Getting Started

Starting your own business will probably complicate your tax situation. Keeping records such as auto mileage logs, receipts for meals, and entertainment expenses will challenge you. So will the rules for payroll taxes. Remember that keeping accurate records of these expenses will bring you deductions on your tax return.

Tax laws can be complex and confusing. Consult a tax professional for assistance in getting you business established. Visit the IRS website for more information.

Which Tax Forms to File?

Sole Proprietor



  • Corporation files its own tax return on Form 1120S
  • Owner’s share of income/loss reported on Schedule E (Form 1040)
  • Owner is an employee, so payroll taxes are required
  • S Corporation distributions are not subject to self-employment tax, however a reasonable salary must be paid to owner


  • Corporation files its own tax return on Form 1120 and pays its own tax
  • Owner is an employee, so payroll taxes are required

If You Have Employees

If you have employees, you will have a number of payroll tax forms to file including quarterly federal reports (Form 941), quarterly state tax reports (Form OQ) , annual federal unemployment tax reports (Form 940) and annual W-2 forms.

If your workers are independent contractors, you must report payments over $600 in a calendar year on Form 1099-MISC.

You must also report other types of payments such as rent or interest on Form 1099-MISC or Form 1099-INT. Check with a tax specialist or the IRS for more specific information.

Accounting Methods


Income is recognized when earned and expenses are deducted when incurred. Example: If you bill a client for services, you count that as income when you generate the invoice, not when the client actually pays you. When you receive a bill, you consider that as an expense at the time you receive it, not when you pay the bill.


Income is recognized when payment is received and expenses are deducted when the expense is paid.

Tax Resources


Personal Property Tax
Wasco County Taxing District Information


Washington Department of Revenue