Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are six tax tips the IRS wants new business owners to know.
- First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
- The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
- An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
- Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
- Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
- Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.
IRS Publication 583, Starting a Business and Keeping Records, provides basic federal tax information for people who are starting a business. This publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.
Article Source: IRS Summertime Tax Tip 2010-05
For more tips, visit www.irs.gov
Did You Know?
Fifty-eight of the 100 U.S. employers surveyed have formal, environmentally friendly workplace programs, and nearly all have recycling and paper-reduction programs. Other efforts:
Sixty-one percent of companies with green programs haven’t measured their cost savings. However, among those that have, nearly two-thirds realized savings in paper and electricity costs, and 49 percent reduced their heating and cooling costs.
Operations and HR typically are the corporate departments responsible for green programs (50 percent and 47 percent, respectively). – Article Source: SHRM Online Staff visit www.shrm.org for more!
Social Security Number Verification Tips
Q: What happens when a new hire’s social security trace comes up, “not a match” on the SSN system? A: You must communicate verbally and in writing with the employee. First, the employee cannot work until the problem is resolved. Second, the message is simple – “bring better documents” and give a reasonable deadline for them to respond. In the letter, it is important to identify the consequences such as, “Your employment will terminate on (date) if you do not respond to this request by (date).”
Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney or an HR Professional.