There are several methods to figure income tax withholding, based on information you get from your employees on Form W-4, Employee's Withholding Allowance Certificate. This method is called the Percentage Method.

Many people can calculate their taxes using the tax tables provided by the IRS in the instructions to the 1040EZ, 1040A, or 1040. Simply take the taxable income amount from Line 43 of Form 1040, Line 27 of Form 1040A, or Line 6 of Form 1040EZ, go to the IRS tax tables (included in the instructions to any of these forms) and find the line in the bold-faced column that includes your income amount, and read across to the right to find the column that pertains to your filing status. The amount shown at the intersection between the income line and the filing status column will be your tax.

The federal Employee's Withholding Allowance Certificate, Form W-4, must be completed so that you know how much federal income tax to withhold from your new employee's wages. The importance of having each employee file a Form W-4 cannot be overstated, so make its completion a priority.

For tax year 2008, if you make a contribution to a traditional or Roth IRA or to a qualified employer plan (like a 401(k)), you may be eligible to receive a tax credit of up to $1,000 for the year. To qualify, your adjusted gross income for the year must be less than $26,500 if you are single ($39,750 for head of household and $53,000 if married filing jointly).

Sole proprietors need to have an EIN only if they have one or more employees, if they have a Keogh plan, or if they are required to file excise tax forms such as those for sales tax, alcohol or tobacco.

The dollar limits for both the exclusion of employer-paid adoption expenses and the tax credit apply "per adoption effort." Therefore, if your adoption spans two or more years, you can only claim total credits of up to $11,650 over all the years that you paid expenses. If your AGI, as modified above, is $174,730 or less, you qualify for the entire dollar amount of the credit and/or exclusion.

Self-employed people must fill out a special form to claim the home office deduction. You must complete Form 8829, and then transfer the total to your Schedule C when you file your income tax return. Unfortunately, Schedule C-EZ, which is a much simpler form, can't be used if you're claiming the home office deduction. The business portion of your home mortgage interest and real estate taxes is claimed on Form 8829 and cannot be claimed again as an itemized deduction on Schedule A of your return.

The following form is used to notify the IRS of any change in your home or business mailing address, or business location. For each change, you must file a separate form.

If all of your child's income was in the form of interest, dividends, and capital gain distributions (e.g., from mutual funds), and the amount is more than $850 but less than $8,500, you can elect to report the income on your own return rather than filing a separate return for the child.

If you had three or more children and your tax bill is too low to allow you to claim all of your child credit, you must complete and file IRS Form 8812, in order to be able to claim the extra refundable amount.

If your child is required to file a tax return, we recommend that you have him or her file a separate return on Form 1040-EZ, 1040A, or 1040.

If you made total noncash gifts over $500 for the year, you must complete and attach to your tax return IRS Form 8283. If any single gift or group of similar gifts was valued at over $5,000, you must also get an appraisal of the item from a qualified appraiser.

The passive activity loss rules generally prevent taxpayers with adjusted gross income (AGI) above $100,000 from deducting some or all losses from real estate rentals, other than the rental of your home that was also used for personal purposes. There is an exception to these rules for real estate professionals.

Because some taxpayers, particularly wealthy taxpayers, have been so successful in their efforts to legally minimize their tax bills, Congress came up with another way to tax them: the alternative minimum tax (AMT). The AMT provides a formula for computing tax that ignores certain preferential tax treatments and deductions that taxpayers would otherwise be entitled to claim.

The installment method can be used to defer some tax on capital gains, as long as you receive at least one payment for a piece of property after the year of the sale. It can't be used if the sale results in a loss. The bad news is that payments for many (or even most) of the assets of your business are not eligible for installment sale treatment. In most cases, only gain on assets that have appreciated in value beyond their original purchase price will be eligible for installment sale treatment.

If you are an employer setting up a SEP plan, you should complete IRS Form 5305-SEP if you are eligible to do so. This form is intended to help you set up your SEP plan and it is not filed with the IRS. Once you complete Form 5305-SEP, you should keep it on file with your business records. You can also use the form as a source for the information you are required to communicate to your employees about the SEP plan.

If you were older than 59-1/2 before you received a lump sum from a qualified employee retirement plan, you may have some other options that can reduce your tax bill. To use any of these special treatments, you must complete IRS Form 4972 and attach it to your tax return.

An activity is presumed to be engaged in for profit and not to be a hobby, if it is profitable in three out of five consecutive years. For a new business, this means that you don't have to show a profit for your first two years.

If you want an automatic six-month extension to file your tax return, you can file Form 4868 by April 15. However, you must pay any tax you estimate will be due by April 15 or you may be subject to interest and penalties on overdue taxes. Your actual return would then be due on October 15.

If you sell or dispose of property used in a trade or business, it must be reported on IRS Form 4797, Sales of Business Property. This form is divided into several sections, which are used for different types of property.

If you've suffered the results of a theft, accident, fire, flood, or some other casualty during the year, you may be able to deduct some of your unreimbursed losses.

Almost every business must invest in some major equipment, vehicles, machinery, or furniture in order to operate. Some businesses will require assets such as land, a building, patents, or franchise rights. Major assets that will be used in your business for more than a year are known as "capital assets" and are subject to special depreciation treatment under the tax laws.

Moving expenses are reported on IRS Form 3903, which is one of the simpler and more self-explanatory tax forms that you will run across. Moves to a location outside the U.S. are reported on Form 3903-F, Foreign Moving Expenses. If you move to more than one location during the year, you'll need to fill out two forms.

To claim the credit for child and dependent care expenses, you need to fill out Parts I and II of IRS Form 2441, Child and Dependent Care Expenses, if you're filing IRS Form 1040.

If you have expenses that are not reimbursed by your employer, or if your employer does not use an accountable plan, you'll generally have to claim the nonreimbursed expenses on Form 2106. In some cases you may be able to use Form 2106-EZ, Unreimbursed Employee Business Expenses.