The IRS’s Own Tax Guide for Small Business

Yes, the IRS does provide a tax guide for small business. It is titled Publication 334 (2020), Tax Guide for Small Businessi. It’s more than 100 pages of specific information about small business taxation, income, expenses, deductions, forms, and more. This article is not intended to get into the weeds of small business taxation, but it can help you to know what you will find in the IRS document. Here are the chapter headings with summary descriptions:

IRS Tax Guide to Small Business Chapter 1: Filing and Paying Business Taxes – You learn about tax ID numbers. The ITIN, Individual Taxpayer Identification Number, is issued to those taxpayers that are not residents eligible for a social security number which they use to file their personal income taxes, including reportable business income. The EIN, Employer Identification Number, is required for business that employ people and pay wages, or if they file pension or pay excise taxes.

This chapter also discusses the filing of tax returns including e-filing. It goes into detail about the types of taxes paid by businesses, forms used, and due dates.

Chapter 2: Accounting Periods and Methods – Instructions for setting up a calendar or fiscal year for accounting and tax reporting purposes are in this chapter. The calendar year begins January 1 and ends December 31. A business can have their own fiscal year for accounting and reporting, often based on the type of business, seasonal sales, or other factors.

As for accounting methods, there are two major methods, Cash or Accrual. Using the cash method, you consider income for taxes when it is received, and expenses as deductions when they are paid. In the accrual method, if you have unpaid invoices at the end of your tax year, you would report that as income. Unpaid but owed expenses can be reported for deductions.

Tax Guide for Small Business Chapter 3: Dispositions of Business Property – Disposition of business property includes property retired from use in the business either through sale, loss, or perhaps just being worn out. There can be tax consequences if the property is or was being depreciated or other accelerated deduction activity was involved.

Chapter 4: General Business Credits – Credits are great for the business, as they reduce income subject to taxation. There are many of them, some very specialized, such as the “Distilled spirits credit.”

Tax Guide for Small Business Chapter 5: Business Income – This chapter identifies types of income considered as business income, as well as what is not business income, such as consignments.

Chapter 6: How to Figure Cost of Goods Sold – Calculating cost of goods sold for tax reporting involves the cost of goods and inventory stock levels. This chapter addresses calculating the cost of goods sold for reporting on Schedule C, lines 35 through 42.

Tax Guide for Small Business Chapter 7: Figuring Gross Profit – The chapter walks you through working with income and expenses to calculate gross profit. You are guided in checking items like sales tax collected and others to get the calculations right.

Chapter 8: Business Expenses – In this chapter you get a detailed breakout of the various categories of allowable business expenses, including but not limited to:

  • Vehicle expenses
  • Depreciation
  • Bad debts
  • Salaries and wages
  • Interest
  • Insurance
  • Legal and professional fees
  • Rent expense
  • Pension plans
  • Taxes
  • Travel and meals
  • Home office

You also get information on expenses you cannot deduct.

Tax Guide for Small Business Chapter 9: Figuring Net Profit or Loss – This chapter carries the previous gross profit calculation chapter on through getting to net profit, the profit that is normally taxable.

Chapter 10: Self-Employment Tax – Here the self-employed individual learns about what is considered as taxable self-employment income and how to report and pay it.

Tax Guide for Small Business Chapter 11: Your Rights as a Taxpayer – This chapter outlines the Taxpayer Bill of Rights published by the IRS in 2014.

Chapter 12: How to Get More Information – Here you get links and other information about resources for tax help.

There is no better place to access a tax guide for small business than at the IRS website.

i Tax Guide for Small Business – IRS Publication 334

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