//Four Things to Know about Taxes and Starting a Business

Four Things to Know about Taxes and Starting a Business

Source: https://go.usa.gov/xn4Cj

New business owners have tax-related things to do before launching their companies. IRS.gov has resources to help. Here are some items to consider before scheduling a ribbon-cutting event.

Choose a business structure

When starting a business, an owner must decide what type of entity it will be. This type determines which tax forms a business needs to file. Owners can learn about business structures at IRS.gov. The most common forms of businesses are:

Determine business tax responsibilities 

The type of business someone operates determines what taxes they need to pay and how to pay them. There are the five general types of business taxes.

  • Income tax – All businesses except partnerships must file an annual income tax return. They must pay income tax as they earn or receive income during the year.
  • Estimated taxes – If the amount of income tax withheld from a taxpayer’s salary or pension is not enough, or if the taxpayer receives income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, they may have to make estimated tax payments.
  • Self-employment tax – This is a Social Security and Medicare tax. It applies primarily to individuals who work for themselves.
  • Employment taxes – These are taxes an employer pays or sends to the IRS for its employees. These include unemployment tax, income tax withholding, Social Security, and Medicare taxes.
  • Excise tax – These taxes apply to businesses that:
    • Manufacture or sell certain products
    • Operate certain kinds of businesses
    • Use various kinds of equipment, facilities, or products
    • Receive payment for services

Choose a tax year accounting period

Businesses typically figure their taxable income based on a tax year of 12 consecutive months. A tax year is an annual accounting period for keeping records and reporting income and expenses. The options are:

  • Calendar year: Jan. 1 to Dec. 31.
  • Fiscal year:12 consecutive months ending on the last day of any month except December.

Set up recordkeeping processes

Being organized helps businesses owners be prepared for other tasks. Good recordkeeping helps a business monitor progress. It also helps prepare financial statements and tax returns. See IRS.gov for recordkeeping tips.

Additional Resources:

 

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By |2017-10-30T10:33:13+00:00October 30th, 2017|AFSG|0 Comments

About the Author:

Lauryn Charles owns and manages Accountable Financial Services Group, Inc., founded in July of 2007. Lauryn has many years of experience working with small business owners in the field of accounting, banking, and financial services. An accounting graduate with an MBA in International Business from Florida Atlantic University, Ms. Charles is an expert tax preparer and accountant. She is a Registered Tax Return Preparer as designated by the Internal Revenue Service. Ms. Charles is a member of the Pompano Beach and Deerfield Beach Chamber of Commerce. She is on the board of directors of multiple non-profit organizations, she is the co-founder of Pompano’s Young Professionals, and serves many other charitable organizations in the area.