Setting up a new business requires a lot of work—and that’s before you even open your doors. From registering your business to getting all the right paperwork in order, there’s a lot to do. Not least among these are tasks related to your new business’s taxes. Business taxes are significantly more complex than personal tax returns, so it’s important that you handle these things early on, and enlist the aid of a business tax accountant in Provo. Here are a few tax-related tasks that every new business owner needs to take care of.
Choosing Your Business Structure
To register your business with your state, you’ll need to select a business designation, or a business structure, for your company. Each designation has its pros and cons, and may or may not be appropriate for how your business is set up; additionally, the structure you choose will impact how your company is taxed, so it’s important that you research each designation to determine which is right for you.
You can learn more about business designations and how they impact your taxes on our blog.
Receiving Your EIN
Whether you have other employees or not, it’s important that you get an Employer Identification Number (EIN) for your business. This number will be used to identify your company, and is necessary for your first business tax return.
Selecting a Tax Year
Personal tax returns will almost always be paid based on the calendar year; this means you look at income earned between January 1st and December 31st of any given year to determine your taxable income. However, businesses often have the option of choosing to operate on a fiscal year that differs from the calendar year. If you’re not sure whether the calendar year or a fiscal year is best for your company, speak to a business accountant to get some insight. It’s important that you’re also aware that not every business qualifies to pay taxes based on a different fiscal year. You can learn more about some of the qualifications and restrictions on the IRS’s Tax Years page.
Declaring your business’s tax year is simple—just file your first tax return using either the calendar year, or your chosen fiscal year. If you decide later on that you would like to change to a different tax year, you’ll have to request approval from the IRS using Form 1128.
Using Employee Forms
Many first-time business owners will often overlook the importance of doing things by the book. When you’re hiring your best friend, sister-in-law, or your dad to help out with your business, it might seem silly to have them fill out paperwork that establishes them as an employee. But failing to do this upfront can cause a lot of issues down the road. Instead of creating more work for yourself, ensure that everyone you hire fills out a W-4 and an I-9.
If you’re hiring an independent contractor or freelancer, they should complete a W-9 for you. We also strongly recommend that you have a written contract (preferably one reviewed by an attorney) that outlines your expectations, the work the contractor will be doing for you, and any deadlines and other essential information.
Keep a copy of all of these forms in your records for at least four years, and make sure your employees receive a copy as well.
Paying Your Business Taxes
Last but not least, make sure you’re paying your business’s taxes—and do it on time. In addition to impacting how your business is taxed, your company’s business designation may also impact when your business has to be taxes. For companies operating on a calendar year, the business tax deadline is March 15th, with an extension deadline of September 15th. If your company operates on a different fiscal year, your tax deadline is based on when your fiscal year ends; speak to your business tax accountant in Provo if you’re not sure when your taxes are due.
Building a new business is an exciting venture, but it’s important that you don’t get too caught up in the thrill of it all, and overlook the essential tax-related tasks mentioned in this article. If you need assistance with handling your business’s taxes, contact Biesinger & Kofford CPAs today.