How your company should be structured is one of the first decisions you will have to make as a business owner? This decision is important, because the type of business you create determines the types of applications you’ll need to submit. You should also research liability implications for personal investments you make into your business, as well as the taxes you will need to pay.
It’s important to understand each business type and select the one that is best suited for your situation and objectives. Keep in mind that you may need to contact several federal agencies, as well as your state business entity registration office. In making a choice, you will want to take into account the following:
When you’re running a business, you don’t need to be a tax expert, too. But you do need some tax basics. IRS Small Business Advantage gives you the information you need to stay tax compliant so your business can thrive.
Choosing a Tax Professional
With your new responsibilities, you may decide to hire a professional tax preparer to assist with your taxes. Enrolled agents, tax attorneys, and certified public accountants have training and expertise in federal taxes. When selecting a tax professional, ask a few questions to see if he/she offers what you are looking for:
Experience: Does the tax professional have experience in working with similar size and type businesses? Is the professional familiar with your particular line of business?
Services: Does the tax professional offer electronic filing—the safest and most efficient way to file your tax returns?
Price: What does the tax professional charge for services? If the IRS examines your return, what is the tax professional’s policy on assisting you? Is the tax professional authorized to practice before the IRS?
Qualifications: New regulations require all paid tax return preparers to register with the IRS and obtain a Preparer Tax Identification Number (PTIN). Ensure that the tax professional you choose has a PTIN.
Employer Identification Number (EIN)
An EIN is also known as a federal tax identification number, and is used to identify a business entity. Employers with employees, business partnerships, and corporations and other types of organizations, must obtain an EIN from the IRS. The EIN is also known as an Employer Tax ID and Form SS-4.
You are required to have an EIN if you answer “yes” to any of the following six questions:
Do you have employees?
Do you operate your business as either a corporation or partnership?
Do you file any of these tax returns: employment, excise, or alcohol, tobacco and firearms?
Do you withhold taxes on income, other than wages, paid to a non-resident alien?
Do you have a Keogh plan?
Are you involved with any of the following types of organizations?
Health Care Tax Credit
Health coverage legislation enacted in 2011 included a Small Business Health Care Tax Credit to help small businesses and small tax-exempt organizations provide health insurance coverage to their employees.
Small businesses and tax-exempt organizations providing health insurance coverage will qualify for a special tax credit. Included in the health care reform legislation, the Patient Protection and Affordable Care Act encourages small business employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small business employers paying at least half the cost of single coverage for their employees.
Go to www.irs.gov, search: Health Care Tax Credit.
Knowing when and what you have to file can save you a lot of headaches at tax time. To avoid paying penalties, mark your calendar with the following key dates.
If a filing or payment deadline falls on a Saturday, Sunday, or legal holiday, the deadline will be the next business day.
January 31, 2012
Furnish Forms 1098, 1099 and W-2G to recipients for certain payments during 2011. Furnish Form W-2 to employees who worked for you during 2011.
March 15, 2012
Corporations: File Form 1120 for 2011 calendar year and pay any tax due. For automatic 6-month extension, file Form 7004 and deposit estimated tax.
Electing Large Partnerships: Furnish Sch. K-1 (Form 1065-B) to each partner.
S Corporations: File Form 1120S for 2011 calendar year and pay any tax due. Furnish a copy of Sch. K-1 to each shareholder. File Form 2553 to elect S Corporation status beginning with calendar year 2012.