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:
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:
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
Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers and reporting agents. Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.
Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart. Over the past few months, a number of these individuals and companies around the country have been prosecuted for stealing funds intended for the payment of payroll taxes. Examples of these successful prosecutions can be found on IRS.gov.
Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes. This is true even if the employer forwards tax amounts to a PSP or RA to make the required deposits or payments. For an overview of how the duties and obligations of agents, reporting agents and payroll service providers differ from one another, see the Third Party Arrangement Chart on IRS.gov.
Here are some steps employers can take to protect themselves from unscrupulous third-party payers.
Tax On Wheels, LLC is available to assist you with your payroll filing requirements including state and local filing obligations. Give us a call at 803 732-4288 if we can assist your company.
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.
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
3. CP2000
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.
Let Tax On Wheels, LLC help you get your business up and running. Give us a call us at 803 732-4288.
If you are a small employer with fewer than 25 full-time equivalent employees that earn an average wage of less than $50,000 a year and you pay at least half of employee health insurance premiums…then there is a tax credit that may put money in your pocket.
The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.
Here is what small employers need to know so they don’t miss out on the credit for tax year 2011:
For tax years 2010 to 2013, the maximum credit for eligible small business employers is 35 percent of premiums paid and for eligible tax-exempt employers the maximum credit is 25 percent of premiums paid. Beginning in 2014, the maximum credit will go up to 50 percent of qualifying premiums paid by eligible small business employers and 35 percent of qualifying premiums paid by eligible tax-exempt organizations.
Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.
Please feel free to contact Tax On Wheels, LLC at 803 732-4288 if we can assist you with these or other tax issues.