Many people dream of being their own bosses. If you're hoping to launch a business, get off to a strong start by making good decisions. For example, which business structure will you use (such as a sole proprietorship, partnership or corporation)? This decision will affect the taxes you pay. Another decision is whether to operate on a calendar year or fiscal year basis. You should also obtain a federal employer ID number to identify your business. If you hire employees, you must have them complete certain forms right away, including Form I-9 and Form W-4. Click here for more from the IRS, including links to requirements for individual states.
Is there an emergency plan in place for your business? As Americans deal with hurricanes and other disasters, the IRS is reminding them to prepare. Update, secure and duplicate essential tax and financial documents. You may need them to support insurance claims or apply for tax benefits. Compile lists of business equipment and belongings. IRS.gov has disaster loss workbooks for that purpose.
If you use a payroll service provider, check to see if they have a fiduciary bond in place to protect your business if the provider defaults. If you don't already use the Electronic Federal Tax Payment System for payroll deposits and other tax payments, consider signing up here.
Businesses that receive more than $10,000 in cash must report the transactions to the IRS. This is done on Form 8300, Report of Cash Payments Over $10,000. Although many cash transactions are legitimate, information reported on Form 8300 can help combat those who evade tax, profit from the drug trade or engage in terrorist financing. The IRS recently announced that beginning Jan. 1, 2024, businesses must electronically file Form 8300 instead of filing paper returns.
The new requirement for e-filing Form 8300 applies to businesses mandated to e-file certain other information returns, such as the Form 1099 series and Form W-2. For more information from the IRS, click here.
Attention employers and businesses that must obtain taxpayer identification numbers (TINs): The IRS just updated some relevant information. Publication 1586, "Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs on Information Returns" has several objectives. The publication provides general information needed to avoid penalties for information returns that are filed with missing or incorrect TINs, describes the actions that must be taken to solicit (request) a TIN, and explains the requirements for establishing reasonable cause. The penalty amounts have now been updated to reflect inflation. To learn the new amounts, click here.
Recent legal action serves as a reminder to businesses: Take payroll tax administration responsibilities seriously. The Oklahoma- and Virginia-based owners of a mental health counseling services company pleaded guilty to failing to file required quarterly employment tax returns and pay over the full amounts they withheld from employee paychecks. The guilty parties admitted that over several years, they intentionally failed to pay the IRS approximately $1.3 million in taxes they withheld from employees. When they're sentenced in a U.S. District Court, each defendant faces up to five years in prison, restitution requirements and possible financial penalties.
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