The calculated tax must be paid to the IRS. If the tax is likely to be more than $1000, see estimated tax payments below. If the tax is less than $1000, the business owner may pay the owed tax at the end of the year upon completing their tax return.

If the business is a sole proprietorship and the business owner does not have a social security number, they will need to file for an Individual Taxpayer Identification Number or ITIN in order to submit their taxes.

Estimated Tax Payments

Businesses that anticipate owing more than $1000 at the end of the tax year are required to make quarterly estimated tax payments. Using an estimation of their income for the year, the business completes worksheet 1040-ES and sends in one fourth of the amount on each deadline. Payments can be made electronically via credit card or automatic withdraw. The IRS still accepts check and money orders by mail as well.

The payment deadlines generally fall in April, June, September, and January, but can vary by tax year. If the business miscalculates their income, the end of year filing will be adjusted. Unpaid tax will be added, and those that overpaid will receive refunds.

State Tax

Most U. S. states have separate state income tax laws. Filing procedures and rates vary widely from state to state. Those who own a business should investigate their local tax code for more information.

Obligations of the Self-Employed

Independent contractors should keep excellent records to make the process of filing taxes easier. Receipts and invoices should be kept for reference, but also stored for use in case of a future audit or tax dispute.

Tax code is complicated and ever changing, so make sure to look up the new tax rules for each filing year. Those with complicated finances may want to hire a professional advisor to check or prepare the tax forms as they can prevent costly mistakes.

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