If you are starting a business, it's important to understand your tax obligations. Our tax pros discuss these helpful tax tips you should know.
Entrepreneurs looking to start a new business, large or small, will need to understand the rules regarding income tax, payroll tax, and possibly sales tax obligations. These five helpful business tax tips will help ensure your new company is off to a strong start and pave the road to future success.
If you are starting a business and want to know more about Federal & local tax obligations, contact our Pittsburgh Business Tax Professionals to find out if you have everything you need - (412) 931-1617.
- Business Structure. One of the first decisions you need to make is to choose the type of structure for your business. The most common types that you can choose from are sole proprietor, partnership and corporation. This decision will determine which tax forms you will file, so if you need further assistance, speak with a pro accountant to find out which structure will be the best for your situation.
- Business Taxes. There are four general types of business taxes- income tax, self-employment tax, employment tax and excise tax. The type of taxes that your business will be responsible for will depend on the type of business structure you set up. You may need to make estimated tax payments quarterly throughout the year.
- Employer Identification Number. You may need to get an EIN for Federal tax purposes. You can apply for one online through the Federal Government's website - IRS.gov.
- Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. The most common methods are 1) cash and 2) accrual. 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. You must use a consistent method to ensure your tax obligations and deductions are being recorded accurately.
- Employee Health Care. The Federal Government created the Small Business Health Care Tax Credit to help small businesses and tax-exempt organizations pay for health care coverage that they offer their employees. A smaller company/employer is eligible for this credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time, and is only available to businesses that purchase their insurance through the government Marketplace.. According to the IRS, 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.
From IRS.gov - About the Affordable Care Act:
The 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 have 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.