FAQs - Tax

What are the Social Security Limits for 2020?

For 2020, the FICA rate is 6.2% and the wage base is $137,700. The medicare rate is 1.45% and there is no wage base limit. 

What is the Social Security Earnings Limit for 2020?

Prior to reaching full retirement age, the limit for 2019 is $18,240.  The year an individual reaches full retirement age, the earnings limit is $48,600.  No benefits will be withheld if you continue working once an individual hits full retirement age. 

What is the Maximum Section 179 Expense you can take in 2020?

The maximum section 179 expense you can take in 2020 is $1,040,000.  The threshold phaseout was increased to $2.59 million as well, for the 2020 tax year.  Section 179 eligible property has been expanded by the Tax Cuts and Jobs Act to include non-residential real property, such as roofs, HVACs, fire protection, and security systems. 

How much bonus depreciation can you can take in 2020?

The Tax Cuts and Jobs Act establishes a 100% first year deduction for qualified property acquired and placed in service after September 27, 2017.  Also, the definition of "original use" to the taxpayer can now include used property, as long as its the first time being placed in service by the taxpayer. 

What is the Standard Mileage Rate for 2020?

For miles driven in 2020, the standard mileage rate is 57.5 cents per mile. The medical / moving expense rate is 17 cents per mile and the charitable work rate is still at 14 cents per mile. 

What is the Percentage of Prior Year's Federal Tax Liability for Protective Estimates?

If your adjusted gross income was $150,000 or less in the prior year, the applicable percentage is 100% of the prior year tax. If your adjusted gross income exceeded $150,000 in the prior year, the applicable percentage is 110%. 

What Tax and Accounting Records does your Business Need to Keep and for How Long?

First consider the records you need to substantiate your annual income tax return. The IRS says that you must maintain adequate records to support almost every item of income and expense that you claim. That means you must be able to produce receipts, invoices, canceled checks or banking records supporting all expense items. Similarly, you should keep sales slip, invoices, or bank records to support items. 

Most businesses have adequate accounting to capture routine transactions, but not for non-routine transactions such as the purchase of depreciable assets. When you buy a car, computer, or piece of office equipment, be sure to file all purchase documents, assign an inventory number, and immediately set up a depreciation schedule.

Good recordkeeping for travel and entertainment expenses is essential. Although the rules can be complex, in general you should capture where, when, who, how much, and the business purpose for each expense. A well-designed standard expense report form can help insure that your records contain all the required information. Also, if you have employees who drive on company business, make sure they keep an auto log showing the miles driven for each trip. Generally, the IRS can audit a tax return for three years after the date it was due or the date the tax was paid, whichever is later. However, if there is a major understatement of income, they can audit for six years after the due date (or almost seven years after the tax year). For that reason, you should keep most income tax records for seven years. Keep real estate records indefinitely. The IRS requires records relating to employment taxes to be kept for at least four years after the date of the return or the date the tax was paid, although here again a seven-year rule is safer.

Accounting Records:

Accounts Payable 7 Years
Accounts Receivable 7 Years
Audit Reports Indefinitely
Chart of Accounts Indefinitely
Depreciation Schedules Indefinitely
Expense Records 7 Years
Financial Statements (annual) Indefinitely
Fixed Asset Purchases Indefinitely
General Ledger Indefinitely
Inventory Records 7 Years (Indefinitely for LIFO system)
Loan Payment Schedules 7 Years
Purchase Orders (1 Copy) 7 Years
Sales Records 7 Years
Tax Records Indefinitely


Bank Records:

Bank Statements 7 Years
Canceled Checks 7 Years (Indefinitely for R.E. Purchases)
Loan Records 7 Years (From the date of last payment)
Electronic Payment Records 7 Years


Real Property Records:

Construction Records Indefinitely
Leasehold Improvements Indefinitely
Lease Payment Records Life + 4 Years
Real Estate Purchases Indefinitely

 

What Corporate Records does your Business Need to Keep and for How Long?

Every incorporated business needs good corporate records, including documents associated with forming the company, bylaws, business licenses, and minutes of all board meetings. Shareholder records should include stock registers and records of all share issuances and redemptions. Also keep copies of all contracts and leases. Finally, don't forget current and terminated employee files, and records of employee pension or profit sharing plans. Most corporate and employee pension plan records should be kept indefinitely. 

Corporate Records:

Board Minutes Indefinitely
Bylaws Indefinitely
Business Licenses Indefinitely
Contracts - Major Indefinitely
Contracts - Minor Life + 4 Years
Insurance Policies Life + 3 Years
Leases / Mortgages Indefinitely
Patents / Trademarks Indefinitely
Shareholder Records Indefinitely
Stock Registers Indefinitely
Stock Transactions Indefinitely


Employee Records:

Benefit Plans Indefinitely
Employee Files (ex-employees) 7 Years / Employee lawsuits statute of limitations
Employment Applications 3 Years
Employment Taxes 7 Years
Payroll Records 7 Years
Pension / Profit Sharing Plans Indefinitely

 

What Computer Records does your Business Need to Keep and for How Long?

These days, more and more business records are stored electronically. While this saves time and space, it also increases the risk of accidental loss or damage. A hard disk in a personal computer can crash at any time, perhaps erasing months of data. Make sure your computer system is backed up regularly, and keep the backup copy in a fireproof location, preferably offsite.

Who is Considered an Independent Contractor?

A major tax planning issue for many new and existing businesses to consider involves either the hiring of employees or utilizing independent contractors. When utilizing an independent contractor, the employer can realize significant cost savings in both federal and state employment taxes including FICA, Medicare, and unemployment taxes. This action has forced the IRS to set guidelines to distinguish between an employee and an independent contractor. The IRS has set up a list of 20 points which will help clarify which individuals are classified as employees and which are classified as independent contractors: 

  1. Working requirements - If a person is required to comply with instructions involving where and when to perform a job, he can be construed to be an employee.
  2. Training - If members of the business instruct an individual how to perform certain work or adopt certain methods, this can be construed as grounds for being an employee.
  3. Integration of services - If the services provided by an individual are an integral part of the employer's business and are subject to direction and control, this can be grounds for that person to be considered an employee.
  4. Hiring, supervising and payment - If a worker is contracted to perform a task for the company and has the ability to hire, supervise, and pay other workers, he is to be considered an independent contractor.
  5. Right to terminate service - An independent contractor cannot be dismissed as long as he is performing the desired work.
  6. Set hours - If a person is obligated to be at the place of business during a set time frame, he can be considered an employee.
  7. Payment by hour, week or month - Independent contractors are normally paid by the job, whereas an employee is paid consistently over time.
  8. Continuing relationship - If a person performs similar tasks at regular intervals he can be thought of as an employee.
  9. Working tools and equipment - A person who has substantially all of his own tools is more likely to be considered an independent contractor.
  10. Place of business - A person consistently performing work from the employer's place of business can be considered an employee.
  11. Services available to public - If a worker can hold himself out to the public by advertising, holding a business license among other things, he can be considered an independent contractor.
  12. Realization of profit or loss - If a person can profit or take a loss on the work her performs, he can be thought of as an independent contractor.
  13. Business and travel expense - If business and travel expenses are paid by the employer, the worker can be considered an employee.
  14. Reports - If a worker is required to submit reports on a regular basis, he can be thought of as an employee.
  15. Services rendered personally - The employer who is not only looking for the results of a person's work but also the method is considered to be hiring an employee.
  16. Right to discontinue a relationship - If an employer can discontinue a working relationship without incurring liability, the worker can be considered an employee.
  17. Work pattern - If a worker is required to follow a set of orders or patterns and not have his own work schedule, he is considered to be an employee.
  18. Outside services for other businesses - A worker who performs similar or larger jobs for businesses other than the employer is considered to be an independent contractor.
  19. Full time - If a person devotes substantially all of his time to one business, he can be considered an employee.
  20. Facilities - If a substantial amount of money is spent on a worker's own facilities, that person can be thought of as an independent contractor.

 

What are Deductible Business Expenses?  

Travel
Deductible travel expenses include any ordinary and necessary expenses incurred while commuting from work place to another work place. An ordinary expense includes any cost assumed while engaged in doing business in one's profession. A necessary expense is a cost which is needed to complete business activities. If a vehicle is used for business travel, one is eligible to deduct certain costs for business use. There are two methods to be aware of when reimbursing the employer or employees for travel in a vehicle. The first method involves reimbursement of actual expenses and the other involves the use of per diem mileage rates set up by the federal government. Regardless of the method used, it is imperative for tax purposes to keep accurate and descriptive records showing dates, miles, costs and purpose of travel.

Actual Expenses
If using actual expenses for business travel, one is eligible to deduct the following items on the tax return:
  • Depreciation
  • Lease fees
  • Rental fees
  • Oil and Gas
  • Tolls
  • Repairs
  • Insurance
  • Licenses
  • Carport storage
If the vehicle is used for both business and personal use, the expenses incurred must be allocated proportionately between business and personal miles driven.

Standard Mileage Rate (Per Diem)
This method is used in lieu of taking the actual expenses incurred. The standard mileage rate set forth each year by the federal government is based on depreciation amounts, oil and gas usage, licenses, insurance and other factors. This rate gives an amount to deduct from the tax return without figuring all of the specifics of auto expenses. This method does not mean that a mileage log can be ignored. It is a requirement to have documentation explaining all business miles driven. In addition to taking this per diem rate deduction for expenses, one may also separately include the costs of tolls, car storage and parking fees. Again, it is important to keep track of these expenses in a log with the relevant receipts. The rules and methods for deducting automobile expense and various other travel expenses can be confusing. It would be beneficial to sit down with an accountant to discuss whether appropriate records are being kept and how to properly deduct this expense.

Entertainment
Under the new Tax Cuts and Jobs Act, entertainment expenses incurred on or after January 1, 2018, are nondeductible. Prior to the most recent tax law changes, entertainment expenses were 50% deductible to the extent that they were directly related to, the active conduct of a trade or business.

Reimbursement of Employee Expenses
Employers generally can deduct amounts reimbursed to employees for business expenses which they have incurred on behalf of the business. The amount and manner in which one can deduct employee expenses depends on whether reimbursements are recorded under an "accountable" or "non-accountable" plan.

Accountable Plans
For reimbursement of employee expenses to be an accountable plan, it must meet all three of the followin rules:
  • The expenses incurred by the employee must be business related
  • The expenses incurred must be turned in to the employer within a reasonable period of time
  • An employee must return an excess reimbursement within a reasonable period of time
Again, an employee must provide the records detailing to whom, why, and where the expenses occurred to receive the reimbursement.

Non-Accountable Plans
A non-accountable plan is a reimbursement arrangement that does not meet the three basis rules for accountable plans. Any amount which is an excess reimbursement that an employee fails to return or reimbursements to employees for nondeductible expenses are part of the non-accountable plan. If either of these two situations arise, the employer will need to combine the amounts of over-reimbursements and other nondeductible expense allowance amounts and include them as wages to the employee.

 

What are Some Individual Tax Planning Tips? 

  1. Monitor your estimated payments and withholding to avoid underpayment penalties.
  2. Be certain that you have social security numbers for all of your dependents and that they are reported properly on the tax return.
  3. Contribute to a non-working spouses IRA.
  4. Consider a $2,000 Education IRA for each child under age 18.
  5. Analyze your borrowings and restructure debt where possible to gain a tax deduction.
  6. Don't overlook minimum distributions at 70 1/2 and rack up a 50% penalty.
  7. Don't forget the filing requirements for household employees.
  8. Consider funding a nondeductible regular or Roth IRA..
  9. Contribute directors' fees to retirement accounts.
  10. Make contributions to your working children's IRA's.
  11. Shift pretax income to low-income parents and grandparents rather than giving them gifts.
  12. Review your estate plan to determine if you should consider using part or all of the unified credit.
  13. Even though the estate and gift tax rates are the same the computation of the tax liability is very different. Making a taxable gift can result in paying less taxes.
  14. If you are self-employed consider employing your under 18 child.
  15. To calculate exact gains or losses on mutual fund investments, save every statement you receive. Remember that reinvested dividends increase your tax basis.
  16. When selling shares of stock that you purchased at different prices at different times, inform your broker beforehand that you are selling the shares with the highest basis. This will minimize taxable gain or maximize deductible loss.
  17. Donate appreciated property to charities to avoid capital gains tax. The amount of your deduction is the value of the property rather than its cost. Special rules can apply.
  18. Consider paying off your home mortgage if you're subject to the itemized deduction phase-out.
  19. Use your employer's flexible spending account or cafeteria plan.
  20. Gift appreciated stock that you have held over 12 months to your child age 14 or older to pay capital gains tax at a lower rate upon sale.

 

What are Some Business Tax Planning Tips?  

  1. Consider whether your current form of business if still best for you.
  2. Avoid payroll taxes by shifting a portion of compensation from salary to fringe benefits. Unreimbursed medical expenses and payroll-deducted group insurance are ideal benefits to include in a Section 125 cafeteria plan.
  3. Set up a cafeteria plan to allow employees to pay for their dependent care expenses. This will likely save them more than they would with the child care credit.
  4. Self-employed taxpayers who employ their spouses in the business may deduct 100% of the health insurance premiums for the spouse and dependents.
  5. Establish a 401(k) or SIMPLE program to help attract and retain quality employees.
  6. Time purchases of personal property to maximize depreciation deduction and avoid the mid-quarter convention.
  7. Switch to an "accountable" plan if you're currently reimbursing employee business expenses under a "nonaccountable" plan.
  8. Buy business supplies at the end of a profitable year and accelerate other expenditures like repairs and maintenance.
  9. Review entertainment, club dues, and meal expense accounts to make sure they are correctly classified.
  10. Review the status of workers as employees or independent contractors.
  11. Donate excess inventory to qualified charities to receive larger deductions.
  12. Employ your children if you own your own business to take advantage of several tax benefits.
  13. Buy equipment before the end of the year to take advantage of the Section 179 expense deduction.
  14. Review the amount of your estimated tax payments.
  15. Determine whether you'll be subject to the AMT this year or in the future.  AMT rates and thresholds have changed under the TCJA.
  16. Shift income into next year by delaying billing and collection activities if a cash method business, or delay shipments of an accrual basis business.
  17. Consider the corporate accumulated earnings penalty tax before paying dividends.
  18. Set up a nonqualified deferred compensation plan for your highest paid employees.
  19. Declare bonuses to qualified corporate employees before year-end, then pay them within the first 2 1/2 months of the next tax year.
  20. Determine how state and local taxes and year-end strategies will affect your overall plan.
  21. Under the new Tax Cuts and Jobs Act, passthrough entities may be eligible for a deduction up to 20% of their Qualified Business Income.
  22. Bonus depreciation and Section 179 expensing have both increased under the new Tax Cuts and Jobs Act.

FAQs - Record Retention 

What Tax and Accounting Records does your Business Need to Keep and for How Long?

First consider the records you need to substantiate your annual income tax return. The IRS says that you must maintain adequate records to support almost every item of income and expense that you claim. That means you must be able to produce receipts, invoices, canceled checks or banking records supporting all expense items. Similarly, you should keep sales slip, invoices, or bank records to support items. 

Most businesses have adequate accounting to capture routine transactions, but not for non-routine transactions such as the purchase of depreciable assets. When you buy a car, computer, or piece of office equipment, be sure to file all purchase documents, assign an inventory number, and immediately set up a depreciation schedule.

Good recordkeeping for travel and entertainment expenses is essential. Although the rules can be complex, in general you should capture where, when, who, how much, and the business purpose for each expense. A well-designed standard expense report form can help insure that your records contain all the required information. Also, if you have employees who drive on company business, make sure they keep an auto log showing the miles driven for each trip. Generally, the IRS can audit a tax return for three years after the date it was due or the date the tax was paid, whichever is later. However, if there is a major understatement of income, they can audit for six years after the due date (or almost seven years after the tax year). For that reason, you should keep most income tax records for seven years. Keep real estate records indefinitely. The IRS requires records relating to employment taxes to be kept for at least four years after the date of the return or the date the tax was paid, although here again a seven-year rule is safer.

Accounting Records:

Accounts Payable 7 Years
Accounts Receivable 7 Years
Audit Reports Indefinitely
Chart of Accounts Indefinitely
Depreciation Schedules Indefinitely
Expense Records 7 Years
Financial Statements (annual) Indefinitely
Fixed Asset Purchases Indefinitely
General Ledger Indefinitely
Inventory Records 7 Years (Indefinitely for LIFO system)
Loan Payment Schedules 7 Years
Purchase Orders
(1 Copy)
7 Years
Sales Records 7 Years
Tax Records Indefinitely


Bank Records:

Bank Statements 7 Years
Canceled Checks 7 Years (Indefinitely for R.E. Purchases)
Loan Records 7 Years (From the date of last payment)
Electronic Payment Records 7 Years


Real Property Records:

Construction Records Indefinitely
Leasehold Improvements Indefinitely
Lease Payment Records Life + 4 Years
Real Estate Purchases Indefinitely

 

What Corporate Records does your Business Need to Keep and for How Long?

Every incorporated business needs good corporate records, including documents associated with forming the company, bylaws, business licenses, and minutes of all board meetings. Shareholder records should include stock registers and records of all share issuances and redemptions. Also keep copies of all contracts and leases. Finally, don't forget current and terminated employee files, and records of employee pension or profit sharing plans. Most corporate and employee pension plan records should be kept indefinitely. 

Corporate Records:

Board Minutes Indefinitely
Bylaws Indefinitely
Business Licenses Indefinitely
Contracts - Major Indefinitely
Contracts - Minor Life + 4 Years
Insurance Policies Life + 3 Years
Leases / Mortgages Indefinitely
Patents / Trademarks Indefinitely
Shareholder Records Indefinitely
Stock Registers Indefinitely
Stock Transactions Indefinitely


Employee Records:

Benefit Plans Indefinitely
Employee Files (ex-employees) 7 Years / Employee lawsuits statute of limitations
Employment Applications 3 Years
Employment Taxes 7 Years
Payroll Records 7 Years
Pension / Profit Sharing Plans Indefinitely
 

What Computer Records does your Business Need to Keep and for How Long?

These days, more and more business records are stored electronically. While this saves time and space, it also increases the risk of accidental loss or damage. A hard disk in a personal computer can crash at any time, perhaps erasing months of data. Make sure your computer system is backed up regularly, and keep the backup copy in a fireproof location, preferably offsite. 

What records should individuals keep and for how long?

Permanent

Income, Estate, and Gift tax returns

W-2 forms

Marriage Licenses

Birth and Death certificates

Wills and Trust documents

Adoption papers

Records of paid mortgages

Life Insurance policy documents

Vehicle Records - until sold

Passports - until expiration

Divorce, Alimony, and Custody documents

Deed and Title papers

Detailed list of financial assets held - updated annually

Individual Retirement Acccount records

Military records

Documents for home purchase or sale

Cancelled checks or statements for non-deductible IRA contributions

Social Security cards

7 years

Medical receipts

1099 forms

Major purchase receipts

Records, receipts, and cancelled checks for tax deductions

401(k) and IRA statements

Stock and bond certificates (7 years from the date of sale)

1-3 years

Bank statements with no tax or other significance

Credit card statements with no tax or other significance

Utility records 


FAQs - Retirement Planning

What are the 2019 Individual 401(k) Deferral Limitations for Retirement Plans?

The 401(k) contribution for 2019 is limited to $19,000. If you are over age 50, you can contribute an additional $6,000.

What are the 2019 Maximum Defined Contribution Plan Limitations?

The aggregate contribution for defined contribution plans for 2019 is limited to $56,000. The profit sharing contribution for 2019 can be up to 25% of $280,000 not to exceed $56,000.

What is the 2019 Annual Compensation Limit for Retirement Plans?

The 2019 annual compensation limit is $280,000.

What are the 2019 Maximum Defined Benefit Plan Limitations?

The defined benefit plan annual benefit for 2019 is limited to $225,000.


FAQs - Business Consulting

What does a business consultant offer?

Certified Public Accountants
A certified public accountant provides a vast variety of services to assist in preparation of a comprehensive set of plans to start a new business venture. Certified public accountants know the financial aspects of business and understand how they operate. They bring a sense of security with their experience in dealing with a variety of business owners on a daily basis. Business owners can rely on CPA's for objective advice, a wide range of expertise, creative alternatives to problems and most importantly, reliability and trust.

Attorneys
Attorneys are needed to draft and review business documents, draft and implement the legal form of business, evaluate business agreements and provide representation in legal matters. Like the certified public accountant, the attorney’s daily exposure to business problems is an invaluable tool to the new business owner. Choose an attorney that has a good business background and will be around for the long term to grow with the business.

Bankers
It is important to establish a banking relationship prior to starting a business. They should be interested in establishing a long term relationship and building understanding based on an individual company's needs. A financial institution will want a business's plan and personal financial statements before lending the funds necessary to start or continue business endeavors. An accountant can assist in compiling the necessary information required by the financial institution.

Insurance
The cost of insurance can be material part of your operating budget depending on the type of business you are in. Choose an agent that understands the business you are in, and can explain your coverage to you in a way that you can understand. Before choosing a business consultant, interview them first and be certain that you are comfortable dealing with them. You should interview more than one so you have something to compare to.


FAQs - Starting a New Business

What Organization Structure Should I Choose when Starting a New Business?

There are many ways a business venture can be structured; however, the law distinguishes each business into one of five categories; sole proprietorship, partnership, corporation, the small business "S" corporation and finally the limited liability company. The type of structure chosen will have a variety of ramifications on the future of the company, tax implications, and the owner's personal liability. Before making a final decision about the structure of the business, one should understand all of the implications each structure will have on the owners. An attorney and an accountant can provide the best information to make that decision. 

The Sole Proprietorship
When an individual forms a business and operates it in his or her own name, or a trade name, that person runs the risk of having all of his or her own personal assets exposed to the creditors of the business. That may mean that in the event of business failure, not only could the business be lost, but there could also be a loss of personal assets to pay for debt acquired by the business. All income and losses pass through to the individuals' personal income tax return and is then taxed only once.

The Partnership
In a general partnership each partner is personally liable for all of the business debts. All income and losses pass through to the partners creating no partnership tax. Through the partnership agreement, the partners can determine disproportionate allocations of these pass-through items among the partners. The partnership is terminated when any of the partners withdraws, dies, or becomes bankrupt. A new partnership can then be formed with the remaining partners. There is no legal form which needs to be completed to form a partnership; however, it is strongly suggested that an agreement be set up before business is to commence. It is also possible to establish a limited partnership which protects the personal assets of the limited partners.

The "S" Corporation
Unlike a regular "C" corporation, which is in effect a separate entity for tax purposes, the "S" corporation eludes double taxation of income to its shareholders. An "S" corporation more closely resembles a "partnership" for tax purposes because revenue, expenses, gains and losses flow to the shareholders' individual tax return pro-rata to their ownership interest. Thus, there is no corporate level tax on the earnings of an "S" corporation. However, an "S" corporation still provides limited personal liability to its shareholders. In short an "S" corporation has some of the important advantages of a regular corporation and partnership included in one business structure. A corporation can elect to be an "S" corporation by filing the IRS Form 2553, Election By A Small Business Corporation. The election must be applied for by the 15th day of the 3rd month of the tax year in which the election is to apply. If the election is made after this date it will automatically apply to the next year. Some important requirements must be followed to obtain and retain the "S" corporation status. If at any time an "S" corporation fails to meet these requirements the election is revoked and the structure of the company will revert to the "regular corporation" status and the corporation is prohibited from electing "S" status for five years. The requirements are as follows:
  • All shareholders must consent to the "S" corporation status
  • There may be no more than 35 non-spousal shareholders at any time
  • The company must be a domestic corporation set up in the United States or organized under federal or state law
  • There can only be one class of stock
  • Only, individuals, estates and certain trusts are eligible as shareholders Those who are shareholders must be citizens or residents of the United States
Limited Liability Company
The limited liability company (LLC), like an "S" corporation, is a hybrid form of organization with the limited liability of a corporation and the income tax treatment of a partnership. Owners of an LLC are not held personally liable for the claims of the company. Also, when the assets or ownership interest in an LLC is transferred, there is a step-up in basis and no gain recognized. This is what distinguishes it from an "S" corporation. Such an event in an "S" corporation is taxable to the shareholder and may trigger tax to the "S" corporation. However, the formation of the limited liability company is more difficult. To be classified as an LLC, the entity must lack at least two of the following four corporation characteristics:
  • Limited liability
  • Centralized management
  • Continuity of life
  • Free transferability of ownership interest
In summary, each business entity has its own set of unique circumstances. We strongly suggest that an accountant be consulted to sort through individual needs, to discuss the specifics of each business structure, and to assist you in choosing the type that is most appropriate for the situation.

 

What Numbers Do I Need When Starting a New Business?

Federal Employer Identification Number
Companies which are structured as a corporation or a partnership are required to have a federal employer identification number. Sole proprietorships are required to obtain a number if they will be paying wages to other family members. This number can be obtained by filing a Form SS-4. The number should be obtained before the business is required to make their first federal tax deposit. An accountant is able to provide the correct forms and to assist in filing them properly.

Indiana Identification Number
Companies that withhold Indiana income tax from their employees and or collect sales tax from their customers must apply for a state number by filing Form BT-1. An accountant can also assist in the filing of this form.

Why Should I Develop a Business Plan and Budget?

Many business failures can be traced back to a lack of planning. A business plan helps to identify your customers, product demand, capital requirements, and human resource needs. With this information, an operating budget can be constructed along with a cash flow statement to forecast the company's borrowing needs. Business plans and budgets, along with personal financial information, are basic elements required by financial institutions considering a company's request for financing. If outside financing is required, the business owner should be prepared to provide personal guarantees. An accountant can assist the business owner in the preparation of these documents.

How do I Develop an Effective Record-Keeping System?

When starting a business it is important that thought and consideration be given to designing a record-keeping or accounting information system which will meet the needs of the business. The system which is implemented should provide information which assists in making current and future business decisions to accomplish the organizational goals. 

An accounting information system encompasses the processes and procedures by which an organization's financial data is received, recorded, handled, processed, stored, and ultimately reported. The goal of providing relevant and accurate information is to organize the financial data into useful summary statements. At a minimum, a balance sheet, income statement, and a statement of changes in owner's equity should be easily accessible output. These reports will be necessary to make decisions about operations and to plan for the future. Also, they will most likely be required by external groups, such as banks, who will be concerned with the financial strength and performance of the business.

Whether the business requires computer applications or simple manual accounting records, it is important to set up an organized and efficient manner of dealing with the wide variety of information involved in running the company. The first step in actually creating a record-keeping system is to sit down with a service representative from a financial institution and find a checking account that will meet the company's needs. A checking account is the basic source of recording the cash inflows and outflows of the business. While developing a record-keeping system, the business may have a variety of other issues to address before it can open its doors for operation. Here is a very short list of questions most small businesses have or should consider when first starting out:
  1. What kind of accounting method should my business implement cash, accrual, etc.
  2. What internal control measures should be implemented to safeguard the assets of the company?
  3. How and where should I store my business records?
  4. Which records am I required to keep, and for what length of time?

What Information do I Need From New Employees?

W-4 Form
Each employee of the company must complete a W-4 Form, Employees' Withholding Allowance Certificate, so that the employer withholds the proper amount of federal income tax based on the employee's designation, from the employee's pay. Once an employee completes the W-4, it generally remains valid until the employee completes a new form. Employees claiming an exemption from withholding must prepare a new Form W-4 each year and submit it to the employer by February 15. The employer is required to begin withholding immediately if an employee who previously claimed exemption from withholding does not submit a new W-4 for the current year. The employer should withhold as if the employee is single with zero withholdings.

I-9 Form
This form is to be completed by each employee to meet requirements of the Immigration Reform Act of 1986. The law prohibits an employer from hiring illegal immigrants. To be in compliance with this act, employers are required to verify the identity and employment eligibility of all employees hired after the effective date of the Immigration Reform Act (November 6, 1986). An employer must have the new employee complete the I-9 and sign the form. The employee must provide proof of identity within three days of employment. These forms should be retained for three years after the date of hire or one year after the date of an employee's termination, whichever comes first. Social Security Number All employees should have obtained a Social S

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Our mission is to provide timely, professional, and ethical business advisory services to our clientele, be actively involved in our community and promote professional and personnel in a working environment that encourages initiative, innovation and teamwork

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235 East 86th Avenue
    Merrillville, IN, 46410
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Swartz Retson Northwest Indiana CPA Firm is trusted by clients in Lake County Indiana communities including Crown Point, Dyer, East Chicago, Gary, Hammond, Highland, Hobart, Merrillville, Munster, Schererville, and St John; and Porter County Indiana communities including Chesterton, Portage, and Valparaiso.

PRIVACY POLICY   SITE MAP      

We collect nonpublic personal information about you from the following sources:

  • Information we receive from you on applications, tax organizers, worksheets and other documents;
  • Information about your transactions with us, our affiliates, or others;
  • Information we receive from a consumer-reporting agency.

  • We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as permitted by law.

    We restrict access to nonpublic personal information about you to those members of our firm who need to know that information to provide services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information.

    If you have any questions about this policy, please do not hesitate to contact us.

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