Starting a new business is complicated, with various requirements for different kinds of companies. Understanding the types of taxes you are expected to pay, knowing applicable deductions, and maintaining a diligent tax filing system are essential to filing taxes correctly. Read on to discover tax tips that can make filing this year a breeze.
- The Four General Business Taxes
Knowledge is power, especially when it comes to staying on the right side of the IRS with your new business venture. Understanding the four general business taxes is an essential part of the tax process; knowing where your money is going and what you can expect to pay will make filing your taxes much easier. These four main taxes include income tax, self-employment tax, employment taxes, and excise taxes.
Income Taxes
All businesses barring partnerships are required to file annual income taxes, and different forms are required depending upon how your business is organized.
Self-Employment Taxes
Self-employment taxes are required for those who are, you guessed it, self-employed. This is a Medicare and social security tax, and provides you with disability benefits, retirement benefits, and hospital insurance, among other things.
Employment Taxes
If you have employees, then you have to fulfill employment tax responsibilities for anyone you employ. This can include Federal income tax withholding and social security taxes, along with other requirements.
Excise Taxes
Excise taxes are dependent on the types of services you provide as a business. If your company manufactures and sells a particular product, uses various kinds of equipment or facilities, or you receive payment for certain services, you’ll be required to pay excise taxes. These taxes are regulated by the government, and a tax professional can easily help you determine the necessary filings for your business purposes.
- An Employer Identification Number
If you’ve just started your new business, you’ll need to obtain an Employer Identification Number, more commonly noted as EIN. This number is essential for filing your federal taxes if you fall under the distinction of needing one, so be sure you have this number ahead of time. You can easily determine if you need an EIN at IRS.gov.
- Applicable Tax Deductions
There are a variety of tax deductions you may not be aware of. If you work at home, you can write off your home office and the expenses you spent to put it together. If you work in an office, you have a variety of deductions to consider. From furniture to office supplies, software to insurance premiums, it’s essential that you take the time to find out what may qualify you for a tax break. Travel, food, and entertainment are all applicable providing they served a legitimate business purpose. Certain property and stock contributions are also applicable under tax deductions, so talk with a certified tax professional to find out what your business may qualify for.
- Create a Filing System
If you’re self-employed and just started your own business, then you should be diligent about saving and collecting any and all receipts related to your business expenses. From meals with clients to cab rides to meetings, you should ask for a record of the transaction. Whether it’s a paper receipt or a digital record, keep a cache of all expenses and make it easy to prove your claims when it comes time to file.
While it can be tempting to combine personal and business expenses on the same account, this makes it a lot more complicated when it comes time to do your taxes, and could be a red flag for the IRS. Having a different account will make it easier for you to discern the items that are qualified for deduction, and make your chances of an audit less likely.
- Health Care Tax Credit
Small business owners should look into filing for health care tax credit if they meet the following distinctions: the average annual wages in your company are less than $50,000 a person, you employ fewer than 25 full-time-equivalent employees, you contribute 50 percent or more to your employees’ self-only health programs, and your health insurance has been purchased through Small Business Health Options Program Merchants.
If you’re a new business owner, the tax process will be a harder one to navigate this year. With extra tax requirements, it can feel impossible to nail down the correct filing system. Make sure you understand the tax necessities required for your particular business. If you’re worried about making an error, consider using professional tax resolution services to ensure you file correctly and avoid any trouble with the IRS.