The IRS can end up taking more than 50% of your Schedule C profit in ordinary income taxes and self-employment taxes. After all, the highest tax bracket is now 39.6% and the self-employment tax is 15.3%.
To preserve capital, you would be wise to find out all the ins and outs of the tax law and educate yourself on those laws that apply to your business.
A tax professional can help you navigate the tax code and execute the best tax strategy for your specific situation. But there’s also a lot you can learn on your own, and the IRS supplies many resources, including a Small-Businesses & Self-Employed Tax-Center.
Under this section, the IRS offers the following tips:
A-Z Index–The A-Z Index for Business provides the ability to look up any tax topic by subject. For example, say you want to know the auto mileage rate for 2014. You would click on “A,” scroll down to auto, click and there you have it. Within the index module is a section that contains broad overviews of tax law based upon your entity structure: sole proprietor, corporate, LLC, partnership, etc.
Forms and Publications–To read up on specific subjects, the IRS provides the Small-Business Forms and Publications center. This includes topics regarding payroll and payroll taxes as well as application of income tax law. If you are required to file a particular form with the IRS, you may download the form from this location.
EIN–You can find out if you need an Employer ID Number by tapping into the EIN Site. You can also apply for one through the EIN Online Application process.
Education–Tax workshops and webinars are available at the Business Tax Workshops and Webinars site. Click on your state to find local workshops. You can also find tips on topics from the entrepreneurial commitment to recordkeeping to taxes.
Video Portal–If you would rather watch and listen than read, there is a video portal that contains short videos on various topics. Visit IRS Videos or look for them on YouTube. The information is presented in a user-friendly format.
e-News–The IRS offers a bi-weekly email subscription tax newsletter for business owners. This is a valuable source of tax law updates as well as containing explanations of current tax law that govern small businesses. To get the updates, sign up here: e-News for Small Businesses.
Payroll and Contract Workers–A chief area of concern for small business owners is dealing with employees. It’s not enough to hire a payroll service. You need to understand how payroll works and the IRS has a page with all the information you need: Employment Taxes. Business owners also need help in determining whether the worker should be classified as an employee or an independent contractor. The IRS provides guidance: Independent Contractor or Employee?
Lastly, the Small Business Administration (SBA) offers a variety of services and workshops to small business owners. To join their mailing list, click here: SBA Subscription.
Tax law is complex and may require the services of a qualified tax professional to interpret what you read on any tax sites and how those laws apply to your particular situation.
Source: Fox Small Business