How Well Do You Know Small Business Taxes?

How well do you know small business taxes? Like businesses themselves, business taxes come in all shapes and sizes. One size does not fit all. With tax day on the horizon, do you know about the fundamental types of taxes that could apply to your business? Take this brief 5-question quiz to find out!

Question 1

  • Question – Which businesses are not required to file a yearly income tax return?
    • All businesses
    • All business structures except for partnerships
    • Partnerships
    • Sole proprietorships
  • Answers – All business structures — except partnerships — will file a yearly income tax return. Partnerships do not pay income tax, but they do file an annual “information return.” Even though most business types should file a yearly return, not all will use the same forms. Your forms depends on your business structure, which is officially established during your start-up phase. Partnerships and S-Corporations are considered “pass-through” entities – i.e. earnings and deductions pass through the business to the individual partners or shareholders. Each person receives a form called a ‘K-1’ which is then entered on each taxpayer’s income tax return.

Question 2

  • Question – How often are estimated taxes paid?
    • Four times a year
    • Twice a year
    • Three times a year
    • Once a year
  • Answers – Four times a year. Estimated taxes are paid in regular installments – usually four equal payments – throughout the year. If you don’t have an employer withholding taxes for you, or if you don’t have enough withheld to cover your full liability, you may need to pay estimated tax.

Question 3

  • Question – Who must pay self-employment taxes?
    • Self-employed persons
    • Church and church organizational employees
    • US citizens living outside the US
    • All of the above
  • Answers – All of the above. When you pay self-employment taxes, you’re contributing to certain benefits to which you’re entitled at any time, such as Medicare, retirement, disability, and survivor benefits. First, see if you’re required to pay self-employment taxes, and then use “Schedule” to determine the amount.

Question 4

  • Question – Which of the following is not a type of employment tax?
    • Federal income tax withholding
    • Social Security and Medicare
    • Federal unemployment
    • None of the above
  • Answers – None of the above. If you’re a business owner with employees, you’ll probably need to report and deposit employment taxes. These include Social Security and Medicare tax, Federal Unemployment (FUTA) Tax, and federal income tax withholdings.

Question 5

  • Question – What are some examples of items that may require you to pay an excise tax?
    • Tobacco and alcohol
    • Highway vehicles and gasoline
    • Both A and B
    • Only A
  • Answers – Both A and B. Businesses that produce or sell certain items (for example, gasoline, tobacco, and alcohol) may be required to pay excise tax. Similarly, businesses that use certain equipment, facilities, or commodities or collect payments for specific services may also be responsible for excise taxes. Excise taxes act differently than general sales tax. With excise taxes, the tax is levied on the seller, who turns around and builds the cost into the sale price. The tax still gets passed on to the consumer. They just pay it indirectly, rather than directly through sales tax. For more information about excise taxes, see the complete list of excise forms and publications.

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Tax Journeyman

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Tax Wizard

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