Issue Number: Tax Tip 2026-46

Important steps for future business owners

Thinking of starting a business? One of the most important first steps for new entrepreneurs and future business owners is to ensure the right business structure is chosen. That’s not all though, there’re a few other tips and best practices for those starting out. Let’s take a look.

Choose a business structure
Each business structure has different tax filing requirements and legal considerations. Knowing the difference between them can help determine which option is best. The most common are:

• Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
• Partnership: An unincorporated business with ownership shared between two or more people.
• Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
• S corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
• Limited liability company: A business structure allowed by state statute.

Choose a tax year
A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

• Calendar year: 12 consecutive months beginning January 1 and ending December 31.
• Fiscal year: 12 consecutive months ending on the last day of any month except December.

Apply for an employer identification number
An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need one even if they don’t have employees. They can get an EIN for free directly from the IRS in minutes.

Make sure all employees have completed these forms

• Form I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services
• Form W-4 Employee’s Withholding Allowance Certificate

Pay all applicable taxes
The form of business determines what taxes must be paid and how to pay them. Authorized users of certain entity types can securely access and manage their federal tax records and information online through Business Tax Account. BTA supports access for the following organizational types: sole proprietorships, partnerships, S corporations, C corporations, federal, state and local governments, Indian tribal governments, and tax-exempt organizations.

Check state specific requirements
Prospective business owners should visit their state’s website for info about state requirements.

More information
IRS YouTube playlist: Start a Business the Right Way

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Issue Number:  2025-12

Inside This Issue

• View and submit Trump Account elections online
• Time-limited settlement opportunity for conservation easement disputes
• Now available: New Look-back Interest Calculator for long-term contracts
• Correction to disaster tax relief for Southeast Georgia
• Business Tax Account designated officials must renew registration
• Other tax news

    View and submit Trump Account elections online

Taxpayers can now view and submit Trump Account elections online through their IRS Individual Account. Using this secure tool, taxpayers can also view the status of a submitted Form 4547, Trump Account Elections.

Visit trumpaccounts.gov for information about Trump Accounts.

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    Time-limited settlement opportunity for conservation easement disputes

The IRS is offering a new settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes with the IRS.

This new time-limited settlement opportunity is intended to advance the goals of the prior initiatives while addressing barriers that may have discouraged acceptance.

Eligible partnerships will receive a letter from the IRS with specific terms and will have 135 days after the date of the letter to settle, cases will be determined by a court decision.

This settlement is not available in cases that: 

• Have been tried and awaiting an opinion
• Are on appeal to one of the United States Circuit Courts of Appeal
• Have already settled
• Have agreed to be bound to another case
• Have a trial set to commence within 30 days of the date of this announcement
• Are designated as test cases, unless all bound cases have settled or agree to settle under this initiative

For full details see the news release and visit the conservation easement page on IRS.gov.

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    Now available: New Look-back Interest Calculator for long-term contracts

Businesses that work on large, multi-year construction or manufacturing projects can use the new Percentage-of-Completion Method Look-Back Interest Calculator to help them figure interest related to long-term contracts.

This new tool supports calculations required for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts.

This tool doesn’t address all fact patterns or complexities associated with look-back interest guarantee compliance with the law or replace authoritative guidance. Business taxpayers should ensure the calculations agree with applicable authorities, including Section 460 of the Internal Revenue Code and Treasury Regulations Section 1.460-6.

Tax professionals should consider each business’s specific circumstances and ensure compliance.

For full details see the news release.

Users can share feedback about the calculator by emailing Stakeholder Liaison. Be sure to put “Look-Back Interest Workbook feedback” in the subject line.

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    Correction to disaster tax relief for Southeast Georgia

The news release for announcing disaster tax relief for Southeast Georgia referenced the Federal Disaster Tax Relief Act of 2023, which doesn’t apply to any payments described in the announcement. Relief isn’t available for retirement plans or IRA distribution relief or disaster-related hardship withdrawal provisions

Please see the “Other relief” section of the news release for additional information.

Visit the tax relief in disaster situations page of IRS.gov for the most recent disaster tax relief info. 

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    Business Tax Account designated officials must renew registration

Business taxpayers registered as a designated official for an S or C corporation in Business Tax Account must revalidate their status between June 15 and July 29, 2026, to renew their role. Annual renewal is required to maintain access to Business Tax Account.

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    Other tax news

The following information may be of interest to individuals and groups in or related to small businesses:

• A more detailed look at what the right to be informed means
• Eligible taxpayers may be able to resolve tax debt through an offer in compromise

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Issue Number:    IR-2026-71

Inside This Issue

It’s not too late; use IRS Free File today

IR-2026-71, June 2, 2026

WASHINGTON – The Internal Revenue Service reminds taxpayers who missed the filing deadline that they can still file their 2025 federal tax return at no cost using IRS Free File.

“IRS Free File makes it easy for taxpayers to meet their filing obligations and claim valuable tax credits at no cost,” said IRS Chief Executive Officer Frank J. Bisignano. “As we continue to transform the IRS into a digital-first agency, tools like IRS Free File help provide a secure, convenient, and reliable filing experience for taxpayers.”

Eligible taxpayers, especially those who do not normally file a tax return, may still qualify for overlooked tax credits or refunds. More than 109 million taxpayers are eligible for free guided tax preparation through IRS Free File. Those who do not qualify can still file electronically using Free File Fillable Forms. IRS Free File remains available through Oct. 15.

IRS Free File offers guided tax software through trusted partners, helping taxpayers file accurate returns and receive refunds quickly. The program provides safe, secure, and user-friendly options for filing taxes from home.

Key benefits of IRS Free File:

• No-cost filing: Taxpayers with an adjusted gross income of $89,000 or less can use guided tax preparation software to file their federal tax return and, in most cases, their state return for free. Those above the threshold can file electronically using Free File Fillable Forms.
• Trusted partners: IRS-vetted tax software providers offer secure options. One partner offers services in Spanish and several offer free state tax return filing for eligible taxpayers. Each partner offers customer support.
• Easy and secure: Step-by-step guidance includes built-in error checks.
• Fast refunds: Filing electronically and choosing direct deposit helps taxpayers receive refunds faster.

The IRS encourages taxpayers to take advantage of this free service before the Oct. 15 deadline.

To get started, visit IRS Free File: Do Your Taxes For Free on IRS.gov.

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Issue Number: Tax Tip 2026-45

Is that activity just a hobby or a business?

Many people have hobbies – things they enjoy doing in their spare time – and some even make a little extra money from them. However, there’s a difference between a hobby and a business, especially how each is treated when it comes to filing taxes.
Businesses operate to make a profit while hobbies are for pleasure or recreation. Here are some common questions people should ask themselves when deciding if what they’re doing is a hobby or business. No single thing is the deciding factor.

Questions to help taxpayers decide if they have a hobby or business

• Is there an intent to make a profit?
• If the activity makes a profit, how much is it?
• Can they expect to make a future profit from the appreciation of the assets used in the activity?
• Do they depend on income from the activity for their livelihood?
• Are any losses due to circumstances beyond their control or are the losses normal for the startup phase of their type of business?
• Are operations adjusted to improve profitability?
• Is the activity carried out like a business with complete and accurate books and records kept?
• Do the taxpayers and their advisors have the knowledge needed to carry out the activity as a successful business?

Taxpayers should review all the factors to make the best decision. Regardless of the decision, if they’re paid through payment apps for goods and services during the year, they may receive an IRS Form 1099-K for those transactions. These payments are taxable income and must be reported on federal tax returns.
Additionally, if they received payment in the form of digital assets, they may also get a Form 1099-DA. Whether taxpayers have a hobby or run a business, good recordkeeping throughout the year will help when they file taxes.

More information

• What to do with Form 1099-K
• Small Business and Self-Employed Tax Center
• Publication 535, Business Expenses
• Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C)
• Publication 5558, Activities Not Engaged In For Profit Audit Technique Guide PDF

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