28. Tax Guide for Small Business Publication

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The guys who sent this letter are generally serious and lack a sense of humor when you owe them money. "We" refers to the IRS. So as not to be put in a position to receive such a letter, you may want to do a bit more than just scan Publication 334. This publication explains some essential federal tax laws that apply to businesses. It describes the four major forms of business organizations-sole proprietorship, partnership, corporation, and S corporation-and explains the tax responsibilities of each. Publication 334 is divided into eight parts. The first part contains general information on business organization and accounting practices. Part II discusses the tax aspects of accounting for assets used in a business. Parts III and IV explain how to figure your business income for tax purposes. They describe the kinds of income you must report and the different types of business deductions you can take.

Part V discusses the rules that apply when you sell or exchange business assets or investment property. It includes chapters on capital gains and losses and on involuntary conversions, such as theft and casualty losses.

The chapters in Part VI bring together some specific tax considerations for each of the four major forms of business organizations. Part VII looks at some credits that can reduce your income tax and some of the other taxes you may have to pay in addition to income tax. It also discusses the information returns that may have to be filed. The last part shows how to fill out the main income tax forms businesses use.

Raise your hand if you once thought about starting a "nonprofit" organization but couldn't figure out what nonprofit meant? Keep it up there if you also wondered why you couldn't keep all those profits yourself. That's why you need Publication 557. This publication discusses how organizations become recognized as exempt from federal income tax under section 501(a) of the Internal Revenue Code. These include organizations described in section 501(c). The publication also explains how to get an appropriate ruling or determination letter recognizing the exemption, and it gives other information that applies generally to all exempt organizations (see Forms 990, 1023, and 1024).

There is, of course, no end to what you need to know about business procedures and practices when it comes to taxes, but there are at least three publications that come to mind:

1. Publication 535: Business Expenses-This publication discusses such business expenses as pay for your employees; fringe benefits; rental expenses; interest; taxes; insurance; employee benefit plans; and certain education expenses for yourself and your employees. It also outlines the choice to capitalize certain business expenses; discusses amortization and depletion; covers some business expenses that may be deductible; and points out some expenses that are not deductible.
2. Publication 917: Business Use of a Car-This publication explains the expenses that you may deduct for the business use of your car. The publication also discusses the taxability of the use of a car provided by an employer, and it explains new rules for deducting car expenses.
3. Publication 587: Business Use of Your Home-587 can help you decide if you qualify to deduct certain expenses for using part of your home in your business. Deductions for the business use of a home computer are also discussed.

	Something to Do Review the tax publication that would help you plan your tax strategy for using your home as part of your business. What forms would be appropriate for you to use? Review the publication that explains the business use of a car. What forms would be appropriate for you to

The art of taxation consists in so plucking the gooseas to obtain the largest amount of feathers with theleast amount of hissing.

Jean Baptiste Colbert
Finance Minister to Louise XIV

So begins the Tax Guide for College Teachers (ISBN 0916018-504), published by Academic Information Services, Inc., fax (only) at (202) 347-0079, which is designed to keep college teachers informed about the latest tax rules. Perhaps one of the most important deductions is that for home office. Although a full discussion is given in the home office chapter, it will remain for future IRS rulings and court cases to interpret the (1994) rules in a variety of situations. As usual, the current-year edition of the Tax Guide for College Teachers includes the new laws, court cases, and IRS rulings of interest to college teachers. New information is given on maximizing student aid, deducting the cost of lunch, satisfying Zoe Baird rules for paying taxes (assuming there are those who still remember Zoe) on household help, and so on. The editors ask you to remember that saving on taxes is worth more than a raise in salary. The extra salary gets ravaged by federal and state taxes at the highest bracket your taxes reach. But the money you save by knowing the tax laws goes into your pocket. The table of contents covers the following items:

A duplicate of the table of contents and sample pages will not be supplied here. All tax information can be obtained by calling the numbers above or use the Internet.