Five Tax Tips For Starting A Business

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, limited liability company,  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.

What is An EIN and Why Is It Important?

By Debby Winters

If you are the owner of a small business and you haven’t checked out the SBA, you definitely need to. Here’s an informative article from them on EIN. Do you know what is it? Do you know why it is important? If you answered “NO” to either then read on. The entire article appears on the SBA website.

What does EIN stand for? Employer Identification Number

Where does a business get an EIN? from the IRS

Who needs an EIN? Every business that needs to open a business bank account, apply for business licenses, or file tax returns. It’s helpful to apply for one as soon as you start planning your business. This will ensure there are no delays in getting the appropriate licenses or financing that you may need to operate.

How do you apply for an EIN?  The simplest way to apply for your EIN is online via the IRS EIN Assistant. As soon as your application is complete and validated, you’ll be issued an EIN.

How much does it cost?  There is no charge for this service.

Check out the SBA website for more information on small business.