Congratulations! You start a new business in U.S. However, understanding the tax responsibilities that come with starting a business venture is also significant for you as the business owner. This article will give you some tax tips of starting a new business based on IRS resources.
Choose a business structure
The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:
(1) Sole proprietorship: An unincorporated business owned by an individual. There is no distinction between the taxpayer and their business.
(2) Partnership: An unincorporated business with ownership shared between two or more people.
(3) Corporation: Also known as a C corporation. It is a separate entity owned by shareholders.
(4) S Corporation: A corporation that elects to pass corporate income, losses, deductions, and credits through to the shareholders.
(5) Limited Liability Company: A business structure allowed by state statute.
Choose a tax year
A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:
(1) Calendar year: 12 consecutive months beginning January 1 and ending December 31.
(2) Fiscal year: 12 consecutive months ending on the last day of any month except December.
Apply for an employer identification number (EIN)
An EIN is also called a federal tax identification number. It is used to identify a business. Most businesses need one of these numbers. It is important for a business with an EIN to keep the business mailing address, location, and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.
If you have employees
You should have all employees complete these forms: Form I-9, Employment Eligibility Verification U.S. Citizenship, and Immigration Services; Form W-4, Employee's Withholding Allowance Certificate.
Pay business taxes
The form of business determines what taxes must be paid and how to pay them.
Visit state's website
Prospective business owners should visit their state's website for info about state requirements.
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
In addition to the four employee benefits previously discussed, it is essential to consider a fifth benefit: health insurance, which represents the most significant expense associated with employee benefits in contemporary workplaces. The Affordable Care Act (ACA) stipulates that organizations employing 50 or more full-time employees are subject to a tax penalty unless they provide adequate healthcare coverage that complies with ACA standards for their full-time workforce.
It is also advisable for employees to engage in a comprehensive dialogue with prospective candidates regarding the company's benefits package prior to joining the organization. It should be noted that the provision of employee benefits is not a mandatory requirement. However, there are five notable exceptions where such provisions are legally binding: Social Security
The IRS Schedule C (Form 1040) is commonly utilized by individuals to submit their individual income tax returns, disclosing their annual income, and determining the taxable portion after accounting for tax deductions and credits. The following will talk about entities that are required to report on Schedule C, as well as the specific deductions applicable to Schedule C.
Maintaining accurate and organized records is a crucial obligation for small business proprietors, irrespective of the size of their workforce, the nature of their services, or the type of business entity. Recordkeeping involves the systematic and methodical storage of business documents. The subsequent section examines the significance of recordkeeping for small businesses and outlines the recordkeeping requirements stipulated by the IRS.
