Steps to small business tax info entrepreneurs should know when starting up

Written By Steps To Faculty Published August 4th, 2010

In any economic climate, starting a new business is a great challenge. But recent changes in taxation as proposed and legislated by President Obama can make the difference between your business soaring or folding. Many business owners often plan marketing strategies, location, demographics, and other key business functions, but neglect to carefully review taxation issues upon their business inception. Failure to do so has caused many business owners to pay more in taxes than necessary or not pay enough taxes that is needed and eventually end up in legal trouble Avoid this by taking the following steps.

Step 1 Visit the IRS

The Internal Revenue Service is the most comprehensive source for all information regarding federal taxation. Specifically, for new business owners the agency has established a special presentation found at

http://www.irs.gov/businesses/small/article/0,,id=200274,00.html

Which can help you put together the correct forms before going forward with your business.

Step 2 Go to your state department of taxation and finance office

In addition to federal taxes, nearly all business owners must also be aware of all state taxation requirement for small businesses. Most states, for example, require quarterly filings of profit and loss statements and also employee tax forms. Be sure to file these right away as it is illegal to operate a business without them.

Step 3 Take available deductions

At the time of this writing, you can take a deduction if you use a home office as a principle place of business. That means that at least 80% of the time the space in your primary residence is used to conduct your business and this can be proven. You may not be aware though that you cannot claim a net loss if you use a home office. These intricate details must be sorted out prior to establishing the site of your business as if you have heavy losses in the first year you still must pay taxes on this. You may need to take a loan to cover these added expenses if you did not plan accordingly.

Step 4 Know which form to use

Are your employees in control of how work will be done for you? If so, then you need Form-1099 as your workers are actually independent contractors. On the other hand, if you have say in how work is to be done, then you have actual employees and will need to fill out Social Security Tax forms, FICA tax forms, and unemployment insurance forms.

Step 5 Get everything in writing

Be clear about the status of each employee/independent contractor upfront. Failure to do so may mean you have to pay retroactive taxes on social security, federal, and state taxes. In addition, you may even be liable for increases and unemployment. Visit irs.gov to get these forms or visit staples.com.

Remember, a little planning now can save your business and you a lot of money later. Please visit stepsto.com for more great business advice.


Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.