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IRS Can Help When Starting a Small Business

If you are opening a new business this summer, the IRS has some basic federal tax information to help you get started.

If you are opening a new business this summer, the IRS has some basic federal tax information to help you get started.

Here are some things to consider when starting a business:

  • Type of Business  One of the first decisions you need to make is what type of business you are going to establish. The most common types of businesses are sole proprietorship, partnership, corporation, S corporation, and Limited Liability Company. The type of business you establish determines which tax forms you will need to file.
  • Types of Taxes  The type of business you operate also determines what types of taxes you will pay and how you will pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
  • Employer Identification Number  A business typically needs to get an Employer Identification Number to use as an identifier for tax purposes. Check IRS.gov to find out whether you will need this number, and, if so, you can apply for an EIN online.
  • Recordkeeping  Good records will help you keep track of deductible expenses, prepare your tax returns and support items that you report on your tax returns. Good records will also help you monitor the progress of your business and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
  • Tax Year  Every business taxpayer must figure taxable income on an annual basis called a tax year. Your tax year can be either a calendar year or a fiscal year.
  • Accounting Method  Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

Visit the IRS.gov website and click on the ‘Businesses’ tab for more information and resources, including a special section on starting a business. Publication 583, Starting a Business and Keeping Records, can also help new business owners understand their federal tax responsibilities. The publication is also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676). 

 

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18000 New IRS Agents July 30, 2012 at 11:50 PM
In order to read your article, one would have to concur with your premise that the IRS can help small businesses. That is not only preposterous, it is exactly what the current administration wants people to think. Would you care to explain how you came to post this in the week subsequent to the President taking unbelievable heat for revealing that he doesn't feel that small business owners have contributed much to their own businesses? As an IRS spokeswoman, I can only wonder how you are even able to sleep at night knowning the depths of the evil you try to portray as helpful. You better stock up on spf, it's gonna be hot where you are headed in the afterlife.
18000 New IRS Agents July 30, 2012 at 11:55 PM
Oh, and make sure you sign up for your EIN ''for tax purposes''. The number is free, every move you make thereafter will be taxed to the outer limits of human reasoning. If anything changes, remember, best to be safe and get a new number, because after all, nothing else matters to us, we need that number so we can find you and syphon your children's inheretance" For further "help" stay tuned to further articles about how the IRS can "help" you and small businesses. Yeah, those small buisnesses the roads built while you were feeling all smart and talented.
Erin Schultz August 01, 2012 at 11:08 AM
Scott Hunzinger said on Facebook: "This is fine, but please talk to both an attorney and an accountant before starting a new business so that you set things up properly to ensure that you are legally protected and to minimize your tax liabilities."

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