Basis is a business term used to identify the value of an individual or entity’s investment in an entrepreneurial endeavor. It is customarily linked to taxation as this term is used by the Internal Revenue Code to determine gain or loss. To further compound its meaning ‘basis’ is sometimes substituted for the term ‘equity’.
Small Business Taxation
Small business taxation is a general class of taxation to include many sub-components. The primary elements of small business taxation address self-employment taxes and federal payroll taxes depending on the situation for the small business owner.
The next section of bookkeeping (advanced skill sets) introduces the bookkeeper to the different organizational methods and explains why certain kinds of transactions are handled differently than standard entry practices. In addition some tax knowledge is infused throughout as the tax code impacts much of how accounting is performed.
In the world of big business corporate earnings are taxed twice under the Internal Revenue Code. The first layer of taxation occurs with the traditional corporate income tax. The second tier of taxation happens when dividends are issued to shareholders. The shareholder pays an income tax at their personal rate.
Profit shifting in business is a term with two different interpretations. The more modern use of profit shifting refers to large multinational U.S. based companies shifting their respective profits to other nations with a friendlier and lower income tax rates. This article is written to explain the older and more traditional meaning of profit shifting specifically as it relates to small business.
The fuel tax credit is a federal refundable tax credit for taxes paid on fuel purchased for off road use. Every gallon of fuel sold at the pump has an 18.3 cent tax assessed by the federal government designated to highway construction and maintenance. When that gallon of fuel is purchased for non-transportation purposes, the purchaser is allowed to receive a refund for the tax paid.
Simply put, this is a tax on your net earnings from your small business operation. If you are unincorporated, you have to pay this tax. This includes those in partnership arrangements, and in any form of Limited Liability Company status. Why don’t corporations pay the tax? Actually they do, it’s just called a different name.