Starting a new business is an exciting, but busy time with so much to be done and so little time to do it in. Also, if you expect to have employees, there are a variety of federal and state forms and applications that will need to be completed to get your business up and running. That’s where a tax professional can help.
1. Business Structure
The first decision you will need to make is determining which business structure you will use. The most common types are a sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you file.
2. Employer Identification Number (EIN)
Securing an Employer Identification Number (also known as a Federal Tax Identification Number) is the first thing that needs to be done since many other forms require it. The IRS issues EINS to employers, sole proprietors, corporations, partnerships, nonprofit associations, trusts, estates, government agencies, certain individuals, and other business entities for tax filing and reporting purposes.
Note: Even if you already have an EIN as a sole proprietor, for example, if you start a new business with a different business entity you will need to apply for a new EIN.
The fastest way to apply for an EIN is online through the IRS website or by telephone. Applying by fax and mail generally takes one to two weeks, and you can apply for one EIN per day. There is no cost to apply.
3. State Withholding, Unemployment, Sales, and other Business Taxes
Once you have your EIN, you need to fill out forms to establish an account with the State for payroll tax withholding, Unemployment Insurance Registration, and sales tax collections (if applicable). Business taxes include income tax, self-employment tax, employment tax, and excise tax. Generally, the types of tax your business pays depends on the type of business structure you set up. Keep in mind that you may also need to make estimated tax payments.
4. Payroll Record Keeping
Payroll reporting and record keeping can be very time-consuming and costly, especially if it isn’t handled correctly. Also, keep in mind, that almost all employers are required to transmit federal payroll tax deposits electronically. Personnel files should be kept for each employee and include an employee’s employment application as well as the following:
- Form W-4, Employee’s Withholding Allowance Certificate. Completed by the employee and used to calculate their federal income tax withholding. This form also includes necessary information such as address and social security number.
- Form I-9 Employment. Eligibility Verification. Completed by the employer, to verify that employees are legally permitted to work in the U.S.
5. Employee Healthcare
As an employer with employees, you may have certain healthcare requirements you need to comply with as well. If so, you should know about the Small Business Health Care Tax Credit, which helps small businesses (fewer than 25 employees who work full-time, or a combination of full-time and part-time) pay for health care coverage they offer their employees. 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.
If you need help setting up or completing any tax-related paperwork needed for your business, don’t hesitate to call.