Five Tax Tips If You’re Starting a Business: If you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five tips to get you started. 1. Type of Business. Early on, you will need to decide the type of business entity you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its income on a specific federal tax form. 2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, payroll tax and excise tax. 3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check with me to find out whether you need the number. If you do, I can help you apply for one. 4. Recordkeeping. Record keeping helps you when it’s time to file your business tax forms at the end of the year. It helps track deductible expenses and supports all the items you report on your tax return. Good records also help you monitor your business progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses. Call me if you need assistance setting up your recordkeeping system. 5. Accounting Method. Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and the accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is even if you receive the income or pay the expenses in a future year. I can help you figure out which accounting method is best for your business.
Posted on: Thu, 29 Aug 2013 03:26:46 +0000
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