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Managing Your Taxes

Business Taxes

Managing Your Taxes

As a business owner you'll need to manage your tax obligations throughout the year. This includes keeping records, setting up accounting procedures, and making regular income tax payments. The resources below explain tax obligations that all business owners should work into their regular operations.

  • Operating a Business

  • Employer ID Number (EIN)
    An Employer Identification Number (EIN) is also known as a federal tax identification number, and is used to identify a business entity. Find out if you need an EIN and how to apply for one.

    Unless you are a professional bookkeeper, you probably don't like to spend valuable business time keeping records. But keeping good records can actually help you save money.

    Business Name Change
    Explanation for businesses on how to make a name change.

    Businesses with Employees
    If you operate a business and have employees, then this section has the information you will need. You will find resources on hiring, recordkeeping and other topics such as employment taxes, and wage reporting requirements.

    Accounting Periods and Methods
    Are you using the correct accounting method?

    What is Taxable and Nontaxable Income?
    You can receive income in the form of money, property, or services. This section lists many kinds of income that are taxable or nontaxable.

    Filing and Paying Your Business Taxes
    This section discusses business taxes you may have to pay and the forms you may have to file. It also discusses taxpayer identification numbers.

    Estimated Taxes
    Federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go: withholding, and estimated taxes.

    Business Expenses
    You can deduct the cost of operating your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold.

    Business Tax Credits
    A list of forms for claiming business tax credits, and a brief explanation about when carryovers, and credits cease.

    Intangible Property is property that has value but cannot be seen or touched. Generally, you can either amortize or depreciate intangible property.

    Changing Your Business Structure
    There are tax implications related to the various types of business structures. It is also important to understand a business' responsibilities when closing a business, selling a business, or declaring bankruptcy.

    Avoiding Problems
    This section provides links to resources to help the small business owner create a recordkeeping system, get the latest on the cash vs. accrual accounting methods, and tips on understanding their IRS notice, what to do if you havenít filed a tax return, and how to recognize and avoid tax scams.

    Closing a Business
    There is more involved in closing your business than just locking the doors. This section provides procedures for getting out of business, including what forms to file and how to handle additional revenue received or expenses you may incur.

    Small Business Resources
    This section offers links to a broad range of resources across federal and state agencies, as well as links to industry-related, private sector agencies and organizations.

    Small Business Tax Calendar
    This 12-month calendar is filled with useful information on general business taxes, electronic filing and paying options, business publications and forms, and common tax filing dates. Each page highlights different tax issues and tips that may be relevant to small business owners.

    Retirement Plans
    The advantages of a retirement plan are numerous. There are economic, business and tax advantages for your business, for your employees and for you. A retirement plan may give you an important competitive edge in attracting and keeping the best employees - and help you plan for your own retirement years. The retirement plans videos are also a great resource for choosing, operating and maintaining your retirement plan.

    Accounting Periods and Methods

    Each taxpayer (business or individual) must figure taxable income on an annual accounting period called a tax year. The calendar year is the most common tax year. Other tax years are a fiscal year and a short tax year.

    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, regardless of when payment is received, and deduct expenses in the tax year you incur them, regardless of when payment is made.

    For a complete discussion refer to Publication 538, Accounting Periods and Methods.

  • Tax Recordkeeping Guide for Businesses

  • Why should I keep records?
    Good records will help you monitor the progress of your business, prepare your financial statements, identify source of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.

    What kinds of records should I keep?
    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.

    How long should I keep records?
    The length of time you should keep a document depends on the action, expense, or event the document records. You must keep your records as long as they may be needed to prove the income or deductions on a tax return.

    How long should I keep employment tax records?
    You must keep all of your records as long as they may be needed; however, keep all records of employment taxes for at least four years.

    How should I record my business transactions?
    Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. These documents contain information you need to record in your books.

    What is the burden of proof?
    The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them.

  • Small Business Expenses and Tax Deduction
    Explains IRS rules for making deductions on business income taxes.

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