This is a tax for individuals who work for themselves, which consists of Social Security and Medicare taxes. Generally, your net earnings in the form of combined wages, tips, interests and dividends from self-employment are subject to self-employment tax. As a business owner, you can deduct your self-employment tax by estimating your adjusted gross income. 

This refers to taxes which are withheld from the employee’s pay and paid directly to the IRS by the employer. On the employee’s behalf. Taxes which are subsumed under the employment tax are the Federal income tax, Federal Insurance Contribution Act (FICA) tax, Federal Unemployment Tax Act (FUTA) tax and the Additional Medicare Tax. The Federal Insurance Contribution Act (FICA) taxes are taxes paid for social security and Medicare. This is a form of tax imposed on higher-earning employees. The Federal Unemployment Tax is tax paid to fund the unemployment account of the federal government, for employees who leave a company involuntarily. Traditionally, employers are expected to deposit either monthly or semi-weekly takes withheld from their employees’ income. These can be done by filing forms 941, 944 or 945.

Excise taxes are indirect taxes that are paid by the customers directly, but are levied on the sale of specific goods and services, such as alcohol, fuel and tobacco. Excise taxes are imposed on the supplier or manufacturer who then transfers the cost to the consumer. In the U.S., excise taxes are factored into overall costs during production or when the service is being rendered. This implies that the consumer doesn’t know he’s paying excise tax. 

Businesses are also expected to contribute to the state’s coffers to enable it to take care of its unemployed.  State unemployment taxes are imposed on businesses to provide for employees who leave their jobs involuntarily.

This is a periodic advance payment of taxes based on the income earned and the amount of estimated tax liability that will be incurred as a result. These are taxes paid the method on income that is not subject to withholding. Such income may include earnings from self-employment, interest, dividends, rents, and alimony. Whenever you earn income, through wages, dividends, or rent, taxes are meant to be paid on it. 

However, while employees are able to have their taxes calculated because of steady wages, self-employed people and business owners have to estimate how much tax they owe because revenue may fluctuate. Business owners make an estimation of the current year’s tax based on the previous year’s income and submit payments based on that estimate. If their estimated payments are too high or too low, this will reflect in their yearly tax return. 

If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

Individuals, including sole proprietors, partners, and S corporation shareholders, can figure out their estimated tax by using  Form 1040-ES. Variables which may be used to calculate your estimated tax are your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year for the prior year.