I invested personal funds to start a new corporation last year. How can I get credit for this on my personal income tax return?
If you invest your personal funds to start a corporation, this is your basis in the stock of the corporation. Your stock basis will show on the balance sheet of the corporation's Form 1120, U.S. Corporation Income Tax Return. Your investment will not show up on your personal income tax return until you sell the stock or until the corporation goes out of business.
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I am starting a small business. What assistance can IRS give me?
If you are starting or already have a small business and need information on taxes, record keeping, accounting practices, completing Federal business and employment tax returns, and meeting other Federal tax obligations, there is help available. Much of the assistance is free. The service is called Small Business Tax Education Program, or STEP. Go to Around the Nation for seminars in your area or check out Tax Info For Business on the IRS web site. You can find out more about this program for small business by referring to Publication 1066, Small Business Tax Workshop, Tax Topic 103, Small Business Tax Education Program (STEP), or mailing the interest form in Publication 1057, Small Business Tax Education Program Brochure, to the nearest IRS Taxpayer Education Coordinator. In addition, the IRS has assembled a business tax kit, Publication 454, Your Business Tax Kit, which contains various forms and publications for persons in business or for those starting a business. Publication 1057 and 454 can be ordered by calling 800-829-1040.
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I want to start my own business. Do I need a business license?
The IRS does not require or issue business licenses. Whether or not the particular type of business or service you provide is regulated by licensing requirements is a question for your state, city, or local government agencies. To access the state you need to direct your question to, please go to our Alphabetical State Index.
How do I find out about whether or not my business needs to collect sales tax?
Your question is a state tax question. Your state revenue department should provide information regarding sales tax to you. To access the state you need to direct your question to, please go to our Alphabetical State Index.
What forms do you use when you have a small business?
The annual forms that you would use to report you business activity to the IRS would depend on the type of entity you operate your business under.
- Sole Proprietorships use Form 1040, SCHEDULE C, Profit and Loss from Business (Sole Proprietorship) or Form 1040, SCHEDULE C-EZ, Net Profit from Business and Form 1040, SCHEDULE SE, Self-employment Tax.
- Partnerships use Form 1065, U.S. Partnership Return of Income and Schedule K-1.
- Corporations use Form 1120, U.S. Corporation Income Tax Return.
- S Corporations use Form 1120S, U.S. Income Tax Return for an S Corporation.
- Limited Liability Companies use one of the choices above according to their structure.
If you hired employees to work in your business, other forms and publications would come into play.
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If you start your own business and send in your quarterly taxes, must you also file a personal income tax return at the end of the year?
If you have $400 or more of net profit from your business, you will have to file a Form 1040 with a Form 1040, SCHEDULE C, Profit and Loss from Business (Sole Proprietorship) and a Form 1040, SCHEDULE SE, Self-employment Tax.
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I just started a small business and want to know if I have to file quarterly or at the end of the year?
As a self-employed individual, you must determine if you are liable for making estimated taxes which are paid on a quarterly basis. The estimated tax worksheet is Form 1040-ES, Estimated Tax for Individuals. When you file your income tax return, you include the income from the business on that return. The forms to be filed are the Form 1040, U.S. Individual Income Tax Return, Form 1040, SCHEDULE C, Profit or Loss from Business, and Form 1040, SCHEDULE SE, Self-employment Tax. You may qualify to use Form 1040, SCHEDULE C-EZ, Net Profit from Business.
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How do I report the closing of a sole proprietorship business?
When a sole proprietor ends a business, the last Form 1040, SCHEDULE C, Profit or Loss from Business, filed for that business does not require notation as a final return because the business is not a separate entity from the sole proprietor. You simply quit filing a Schedule C with your income tax return.
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I went out of business this year and still have inventory on hand. Can I take a deduction for inventory that I can not sell?
Inventory has to be run through the business when sold even after the business closes. If used for personal use, do not file a Form 1040, SCHEDULE C, Profit or Loss from Business, with your return. If you give the inventory away to a nonprofit organization, claim your deduction on Form 1040, SCHEDULE A, Itemized Deductions. When an individual has expenses after the business has closed, they are still able to deduct these expenses.
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