If summer plans include starting a business, be sure to visit IRS.gov. The
IRS website has answers to questions on payroll and income taxes, credits and
deductions plus more.
New business owners may find the following five IRS tax tips helpful:
1. Business
Structure. An early choice to make is to decide on the
type of structure
for the business. The most common types are sole proprietor, partnership
and corporation. The type of business chosen will determine which tax forms to
file.
2. 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 a business pays depends on the
type of business structure set up. Taxpayers may need to make estimated
tax payments. If so, use IRS
Direct Pay to make them. It’s the fast, easy and secure way to pay from a
checking or savings account.
3. Employer
Identification Number (EIN). Generally, businesses
may need to get an EIN for federal tax purposes. Search “EIN” on IRS.gov to
find out if the number is necessary. If needed, it’s easy to apply
for it online.
4. Accounting
Method. An accounting
method is a set of rules used to determine when to report income and
expenses. Taxpayers must use a consistent method. The two most common are the
cash and accrual methods:
- a. Under the cash method, taxpayers normally report income and deduct expenses in the year that they receive or pay them.
- b. Under the accrual method, taxpayers generally report income and deduct expenses in the year that they earn or incur them. This is true even if they get the income or pay the expense in a later year.
Get all the basics of starting
a business on IRS.gov at the Small
Business and Self-Employed Tax Center.
Avoid scams. The IRS does not initiate contact
using social media or text message. The first contact normally comes in the
mail. Those wondering if they owe money to the IRS can view
their tax account information on IRS.gov to find out.
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