Tax Reporting North Babylon NY
New businesses are responsible for reporting taxes, as well as paying taxes to the United States Government. This includes businesses with one employee, and businesses with hundreds of employees. This article looks at the variety of issues associated with new business tax reporting.
Jeffrey Lewis, CFP, ChFC
7 White Deer Court
123 Eakins Rd
Greg S Garritano CPA
515 Johnson Ave
532 Broadhollow Rd
Forensic Accounting & Valuation Services LLC
1 Dupont St Ste 207
1377 Motor Parkway
1393 Veterans Memorial Highway
Accountants Service Bureau of Long Island
34 Merrick Ave
Access Accounting Professionals
532 Broadhollow Rd
Alizio Tax & Consulting Services, LLC
420 Jericho Tpke Suite 325
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Individuals are required by federal law to file taxes with every job where they make at least $600 in a given year. Business taxes do not work the same way as individual taxes, especially new businesses. When starting up a new company, an employer needs to file taxes, whether the company made a profit or not. As many new companies take some time to begin making a profit, it isn't surprising that many businesses report a loss on their taxes in the first few years. The Internal Revenue Service, or the IRS, realizes this, and generally gives new companies leeway during their first few years of operation. If a company continues to report a loss after several years, typically five, the IRS may investigate further with an audit. This is done to ensure that the company is not trying to hide money, or cheat the government out of any taxes. If any discrepancies are found, the company may have to pay back taxes. Businesses are responsible for federal, state, and local taxes for the company. The business is also responsible for social security, Medicare, and unemployment taxes for each of their employees, regardless of how long the employee worked for the company.
A new business may not be expected to pay taxes during the first few years it is in operation. As explained above, many new companies report a loss during the first few years of operation. As the new business struggles to find its footing, the start-up costs of running a business, advertising, and hiring new employees, along with other business related expenses, may cost more than the business makes. Rather than working at a profit, the business is then running at a loss. In some situations, the business can actually write off this loss on their taxes, and avoid making any payments. However, once a business begins turning a profit, the owner must pay taxes to the Federal Government. Paying business taxes actually falls into two separate categories: taxes paid throughout the year, and taxes paid at the end of the year. Throughout the year, the business is responsible for withdrawing taxes from every employee paycheck that is issued. These taxes include federal, local, state, social security, Medicare, and unemployment taxes. At the end of the year, the business is responsible for reporting their overall income, along with any losses or gains. Those businesses that must pay taxes to the Federal Government can do so online over the Internet, or by mailing a check to their local IRS branch. If the business cannot make a lump sum payment, they can file for an extension. Another option is to work out a payment plan with the IRS in which payments will be made throughout the year. Different options can be discussed with a professional accountant or tax preparer.
Business related expenses generally refer to anything that is used to keep the business functional and operational. These expenses can be listed, and many companies are then able to write these expenses off on their taxes. The problem is deciding between what is actually a business related expense, and what is not. In the past, certain companies have made headlines by trying to write off expenses that were not allowed, whether it was an honest mistake or unscrupulous business practice. While a hotel stay is considered an expense if it relates to a business trip, family vacations do not count. The same holds true for cars, clothing, and numerous other things. Business expenses include anything that keeps the business running, not individual members of the company. This includes the rental of property where the offices are located, upkeep of the offices, and sometimes the equipment used in the office. It also includes the items needed daily to keep the company running such as pencils, paper clips, pens, computer ink, paper, etc. Anything purchased must be used solely for the business, and not for any personal reasons. If a new business plans to use any of these expenses as a deduction on their income tax, they must save the receipts for future use.