As you know, TaxMama is the author of Small Business Taxes Made Easy, which some people use as their business bible. Each of IRS’s tips is expanded, in detail, in Small Business Taxes Made Easy, – I’ll add the chapter references to IRS’s tips for you.
A new edition of the book is due out this winter. But, if you’re starting a business now, don’t wait for the new book. Use the current version – and these IRS tips. Note: These tips can be useful even if you’re already in business. Many people who’ve been in business for a dozen years or more have told me how helpful and eye-opening the information has been for them.
Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are six tax tips the IRS wants new business owners to know – and one from TaxMama.
- First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation. (Chapter 3 – Small Business Taxes Made Easy )
- The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax. (Chapter 1 Small Business Taxes Made Easy)
- An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov. (Chapter 1 Small Business Taxes Made Easy )
- Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes. (Chapter 4 Small Business Taxes Made Easy )
- Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used. (Chapter 4 Small Business Taxes Made Easy )
- Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them. (Chapter 4 Small Business Taxes Made Easy )
- TaxMama tip – Every business needs a business plan. That’s the road map your business will follow to success. It also helps you know just what goals and target you need to reach each week or month or year. (Chapter 2 Small Business Taxes Made Easy)
IRS Publication 583, Starting a Business and Keeping Records, provides basic federal tax information for people who are starting a business. This publication is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.