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There are several steps to this process, for federal income taxes and FICA taxes: Federal unemployment (FUTA) taxes, paid by employers.FICA taxes for Social Security and Medicare, paid by both employees and employers.Federal income tax withholding from employee pay.Owners of S corporations divide up the income of the business, and each owner receives a Schedule K-1 to include in their income tax return.Įmployment or Payroll Taxes Paid on Employee EarningsĮmployment taxes are taxes paid by employees and employers, including: S corporations are similar to partnerships. Some LLCs can elect to be taxed as a corporation (see below). Owners of LLCs are taxed as either sole proprietors (one owner) or partnerships (multiple owners).

They receive a Schedule K-1 showing their income from the business, adding this schedule to their personal tax returns. The individual partners or LLC members pay income taxes for their share of the income of the business. Partners in partnerships and multiple-member LLC owners file a partnership business tax return for information purposes only. The net income from Schedule C is added to your other sources of income to determine your total tax.

To determine the net income, you'll need to complete Schedule C as part of your personal tax return. Sole proprietors and single-member LLC owners pay income tax based on the net income of their business. If you share a business with others, the net income is divided between or among the owners, based on their agreement. It's the same thing as profit (income minus expenses).

Income taxes and self-employment taxes (Social Security/Medicare tax) are based on the net income of your business for the tax year.