Tax Tips for Starting a Business

When you start a business, a key to your success is to know your tax obligations. You may not
only need to know about income tax rules but also about payroll tax rules. Here are five tax tips
that can help you get your business off to a good start.

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

2. 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 your
business pays depends on the type of business structure you set up. You may need to make
estimated tax payments. If you do, use IRS Direct Pay to pay them. It's a fast, easy and secure way
to pay from your checking or savings account. Don't hesitate to call if you need assistance or
have any questions about IRS Direct Pay.

3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Call the
office to find out if you need this number. If you do, help is available to make sure this process
goes smoothly.

4. Accounting Method. An accounting method is a set of rules that you use to determine when to
report income and expenses. You must use a consistent method. The two that are most common
are the cash and accrual methods. 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.

5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and
tax-exempt organizations pay for health care coverage they offer their employees. A small
employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a
combination of full-time and part-time. 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.

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 full-time employees. Employers must send reports to
employees and to the IRS on new forms the IRS created for this purpose.

Give the office a call if you're thinking about starting a business but don't know where--or how--to
start.
J.F. Yang & Company,
An Accountancy Corporation
Tax and Financial News:
Contact us:

310-689-8032