IRS Publication 334: Tax Guide for Small Business

KEY TAKEAWAYS

• IRS Publication 334 provides instructions on how small businesses report their income for the year on federal income tax returns
• It provides information on how sole proprietors and single-member LLCs report their income on Schedule C, including business deductions, credits, and self-employment tax

What is IRS Publication 334?

IRS Publication 334: Tax Guide for Small Business provides directions to those who need to complete Schedule C to report income. It is a guide for those who operate as a sole proprietor of a small business and those who are statutory employees. It outlines rules for business tax credits, as well as common business deduction calculations, self-employed tax and other information.

What Does IRS Publication 334 Include?

Publication 334 provides small business owners information about how federal tax law impacts their business. The form provides specific information about the tax deductions small business owners can take. It also outlines how to calculate and then report gross profit, cost of goods sold, operating expenses, and other information. It outlines which forms taxpayers must fill out including what type of business income requires reporting and the accounting methods small business owners should use. It also provides information about reporting if the company is dissolved or sold.

What is a Schedule C form?

Taxpayers can use Schedule C, and attach it to Form 1040, to report income or losses for a small business if operated as a sole proprietor. Business activity includes any activity engaged in with the goal of creating an income or profit and the taxpayer is actively engaged in that business with regularity. This is a common component of federal income tax returns required for income tax purposes.

Handling Small Business Operations For Filing Taxes

Schedule C provides small business owners with a simple way to report income tax. It also allows for reporting personal income taxes alongside sole proprietor income. If you work as an independent contractor and receive a 1099, you may be able to use Schedule C to file taxes. This form cannot be used for corporate income tax reporting.

What Are Business Credits?

Small business credits are the amount a company can subtract from the taxes owed to the IRS. These are credits applied towards owed taxes. Businesses apply these at the time of completing their annual tax return. This could help offset a company’s financial obligation. They may include credits for certain industries, supporting certain populations through employment, or providing daycare facilities onsite.

How Can A Small Business Claim Business Credits?

Some businesses may be able to apply a tax deduction on interest and fees paid on business card use. 

It’s important that you remember the need to include IRS Form 3800 with your tax return. This is if you qualify for more than one small-business tax credit. Each and every small-business tax credit for which your company may qualify is listed on this form. So by filling it out and returning it to the IRS, you can claim the small business credits that you’re eligible for. 

Summary

IRS Publication 334 provides instructions on how small businesses can report their income to the IRS each year. It outlines business credits and deductions. It also provides instructions for who must report income and how to calculate net profit or loss.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.