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Payroll- These are the taxes that are taken out of your employees pay checks. They include their federal and state withholdings, Medicare, and FICA. The employer pays half of the the FICA and Medicare tax on the first 90,000 dollars. After that the only the Medicare tax charged. You can order the IRS Circular E publication to find out the current percentages.

-Federal Unemployment Tax- Also called FUTA, this is another employment tax, but only the employer contributes to it. In 2007 it was 6.2% on the first $7,000 of earnings, but you can claim a credit for participating. Claim this tax on Form 940.

Periodic Payments
Business owners are required to make periodic payments on the companies profit and for Medicare and Social Security taxes throughout the year. This area is very complicated and late payment or underpayment can stick you with heavy fines and interest so it's best to read the laws fro yourself and determine what your company needs to do. One way of estimating your payments to avoid getting nailed with a fine is to pay 90% of your previous years tax liability throughout the year. If you pay at least that much you cannot be fined, but you may have a large lump sum to pay come Springtime.

Benefits
There are many potential tax benefits when electing S corporation status. You can get many of the same perks as a C Corporation without filling out the mounds of extra paperwork. Also, initial cost of incorporation maybe cheaper. One of the best benefits of becoming an S corporation is actually flexibility. Incorporating allows businesses to provide tax-free fringe benefits to employees and shareholders. It also gives shareholders two ways of collecting money from the business, as an active employee earning salary or through dividends.
Shareholders may also gain from S corporation status by earning more when they sell their interest in the company, the flexibility to change status election freely, and by writing off the purchase of their company stock as an investment interest expense.

Resources
Believe it or not the IRS has some helpful publications available to business owners. They are available through mail order, phone, at the local office, and most through the internet. Some become scarce around tax season so order them in advance.

-Publication 334, Tax Guide for Small Businesses
-Publication 15, Circular E
-Publication 583, Starting a Business and keeping records.

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