Self-employed business owners must pay both federal and state taxes on income generated from their businesses. The specific type of business taxes required may vary state by state depending on the type of business. Many self-employed business owners prefer, and may be required, to estimate and submit quarterly state taxes instead of paying them annually. These taxes may be reconciled on an annual basis if you have over or under-estimated the tax payment.
If you are newly self-employed, you may want to consultant with a tax attorney or accountant to assist you in determining the estimated taxes and allowed deductions.
Visit your state’s Department of Revenue, Comptroller or Tax Department’s website or contact them by phone to determine the applicable business taxes you will need to pay.
Apply for a sales tax identification number, if appropriate for your business type and required by your state. If you sell property, products or services you will likely need a tax ID, seller’s certificate or permit to pay your taxes. Your state will likely have downloadable online forms to complete and submit to obtain this information.
Obtain the appropriate state tax forms from your state’s online tax website. If you routinely pay estimated quarterly taxes, you may already have pre-printed tax vouchers sent to you in advance.
Gather all of your supporting business documentation including receipts, ledgers and bills necessary to complete your taxes. Complete the tax forms and take business expense deductions as allowed by the Internal Revenue Service (IRS). Refer to IRS Publication 535 (2009), Business Expenses for a list of all deductible business expenses.
Pay and submit your state taxes, online if possible. Keep all associated paperwork and, if paying an estimated amount on a quarterly basis (every three months, four times per year), determine the due date of the next payment. For example, if your business operates on a calendar tax year, the quarters will end on March 31, June 30, September 30 and December 31. Payment is usually due sometime during the month immediately following the end of the quarter and may vary from state to state.