Understanding your tax
obligation is one key to business success. When you start a business, you need
to know about income taxes, payroll taxes and much more. Here are five IRS tax
tips that can help you get your business off to a good start:
Business Structure. An early choice you need
to make is to decide on the type of structure
for your business. The most common types are sole proprietor,
partnership and corporation. The type of business you choose will determine
which tax forms you file.
Business Taxes. There are four general types
of business taxes. They are income tax, self-employment tax, employment
tax and excise tax. In most cases, the types of tax your business pays depends
on the type of business structure you set up. You may need to make estimated
tax payments. If you do, you can use IRS
Direct Pay to make them. It’s the fast, easy and secure way
to pay from your checking or savings account.
Employer Identification Number
(EIN). You
may need to get an EIN for federal tax purposes. Search “do you need an
EIN” on IRS.gov to find out if you need this number. If you do need one, you
can apply
for it online.
Accounting Method. An accounting
method is a set of rules that you use to determine when to report income and
expenses. You must use a consistent method. The two that are most common are
the cash and accrual methods. Under the cash method, you normally report income
and deduct expenses in the year that you receive or pay them. Under the accrual
method, you generally report income and deduct expenses in the year that you
earn or incur them. This is true even if you get the income or pay the expense
in a later year.
Employee Health Care. The Small Business
Health Care Tax Credit helps small businesses and tax-exempt organizations pay
for health care coverage they offer their employees. You’re eligible for the
credit if you have fewer than 25 employees who work full-time, or a combination
of full-time and part-time. The maximum credit is 50 percent of premiums paid
for small business employers and 35 percent of premiums paid for small
tax-exempt employers, such as charities. For more information on your health
care responsibilities as an employer, see the Affordable
Care Act for Employers page on IRS.gov.
Get all the basics of starting
a business on IRS.gov at the Small
Business and Self-Employed Tax Center.
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