Are you opening a new business this summer? Here are six tax tips
that
you should know.
1. First, you must decide what type of business entity you are going
to
establish. The type of business entity will determine which tax form you
have
to file. The most common types of business are the sole proprietorship,
partnership, corporation and S corporation
2. The type of business you operate determines what taxes you must
pay and
how you pay them. The four general types of business taxes are income
tax,
self-employment tax, employment tax and excise tax.
3. An Employer Identification Number is used to identify a business
entity. Generally, businesses need an EIN.
4. Good records will help you ensure successful operation of your new
business. You may choose any recordkeeping system suited to your
business that
clearly shows your income and expenses. Except in a few cases, the law
does not
require any special kind of records. However, the business you are in
affects
the type of records you need to keep for federal tax purposes.
5. Every business taxpayer must figure taxable income on an annual
accounting period called a tax year. The calendar year and the fiscal
year are
the most common tax years used.
6. 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 an 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.
If you need help in getting these things done and done correctly so
you can
work on your business and not in it. Let me know at dick@woodjones.com
