NEW BUSINESS FORMATION
If
you start a business, one key to success is to know about your federal tax
obligations. You may need to know not only about income taxes but also about
payroll taxes. Here are five basic tax tips that can help get your business off
to a good start.
1.
Business Structure. As you start out,
you’ll need to choose the structure of your business. Some common types include
sole proprietorship, partnership and corporation. You may also choose to be an
S corporation or Limited Liability Company. You’ll report your business
activity using the IRS forms which are right for your business type.
2.
Business Taxes. There are four general
types of business taxes. They are income tax, self-employment tax, employment
tax and excise tax. The type of taxes your business pays usually depends on
which type of business you choose to set up. You may need to pay your taxes by
making estimated tax payments.
3.
Employer Identification Number. 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.
4.
Accounting Method. An accounting method
is a set of rules that determine when to report income and expenses. Your
business must use a consistent method. The two that are most common are the
cash method and the accrual method. Under the cash method, you normally report
income in the year that you receive it and deduct expenses in the year that you
pay them. Under the accrual method, you generally report income in the year
that you earn it and deduct expenses in the year that you incur them. This is
true even if you receive the income or pay the expenses in a future year.
5.
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. A small employer is
eligible for the credit if it has fewer than 25 employees who work full-time,
or a combination of full-time and part-time. Beginning in 2014, 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
2015 and after, employers employing at least a certain number of employees
(generally 50 full-time employees or a combination of full-time and part-time
employees that is equivalent to 50 full-time employees) will be subject to the
Employer Shared Responsibility provision.
Considering
a Tax Professional? We're
here to help. For no obligation free consultation contact us today!
(651) 621-5777, (612) 224-2476, (763) 269-5396 (818)
627-7315, (773) 599-7182
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