Don't Mess With Taxes

Image courtesy @SBAgov

Welcome to National Small Businesses Week (NSBW). This year is the 60th anniversary of the weeklong celebration of the United States' entrepreneurs and small business owners.

More than half of Americans either own or work for a small business. These smaller firms also create about two out of every three new jobs in the U.S. each year.

The event, which in 2023 runs from April 30 through May 6, is officially hosted by the U.S. Small Business Administration (SBA). But the Internal Revenue Service joins in the celebration since taxes are a big part of any business.

Virtual summit: One of the key events this week is the SBA's National Small Business Week Virtual Summit. SCORE, the business mentoring nonprofit that works as a resource partner for the SBA, is cohost of the May 2 and 3 digital gathering.

The free event will offer participants information on strategies through educational sessions and online business resources. Plus, you'll get to remotely meet other business owners and chat with industry experts.

You can check out what the SBA and SCORE have planned for next Tuesday and Wednesday at the summit's online agenda. To take part in any or all of the sessions, all you have to do is register — yes, there's still time — at the SBA's special web page.

IRS small business day: The IRS takes center stage on Thursday, May 4, with a Twitter chat hosted by @IRSnews that will highlight some of the tax agency's business resources,

Among the topics that will be discussed that day is whether your company needs an Employer Identification Number, usually referred to as an EIN. This permanent tax identification number can be used for most business needs, from opening bank accounts to filing a tax return by mail. Business owners can get an EIN immediately and for free by applying online at IRS.gov.

Business entities: One always popular small business topic is selecting a business structure, also known as establishing what business entity your company will take. Your choice determines in large part which income tax return form must be filed.

The most common business structures are sole proprietorship, partnership, corporations, and S Corp. Some small business owners also opt for a Limited Liability Company (LLC), which is not a tax entity, but rather a state designation with its regulations are determined by the state laws where it is formed.

The IRS will treat an LLC as either a corporation or a partnership, or as a sole proprietorship where business taxes are part of the owner's individual tax return, depending on elections made by the LLC and its number of members.

Once your business entity is set, you'll need to decide on your tax year, which is an annual accounting period for reporting income and expenses. Small businesses must figure their taxable income based on a tax year and can choose between a —

• Calendar year, which, as the name indicates, is the 12 consecutive months beginning January 1 and ending December 31; or
• Fiscal year, which is 12 consecutive months ending on the last day of any month except December. A 52-to-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks, but does not have to end on the last day of a month.

Types of business taxes: Then there are the taxes that are due regardless of which tax year you choose. Business owners, including self-employed individuals, a potential plethora of federal levies.

The four general types of business taxes are —

1. Income tax. All businesses except partnerships must file an annual income tax return. Partnerships file an information return.
2. Self-employment tax. This covers Social Security and Medicare taxes primarily for individuals who work for themselves. Payments contribute to the individual's coverage under the Social Security system.
3. Employment tax. When small businesses have employees, the business has certain employment tax responsibilities that it must pay and forms it must file.
4. Excise tax. Excise taxes are imposed on various goods, services and activities. Such taxes may be imposed on the manufacturer, retailer or consumer, depending on the specific tax.

More small business IRS resources: This is just the start of the tax considerations that business owners face.

So, on this opening day of National Small Business Week 2023, today's Sunday Shout Out goes to the many IRS.gov resources available to new, and long-time, business owners.

In addition to the IRS links (and, I must confess, some of my previous business blog posts) already part of this post, other online tax help can be found at these IRS web pages —

• Small Business and Self-Employed Tax Center
• 10 Steps to Start Your Business
• Hobby or Business? IRS Offers Tips to Decide
• Industries, Professions and Business Tax Centers
• Credits and Deductions Under the Inflation Reduction Act of 2022
• Online Tax calendar
• Gig Economy Tax Center
• Publication 5557, A Guide to Starting a Small Business

The IRS also offers an eight-part interactive video workshop designed to help new small business owners learn their tax rights and responsibilities.

No, it's not easy being the boss. But it can be rewarding and profitable, as long as you know all the business and tax rules. Take advantage of the special offerings from the SBA and IRS during this National Small Business Week, and year-round, to become the best, and most successful, possible boss.

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