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Creating structure for new business venture

TAX TIPS

Internal Revenue Service

If summer plans include starting a business, be sure to visit IRS.gov.

The Internal Revenue Service website offers answers to questions on a variety of topics including payroll and income taxes, credits and deductions.

New business owners might find the following five IRS tax tips helpful:

Business

Structure

An early choice to make is to decide on the type of structure for the business. The most common types are sole proprietor, partnership and corporation. The type of business chosen will determine which tax forms to file.

Business Taxes

There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax a business pays depends on the type of business structure set up. Taxpayers might need to make estimated tax payments. If so, use IRS Direct Pay. It’s the fast, easy and secure way to pay from a checking or savings account.

Employer

Identification Number (EIN)

Generally, businesses might need to get an Employer Identification Number, commonly referred to as an EIN, for federal tax purposes. Search “EIN” on IRS.gov to find out if the number is necessary. If needed, it’s easy to apply for it online.

Accounting Method

An accounting method is a set of rules used to determine when to report income and expenses. Taxpayers must use a consistent method. The two most common are the cash and accrual methods. Under the cash method, taxpayers normally report income and deduct expenses in the year they receive or pay them. With the accrual method, taxpayers generally report income and deduct expenses in the year they earn or incur them. This is true even if the taxpayer receives the income or pays the expense in a later year.

For more information and to learn the basics of starting a business, visit IRS.gov.

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