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Federal Taxes

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Common Taxes for Individuals

Income Tax

An income tax is a tax imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income). Income tax generally is computed as the product of a tax rate times taxable income. Taxation rates may vary by type or characteristics of the taxpayer.

Estimated tax

Generally, you must make estimated tax payments for the current tax year if both of the following apply:

  • You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.
  • You expect your withholding and refundable credits to be less than the smaller of:
    • 90% of the tax to be shown on your current year’s tax return, or
    • 100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

 

Common Taxes for Businesses

According to the IRS, the form of business you operate determines what taxes you must pay and how you pay them. The following are the five general types of business taxes.

Income Tax

All businesses except partnerships must file an annual income tax return. Partnerships file an information return. The form you use depends on how your business is organized. Refer to Business Structures to find out which returns you must file based on the business entity established.

The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. An employee usually has income tax withheld from his or her pay. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. If you are not required to make estimated tax payments, you may pay any tax due when you file your return. 

Estimated tax

Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. 

Self-Employment Tax

Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.

Generally, you must pay SE tax and file Schedule SE (Form 1040 or 1040-SR) if either of the following applies.

  • If your net earnings from self-employment were $400 or more.
  • If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization.

Note: There are special rules and exceptions for aliens, fishing crew members, notary public, state or local government employees, foreign government or international organization employees, etc. 

Employment Taxes

When you have employees, you as the employer have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following:

  • Social security and Medicare taxes
  • Federal income tax withholding
  • Federal unemployment (FUTA) tax

Excise Tax

This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following.

  • Manufacture or sell certain products.
  • Operate certain kinds of businesses.
  • Use various kinds of equipment, facilities, or products.
  • Receive payment for certain services.