Taxes
- How do I know what taxes are required for my business?
- Do I need a sales tax number, and how do I register for one?
- If I am self-employed, how do I report my taxes?
- Which business expenses can I deduct for income tax purposes?
- Can I hire my children and get a tax deduction?
- Can I buy a new car in my business and get a tax deduction?
- If I operate my business from my home, what can I deduct from my taxes?
1. How do I know what taxes are required for my business?
Once you start your business, you will have to start paying certain taxes to both the federal government and the Commonwealth of Pennsylvania. The specific taxes you are required
to pay or remit depend on your type of business. The Pennsylvania Department of Revenue Web site (
http://www.revenue.state.pa.us/) provides information on business taxes.
2. Do I need a sales tax number, and how do I register for one?
If you sell tangible personal property, or provide certain fabrication, rental, or other particular services, you must obtain a sales tax identification number, also known as a
seller's certificate, from the state of Pennsylvania. To obtain the appropriate forms, visit the Pennsylvania Department of Revenue Web site (
http://www.revenue.state.pa.us/) or call 717-787-1064.
3. If I am self-employed, how do I report my taxes?
Self-employed business owners are required to pay state and federal income taxes and self-employment taxes on the profits generated by the business. Once your liability for
federal income tax and self-employment tax exceeds $5,000, you will need to remit the tax payments to the IRS. You can estimate and report your federal taxes by using the 1040-ES form,
and your state taxes by using the 1040ES-ME form.
4. Which business expenses can I deduct for income tax purposes?
Generally, all the expenses you incur to start and operate your business are deductible; however, many are subject to various IRS rules. Study some IRS publications (such as the
Business Tax Kit) and look at the tax returns for your form of business to get an idea of what you may be able to deduct as business expenses.
5. Can I hire my children and get a tax deduction?
Yes. There are special tax laws that apply to hiring your children to work for you. Consult with your tax professional to determine how these laws would apply to your
business.
6. Can I buy a new car in my business and get a tax deduction?
Yes, provided the car is used in the business. If it is used exclusively in your business, you can deduct all of its cost and operating expenses. If it serves partly for business
and partly for personal use, you can allocate the business portion and claim a percentage of its cost and expenses.
7. If I operate my business from my home, what can I deduct from my taxes?
You can deduct all regular expenses associated with your business. This is no different from operating your business from a location outside your home. Consult IRS Publication
334, the IRS, a CPA, a tax lawyer, or some other source familiar with these rules.
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