Most likely, business taxes are not among your favorite topics. For small-business owners, multiple levels of taxation at the city, county, state and federal levels, as well as complex and ever changing rules and requirements, form a gauntlet of potential pitfalls.
The Internal Revenue Service is trying to clear some of the tax-related fog for business owners and the self-employed.
A chief improvement is an IRS small business/self employed (SB/SE) Web site. It can be found at www.irs.gov/smallbiz. A section titled "Starting, Operating or Closing a Business," for example, covers a great amount of tax territory. This is where you will find IRS rules on hiring your own children or other family members, recordkeeping, employer ID numbers and selecting a business structure.
The site also helps in answering a key tax question: Is what you are doing a true business or a hobby? If the IRS decides your "business" is a hobby, your expenses may not be deductible. Look for the nine-point checklist.
The advice and information under "Operating a Business" is helpful for any type of small business. If you have employees, you will find resources on hiring, employment taxes and wage reporting requirements. The "Filing and Paying Taxes" section offers an overview of business taxes you may face and the forms you will need to file.
Stephen L. Rosenstein is co-chairman of Greater Baltimore, SCORE Chapter No. 3. Call 410-962-2233 to speak to a SCORE counselor or visit www.scorebaltimore.org To send a question to SCORE representatives, e-mail email@example.com