When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are:
For detailed information, we recommend to check the Small Business Administration's Choose a business structure web page.
Small businesses have expenses like wages, contract labor (i.e. hiring freelancers), equipment, supplies, vehicle expenses, depreciation of assets, rent, utilities, insurance ..... As a small business owner, you are able to minimize your business taxes by writing off a lot of those operational expenses.
Here is the most current information about Deducting Business Expenses.
Many Start-Ups make the mistake of thinking initial business expenses aren’t deductible until their businesses are fully operational. However, the IRS allows small business owners to deduct a wide array of startup expenses before beginning business operations.
The IRS allows you to deduct up to $5,000 in business startup costs and up to $5,000 in organizational costs, but only if your total startup costs are $50,000 or less.
Typical costs to set up a business are rent, insurance, office supplies, business cards, business assets, professional fees (i.e. hiring accountants), and small business loan fees. If you’re operating your business from a home office, you can qualify for a home office deduction.
For the latest Information please visit Write off Start-Up costs.
According to the IRS, individuals, including sole proprietors, partners, and S corporation shareholders, have to make quarterly estimated tax payments if they expect to owe taxes of $1,000 or more when their federal returns or state tax returns are filed. You can figure out your estimated tax payments as a business owner using Form 1040-ES. It may be helpful to use last year’s income, deductions, and tax credits as a starting point. You can also use your previous year’s federal tax return as a guide.
Quarterly estimated tax payments for each respective quarter are due every April 15, June 15, September 15, and January 15 (of the following tax year).
Here are the most common types of taxes to account for as a business owner.
|Self-Employment Tax||Self-Employment Tax (Social Security and Medicare Taxes)|
|Payroll Tax||Employment or Payroll Taxes|
|Excise Tax||Taxes paid when purchases are made on a specific good|
|Sales Tax||Sales taxes in the United States|
|Property Tax||Property taxes in the United States|