IRS Publication 583: Starting a Business and Keeping Records

In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns ). The forms used to report these payments must include the payee's identification number. Employee. If you have employees, you must get an SSN from each of them. Record the name and SSN of each employee exactly as they are shown on the employee's social security card. If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. This may occur, for example, if the employee's name has changed due to marriage or divorce. If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. This form is available at SSA offices or by calling 800-772-1213. It is also available from the SSA website at SSA.gov . Other payee. If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. For more information, see IRS.gov/FormW9 . . If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. For information on backup withholding, see the Instructions for the Requester of Form W-9 and the General Instructions for Certain Information Returns. . Designating a Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. A tax year is usually 12 consecutive months. There are two kinds of tax years. Calendar tax year. A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Fiscal tax year. A fiscal tax year is 12 consecutive months ending on the last day of any month except December. A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. You must use a calendar tax year if: You keep no books or records. You have no annual accounting period. Your present tax year does not qualify as a fiscal year. You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. For more information, see Pub. 538. First-time filer. If you have never filed an income tax return for your business, you can adopt either a calendar tax year or a fiscal tax year. Although, some partnerships and S corporations must use a particular tax year. See Pub. 538 for more information. You adopt a tax year by filing your first income tax return using that tax year. You have not adopted a tax year if all you did was one or more of the following. Filed an application for an extension of time to file an income tax return.