Top Seven Tips for Taxpayers Starting a New Business

Top Seven Tips for Taxpayers Starting a New Business

again, not nearly as exciting as the upcoming "The Dream Team, Part Deux", but potentially useful to the unemployed.....


Top Seven Tips for Taxpayers Starting a New Business

IRS Summertime Tax Tip 2009-02
Anyone starting a new business this summer 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.
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.
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.
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.
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.
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.
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.
Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.
Links:
Starting A Business
Operating A Business
Closing A Business
Publication 4591, Small Business Federal Tax Responsibilities (PDF 470.1K)
Publication 334, Tax Guide for Small Business (PDF 286.2K)
Order Publication 1066C, A Virtual Small Business Tax Workshop DVD
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Tax Benefits for Job Seekers

well, for better or for worse, others are having their own "summer of [fill in name here]" - if so, this information may be of use to you....next blog entry is in the works - look for "The Dream Team, Part Deux" coming soon

IRS Summertime Tax Tip 2009-01 Many taxpayers spend time during the summer months polishing their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. Here are the top six things the IRS wants you to know about deducting costs related to your job search. In order to deduct job search costs, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers as long as you are looking for a new job in your present occupation. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one. You cannot deduct job search expenses if you are looking for a job for the first time. For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676). Links: Publication 529, Miscellaneous Deductions Tax Topic 508, Miscellaneous Expenses Tax Topic 511, Business Travel Expenses