Yakima County Development Association - And you thought the IRS wasn't helpful

Jean Brown

Article by:
Jean Brown

Jean publishes a blog called the Enterprise Corner.  It features articles on entrepreneurship, local industry trends, manufacturing news and periodic ‘toolbox’ articles showcasing assistance, incentives and other resources for local businesses.



And you thought the IRS wasn't helpful

March 08, 2013





When I think of the IRS, helpful isn't always the first word that comes to mind.  However, this email recently came to me and I thought I'd pass it on because it has some excellent tips if you are thinking of starting a business.  Business owners typically aren't sure how to set up their business structure, pay taxes, or keep records so there is a lot of homework to do before you get going.  Disclaimer - this is from the IRS, so keep in mind that these are not the only things you need to do to start a business. "Anyone starting or thinking of starting a new business should be aware of their federal tax responsibilities. Here are the top seven things the IRS wants you to know if you plan on opening a new business this year or thinking of starting a new business. 1.    First, you must decide what type of business entity you are going to establish. The type your business takes 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. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov. 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. 7.    Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.  To get the latest IRS news and products and services, subscribe to e-News for Small Businesses on IRS.gov at http://www.irs.gov/businesses/small/article/0,,id=154825,00.html, click “Subscribe Now” at the bottom of the page and enter your e-mail address.  The IRS Small Business and Self-employed Tax Center at http://www.irs.gov/businesses/small/index.html has more information about starting and operating a new business."  

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