Tax Tips You Need to Know When Starting a Business
When you decide to start a business, you have to know what your tax obligations are. While you need to know, what the income tax rules are you also need to learn about payroll tax rules. Today, we are sharing five tax tips with you to help you get started.
The first thing you need to do when you start a business is decide on a structure type. Usually, business owners go with sole proprietor, partnership, or corporation. The structure of your business determines which tax forms you need to file.
There are four main business tax types. These are income tax, self – employment tax, employment tax and excise tax. Usually, your taxes are based off your business structure. Additionally, depending on your structure you may be required to make estimated tax payments. We suggest using IRS Direct Pay to make payments because it is fast, easy, and secure. You will also have to provide W2 forms for your employees.
Employer Identification Number
You may need to get an Employer Identification Number (EIN) to file your federal taxes. You can visit the IRS website to determine if you need an EIN and if you do need one you can apply for it online.
Your accounting method will determine when you need to report your income and expenses. Once you select a method, you have to consistently use it. The two main types of accounting methods are cash and accrual.
- Cash method – This method allows you to report your income and expenses in the year that you receive the money or spend the money on expenses.
- Accrual method – This method allows you to report the income and expenses during the year that you incur them.
Employee Health Care
The Small Business Health Care Tax Credit will help your business pay for your employee’s health care coverage. Small businesses are eligible for this credit if there are less than twenty-five employees who work full time or a combination of full and part time. The maximum amount that you would receive would be 50% unless you are a tax-exempt employer then it would be 35%.
As an employer of more than 50 full time workers or a combination of full and part time, you would have to comply with the shared responsibility provisions of the Affordable Care Act. Lastly, you have to report the coverage that you offer or provide your full time employees. The reports must be sent to both your employees and the IRS.
For more tax information for businesses, make sure to visit the IRS website.