| Pub. 334, Tax Guide for Small Business |
2004 Tax Year |
Introductory Material
This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Introduction
The purpose of this publication is to provide general information about the federal tax laws that apply to small business
owners who are sole
proprietors and to statutory employees.
A sole proprietor
is someone who owns an unincorporated business by himself or herself. However, if you are the sole member
of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.
A statutory employee
has a checkmark in box 13 of his or her Form W-2, Wage and Tax Statement. Statutory employees have to use
Schedule C or C-EZ to report their wages and expenses.
To use this publication, you will generally need the following forms.
See chapter 12 for information about getting these forms.
Husband and wife business.
If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you
are partners in a partnership,
whether or not you have a formal partnership agreement. Do not use Schedule C or C-EZ. Instead, file Form 1065. For more information,
see Publication
541.
Exception. If you and your spouse wholly own an unincorporated business as community property under the community property laws of a
state, foreign country, or U.S. possession, you can treat the business either as a sole proprietorship or a partnership. The
only states with
community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A
change in your reporting
position will be treated as a conversion of the entity.
This publication does not cover the topics listed in the following table.
What you need to know.
Table A (shown later) provides a list of questions you need to answer to help you meet your federal tax obligations. After each question
is the location in this publication where you will find the related discussion.
Table A. What You Need To Know About Federal Taxes
(Note. The following is a list of questions you may need to answer so you can fill out your federal income tax return. Chapters
are given to help you find the related discussion in this publication.)
|
What must I know
|
|
Where to find the answer
|
| |
|
What kinds of federal taxes do I have to pay? How do I pay them?
|
|
See chapter 1.
|
|
What forms must I file?
|
|
See chapter 1.
|
|
What must I do if I have employees?
|
|
See Employment Taxes in chapter 1.
|
|
Do I have to start my tax year in January? Or can I start it in any other month?
|
|
See Accounting Periods in chapter 2.
|
|
What method can I use to account for my income and expenses?
|
|
See Accounting Methods in chapter 2.
|
|
What kinds of business income do I have to report on my tax return?
|
|
See chapter 5.
|
|
What kinds of business expenses can I deduct on my tax return?
|
|
See chapter 8.
|
|
What kinds of expenses are not deductible as business expenses?
|
|
See Expenses You Cannot Deduct in chapter 8.
|
|
What happens if I have a business loss? Can I deduct it?
|
|
See chapter 9.
|
|
What must I do if I disposed of business property during the year?
|
|
See chapter 3.
|
|
What are my rights as a taxpayer?
|
|
See chapter 11.
|
|
Where do I go if I need help with federal tax matters?
|
|
See chapter 12.
|
IRS mission.
Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and
by applying the tax law with
integrity and fairness to all.
Comments and suggestions.
We welcome your comments about this publication and your suggestions for future editions.
You can email us at
*[email protected]. (The asterisk must be included in the address.) Please put “ Publications Comment” on
the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider
your comments as we revise
our tax products.
You can write us at the following address:
Internal Revenue Service
Business Forms and Publications Branch
SE:W:CAR:MP:T:B
1111 Constitution Ave. NW, IR-6406
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number,
including the area code, in
your correspondence.
What's New for 2004
The following are some of the tax changes for 2004. For information on other changes, see Publication 553, Highlights of 2004
Tax Changes.
Standard mileage rate. The standard mileage rate for the cost of operating your car, van, pickup, or panel truck in 2004 is 37.5 cents a mile for
all business miles. For
more information, see Car and Truck Expenses in chapter 8.
Standard mileage rate available for small fleets. Beginning in 2004, the business standard mileage rate can be used for as many as four vehicles that you own or lease and use
simultaneously.
Self-employment tax. The maximum net self-employment earnings subject to the social security part (12.4%) of the self-employment tax is $87,900
for 2004. For more
information, see Self-Employment Tax in chapter 1.
Increased section 179 deduction dollar limit. The maximum section 179 deduction you can elect for property you purchased and placed in service beginning in 2004 has increased
from $100,000 to
$102,000. This amount will be adjusted for inflation for 2005. For more information, see Publication 946.
Schedule C-EZ expense limit increased to $5,000. You may use Schedule C-EZ instead of Schedule C if your expenses are $5,000 or less and you meet the other requirements shown
in Part I of Schedule
C-EZ.
What's New for 2005
The following are some of the tax changes for 2005. For information on other changes, see Publication 553, Highlights of 2004
Tax Changes.
Self-employment tax. The maximum net self-employment earnings subject to the social security part of the self-employment tax increases to $90,000
for 2005.
Standard mileage rate. The standard mileage rate for the cost of operating your car, van, pickup, or panel truck in 2005 is 40.5 cents a mile for
all business miles. For
more information, see Car and Truck Expenses in chapter 8.
Reminders
Accounting Methods. Certain small business taxpayers may be eligible to adopt or change to the cash method of accounting and may not be required
to account for
inventories. For more information, see Inventories in chapter 2.
Reportable transactions. You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. You may have to pay
a penalty if you are
required to file Form 8886 but do not do so. Reportable transactions include (1) transactions the same as or substantially
similar to tax avoidance
transactions identified by the IRS, (2) transactions offered to you under conditions of confidentiality for which you paid
an advisor a minimum fee,
(3) transactions for which you have, or a related party has, contractual protection against disallowance of the tax benefits,
(4) transactions that
result in losses of at least $2 million in any single tax year or $4 million in any combination of tax years, (5) transactions
resulting in book-tax
differences of more than $10 million on a gross basis, and (6) transactions with asset holding periods of 45 days or less
and that result in a tax
credit of more than $250,000. For more information, see the Instructions for Form 8886.
Photographs of Missing Children
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of
missing children
selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children
home by looking at the
photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
Previous | First | Next
Publications Index | 2004 Tax Help Archives | Tax Help Archives Main | Home
|
