September 13, 2021
Small business owners have a variety of tax responsibilities. The IRS knows that understanding and meeting tax obligations is vital to the success of all businesses, especially a new one. IRS.gov has the resources and information to help people through the process of starting a new business.
Here are some tips for new entrepreneurs:
Choose a business structure.
The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:
- Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
- Partnership: An unincorporated business with ownership shared between two or more people.
- Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
- S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
- Limited Liability Company: A business structure allowed by state statute.
Choose a tax year.
A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:
- Calendar year: 12 consecutive months beginning January 1 and ending December 31.
- Fiscal year: 12 consecutive months ending on the last day of any month except December.
Apply for an employer identification number.
An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need one of these numbers. It’s important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.
Have all employees complete these forms:
Pay business taxes.
The form of business determines what taxes must be paid and how to pay them.
Visit state’s website.
Prospective business owners should visit their state’s website for info about state requirements.
Please feel free to call Tax On Wheels, LLC at 803 732-4288 if you would like to discuss your business tax filing obligations
If you plan to start a new business, or you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips from the IRS that can help you get started.
1. Type of Business. Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different 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, employment tax and excise tax.
3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check IRS.gov to find out whether you need this number. If you do, you can apply for an EIN online.
4. Recordkeeping. Keeping good records will help you when it’s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business’ progress and prepare your financial statements. You may choose any record keeping system that clearly shows your income and expenses.
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 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 true even if you receive the income or pay the expenses in a future year.
Tax On Wheels, LLC specializes in helping entrepreneurs get started on the right footing. Please contact us at 803 732-4288 if we can help you start your business.
As a business owner, it can be difficult to understand how the Affordable Care Act can affect your business. So to help clarify the myths versus facts, the Small Business Administration is launching a new blog series called “Myth vs. Fact: The Affordable Care Act and Small Business.”
One prominent line of thinking that seems to recur frequently is the idea of making sure your business never reaches the 50 full time employee threshold that places you under the financial dictates of the Affordable Care Act. The idea is to layoff or never hire that last employee in order to avoid the financial consequences of having to provide health care insurance for all of your employees. My question is this, doesn’t this kind of thinking allow the competition to come in and steal market share by serving those customers who are not getting the proper attention from your 49 employees?
I’m just saying, The Affordable Care Act may not be a pillar of the laissez-faire free market economics but failing to adequately serve your customers will almost certainly bring the wrath of the free market down on your head.
Beginning next week, the IRS will be sending out approximately 20,000 letters to small businesses questioning the possible underreporting of income. The IRS matched the information reported on 2011 Form 1099-K that was sent to the business to the income the business reported on its tax return.
We understand that there will be three different letters:
1. Soft touch/inquiry
2. Correspondence audit, possibly questioning the underreporting of income
The letters have not been released for review; however, we were notified of the IRS’ plans to mail these letters during a conference call. We were also told that the IRS will post the letters on IRS.gov next week.
This information was provided to us via the NATP. If you have questions or concerns about this information please feel free to contact Tax On Wheels, LLC at 803 732-4288.
The state of South Carolina recently announced that businesses that have filed tax returns since 1998 are also at risk due to the recent security breach at the Department of Revenue.
Consequently, starting Friday Nov. 2nd, Dun & Bradstreet Credibility Corp. will offer
South Carolina businesses who have filed a tax return since 1998 a
complimentary CreditAlert™product which will alert businesses to
changes to their D&B® scores and ratings.
Please understand that these are the instructions on the South Carolina Department of Revenue website and we are posting this information solely as a courtesy to our friends and clients. Tax On Wheels, LLC does not recommend or endorse any credit reporting service. We continue to urge everyone to take a step back and make sure you understand the ramifications of using this or any credit reporting service. Then and only then should you determine if using a credit reporting service is the proper course of action for your business or personal information.