Understanding Tax Types
Basically the small business owner has to worry about four different tax types: income tax, self-employment tax, employment taxes, and excise taxes. We’ve already covered the employment taxes in the numerous chapters related to payroll taxes.
You’ve lived with income taxes all your life, so you probably have a good understanding of what those are and how you file forms for them. You need to add some schedules to your 1040, but otherwise things won’t be that different.
Self-employment taxes are the ones that hurt the most. That’s because as a business owner you must pay both the employee and employer portion of the Social Security and Medicare taxes. You do get to adjust your gross income by deducting the employer portion ...