Tax Tips for New Business Owners

If you have a newly opened business or plan on opening one in the near future here are some taxes to save you big bucks.

1. Choosing the correct business entity will have a large impact on how you pay taxes. The four most common types of business’s are a sole proprietorship, corporation, partnership and S corporation.

2. The type of business you choose to run will determine the amount of taxes you pay and how you pay them. The four most common types of business tax are income tax, self employment tax, employment tax and excise tax.

3. You will most likely need an EIN number which stands for Employer Identification Number. An EIN number is used to by the IRS to identify your business.

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4. All business owners will have to figure out their taxable income on an annual accounting period called a tax year. The two most common types of tax years used are the calendar year and fiscal year.

5. Keeping good records and receipts will insure your business runs smoothly and you get the biggest tax return possible.

6. You will have to choose an accounting method which is used to determine when to report income and expenses. The most common types of accounting methods are the cash method and accrual method.

cash method – You report your business income in the tax year you receive it and subtract business expenses in the tax year you paid them.

accrual method – You report business income in the tax year you earned it and subtract expenses in the year you incurred them.