Ep #64 Tax Tips for Online Business Owners

Elizabeth speaks with Kristine McKinley, CFP®, CPA and Founding Principle of Beacon Financial Advisors, LLC who shares her tax tips for online business owners. Kristine shares her 5 tips to get ready for taxes, when to treat your business like a business rather than a hobby and why, as well as how your profit intentions affect your taxes. 

Elizabeth then answers a listener question about when you need to have a Tax ID Number (EIN) and her Entrepreneur’s Success Tip of the Week: The Art of Connecting, Fifth in the Series The Art of Social Networking.

Click here to learn more about Kristine and get valuable tax tips for your online business . If you’d like more information on getting your own EIN visit the IRS site. 

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Take Control of Cash Flow - only 10 spots available

"Learn the Simple System to Take Control of Your Cash Flow in Just 15 Minutes per Week … So You Never Are Surprised About Your Checking Account Balance Ever Again!"

Fellow small business owners -

Like most of you, I’ve struggled with fluctuating cash flow over the years.  Everything from the boom-bust cycle of client projects, to using personal credit cards to finance the business, to creating useless reports in QuickBooks, to setting prices too low, to never being able to predict income.  You would think that as a financial expert and attorney I would know how to do this stuff, but they don’t teach you how to manage small business cash flow in school.  After investigating all the un-helpful software and books available, the only solution was to develop my own program to take control of my cash flow, and my life!

This Money Meetings system is what I’m sharing with you in the new Cash Flow Coaching Program.  In the Cash Flow Coaching Program, I lead you through the steps of my Money Meetings System AND help you implement the system for your own business, so your business cash flow turns from a struggle to automatic.

Through this program, you will learn:  Read more

Taxes: Keep Government Out of Your Way by Taking Action, Part 2

Are you paying too much in taxes?

This week is the second in a two part series where Elizabeth shares strategies to minimize government interference in your business by being proactive.  She shares 4 strategies for reducing your income tax burden, including changing your legal business entity and entity for tax purposes, using a retirement or health plan, taking deductions (including the home office deduction), and creating a system.  Elizabeth also teaches some tips for dealing with employee payroll taxes and sales taxes.

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When do you need a Tax ID number or EIN for your business?

Question:  “Do I have to get a tax ID number or employer identification number (EIN) to run my business from home?  Can I just use my social security number (SNN)?”

Answer:  It depends.

Let’s start at the beginning.

A tax ID number or employer identification number (EIN) is a number you get from the U.S. federal government that gives an identification number to a business, much like a social security number does for a person.  States also issue tax ID numbers (unlike the social security number system, where you use the same number for both federal and state dealings, you must get a separate number for each state).  This ID number is what you use for tax filings and other dealings with the government.

If you have a business that is not incorporated and is not an LLC, and you are running it as a sole proprietorship (the default if you have not formed a business entity), your default tax ID number is your own social security number.  If you form a business entity (corporation or LLC) or partnership, which is technically a separate “person” from you (even if you are the sole owner and the only worker), then you must get an tax ID number for that business.  You must also get an EIN if you hire employees, because you need that number for your payroll tax filings.

Even if you are not required, you still may want to get a tax ID number for your business.  Why?  Because you don’t want to have to list your personal social security number every time you file out an application for a business credit card or sign a business contract. 

Getting a federal tax ID number is free and easy.  Just fill out a form on the IRS website and you get the tax ID number immediately online, with no waiting.   You are not changing your tax status (if you are a sole proprietorship you are still a pass through tax entity) and do not have any additional paperwork or taxes, just from getting the ID number. 

For more information, check out the IRS’s explanation of Employer ID Numbers.  

Photo courtesy of Beatrice Murch (blmurch) on Flickr.