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IRS Tax Tips for Starting a Business

8/10/2015

 
When you start a business, a key to your success is to know your tax obligations.  You may not only need to know about income tax rules, but also about payroll tax rules.  Here are 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 will 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, use IRS Direct Pay to pay them.  It's the fast, easy and secure way to pay from your checking or savings account.

  • Employer Identification Number.  You may need to get an Employers Identification Number (EIN) for federal tax purposes.

  • 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 your 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.  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.  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.

The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees).  These employers' are called Applicable Large Employers  (ALEs).  ALEs must either offer minimum essential coverage that is "affordable" and the provides "minimum value" to their full-time employees (and their dependents), or potentially make an employers shared responsibility payment to the IRS.  The bast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their full-time employees.  Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

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  • Home
  • About
    • Book An Appointment
  • Accounting
    • Dashboard
    • Xero+Accountency
    • Xero Intro
    • AutoMagical Accounting
    • QuickBooks >
      • QuickBooks Updates
    • Store
  • Payroll
  • Taxes
    • Dashboard
    • Individuals
    • Businesses
    • Tax Stuff >
      • Individuals >
        • Income >
          • Debt Forgiveness
          • Foreign Income
          • Gambling Income
          • Unemployment
          • Other Income
        • Deductions & Credits >
          • Adoption
          • Charitable Contributions
          • Earned Income Tax Credit
          • Educational Expenses
          • Energy Tax Credits
          • Employee Business Expenses
          • Other Deductions and Credits
        • Affordable Care Act - Individuals
        • Children and Dependents
        • Death
        • Disabled Taxpayers
        • Educators
        • Health Care
        • Identify Theft
        • Marriage and Divorce
        • Military
        • Real Estate
        • Retirement Savings
        • Seniors
        • State Taxes
        • Record Keeping
        • Who Must File
        • Other Topics
      • Businesses >
        • Affordable Care Act - Businesses
        • Year-end Reporting Obligations >
          • 1099's
          • Health Insurance Premiums
          • Depreciation
          • Reimbursed Employee Business Expenses
          • Company Automobiles
        • Employment Tax Credits
        • Independent Contractors
        • Tax Credits and Deductions for Businesses
        • Other Business Topics
        • Required Business Posters
      • Amended Returns
      • IRS Notices and Problems
      • Tax Plan >
        • All About the Earned Income Tax Credit
        • 5 IRS Audit Red Flags
        • Retirement Plans for Sole Proprietors
        • Are You Claiming All of Your Tax-Deductable Business Expenses for 2015?
        • All About Past Due Tax Returns
        • Do You Need to File Form 1099s?
        • How to File an Appeal with the IRS
        • Why You Might Get a Letter from the IRS, and What to Do
        • How to File an Amended Tax Return
        • Should You Claim the Home Office Deduction?
        • How to Avoid -- And Deal with -- Identify Theft
        • Q & A: IRS Audits
        • Are You Using the Right Business Structure?
        • Starting Planning for 2015 Income Taxes Now: 5 Tips
        • What You Need to Know About Estimated Taxes
        • Contractor or Employee? How the Income Tax Obligations Differ
        • The New Form 1095-A: Reporting Health Insurance Coverage
        • Are Your Social Security Payments Taxable?
        • Do You Qualify for the Earned Income Tax Credit?
        • Are You Eligible for Health Insurance Tax Credits
        • Employee Retirement Plans - Tax Advantages and Other Benefits
        • 5 Business Tax Credits You May Be Missing
        • New Business in 2012
        • Is it a Bad Debt or a Simple Revenue Loss? Telling the Difference
        • Business Taxes Add Complexity: How Will This Affect You?
      • Tax Scams