5 Tax Tips for New Business
Posted by William Byrnes on August 11, 2014
1. Business Structure. The IRS stated that taxpayers should choose the business type for the new business. Some common types of entities include sole proprietorship, partnership, S corporation, Limited Liability Company (LLC) and C corporation (normally just referred to as a ‘corporation’). The type of business chosen will determine the IRS form(s) that must be used to annually report information and to determine tax owing to the IRS.
2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes a business pays usually depends on which type of business the taxpayer chose to set up.
3. Employer Identification Number. A taxpayer may need to get an EIN for federal tax purposes in order to file the tax form necessary for the business type.
4. Accounting Method. An accounting method is a set of rules that determine when to report income and expenses. A business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, income is reported in the year received and expenses are deducted in the year paid. Under the accrual method, income is reported in the year earn, regardless of when payment was actually made, and expenses are deducted in the year incur, regardless of when paid.
5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.
For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.