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IRS Tax Tips for Starting a Business

When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules. Here are five IRS tax tips that can help you get your business off to a good start.

1. Business Structure.  An early choice you need to make is to decide on the type of http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Business-Structures">structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you will file.

2. Business Taxes.  There are four general http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Business-Taxes">types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes">estimated tax payments. If you do, use http://www.irs.gov/Payments/Direct-Pay">IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

3. Employer Identification Number.  You http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employer-ID-Numbers-EINs">may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online">apply for it online.

4. Accounting Method.  An http://www.irs.gov/uac/Publication-538,-Accounting-Periods-and-Methods">accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

5. Employee Health Care.  The http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-and-the-SHOP-Marketplace">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. 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.

The http://www.irs.gov/Affordable-Care-Act/Employers/Employer-Shared-Responsibility-Provisions">employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers. ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also havehttp://www.irs.gov/Affordable-Care-Act/Employers/Information-Reporting-by-Applicable-Large-Employers"> information reporting responsibilities regarding minimum essential coverage they offer or provide to their fulltime employees.  Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

Get all the tax basics of http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Starting-a-Business">starting a business on IRS.gov at thehttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed"> Small Business and Self-Employed Tax Center.

Additional IRS Resources:

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Simply click on the links below to get information for starting, maintaining and closing a business, business taxes, recordkeeping and help for your day-to-day business activities, directly from the IRS.

IRS Video and Audio Presentations
Learn about federal tax topics through video and audio presentations, archived versions of live panel discussions, archived webinars, video clips and audio archives of national phone forums.

Internal Revenue Service Tax Centers
Provides the full list and links to each of the available IRS Tax Centers

Tax Professionals
The links on this page provide information such as Servicewide Key Messages, Circular 230, and the Tax Gap for Tax Professionals.

Payroll Professionals Tax Center - Information for Payroll Professionals and Their Clients

Small Business and Self-Employed Tax Center
The links on this page provide important information for all small businesses and self-employed individuals.

Self-Employed Individuals Tax Center
The links on this page provide basic information to individuals who are self-employed independent contractors.

Información y Recursos para Pequeñas Empresas (Information for Small Businesses in Spanish)
The links on this page provide information for small businesses in Spanish.

Agriculture Tax Center
Links to agriculture-related topics such as tax tips, financial resources, trends and statistics, forms, and more.

Automotive Tax Center
The links on this page provide information such as tax tips and trends and statistics for the automotive industry.

Child Care Tax Center
The Child Care Tax Center contains links to child care related topics such as the Child Care Provider Audit Techniques Guide, forms, publications, and related links.

Construction Tax Center
The Construction industry page contains explanations of Federal tax topics related to the construction industry, news articles and educational IRS Publications.

E-Business & E-Commerce Tax Center
This is a tax center for E-Business and E-Commerce taxpayers and their tax preparers.  The center provides a centralized source for E-Business and E-Commerce related issues.

Entertainment Tax Center
The links on this page provide information such as tax tips and trends and statistics for the entertainment industry.

Fishing Tax Center
This page provides links to the most common topics in the fishing industry.

Gas Retailers Tax Center
The links on this page provide information such as tax tips and trends and statistics for gas retailers.

Manufacturing Tax Center
The links on this page provide information such as tax tips and trends and statistics for the manufacturing industry.

Real Estate Tax Center
The links on this page provide information such as tax tips and trends and statistics for the real estate industry.

Restaurants Tax Center
The links on this page provide information such as tax tips and trends and statistics for the restaurant industry.

Trucking Tax Center
The links on this page provide information such as tax tips and trends and statistics for the trucking industry.