprietors report business income and expenses on their individual income tax returns. Corporations and S corporations have their own filing requirements. Because federal income tax operates on a pay-as-you-go system, many business owners must also make estimated tax payments throughout the year. These payments are generally made quarterly and may apply when sufficient tax is not being paid through withholding or other means. For additional information about federal filing requirements and recordkeeping, business owners can refer to IRS Publication 583, Starting a Business and Keeping Records.
Self-employment tax
Business owners who work for themselves may also be responsible for self-employment tax, which covers Social Security and Medicare taxes. Generally, individuals must file Schedule SE with Form 1040 or 1040-SR if their net earnings from self-employment are $400 or more. The rules can vary depending on how a business is structured. For example, S corporation shareholders who perform services for the corporation generally receive wages subject to employment taxes rather than paying self-employment tax on their distributive share of S corporation income.
Employment taxes
Businesses with employees have additional tax responsibilities. Employment taxes generally include federal income tax withholding, Social Security and Medicare taxes, and federal unemployment (FUTA) tax. Employers are responsible for properly withholding applicable taxes from employees’ wages, paying the employer’s share of certain taxes, making required federal tax deposits, and filing the appropriate employment tax returns. Deposit and filing schedules vary based on the type of tax and other factors.
Excise taxes
Depending on its activities, a business may also be subject to excise taxes. These taxes can apply to the manufacture or sale of certain products, specific business activities, services, or the use of certain equipment or facilities. Different excise taxes have different reporting requirements. Form 720, Quarterly Federal Excise Tax Return, is used to report a variety of federal excise taxes, including certain fuel, communications, air transportation, and manufacturers’ taxes. Form 2290 applies to certain heavy highway motor vehicles with a taxable gross weight of 55,000 pounds or more, while Forms 730 and 11-C apply to certain wagering activities.
Staying ahead of tax deadlines
Tax compliance involves more than filing an annual return. Depending on your business, you may have estimated payments, payroll tax deposits, information returns, excise tax filings, and other deadlines throughout the year. Missing a required deadline can lead to penalties and interest, making it important to maintain accurate records and stay aware of upcoming due dates. The IRS Tax Calendar for Businesses and Self-Employed can help business owners track many federal tax deadlines.
Your business structure and activities can significantly affect what you need to file, when payments are due, and how much tax you ultimately owe. SEK’s Business Tax & Advisory team can help you understand your business’s federal, state, and local tax obligations, identify planning opportunities, and stay compliant throughout the year. Contact us to discuss how we can support your business’s tax needs.
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