Back to Basics

1. Back to Basics Essential Details of Starting a Business

2. Record Keeping (Types) • Gross Receipts • Purchases • Expenses

3. Record Keeping (Types) • Travel, Transportation, Gift Expenses • Assets • Employment Taxes

4. Length of Retention Recommendations • Tax Records • Until the period of limitations for that return runs out (Usually 3 years) • Unreported income, keep records 6 years

5. Length of Retention Recommendations • Bad Debt Deduction • Keep record 7 years • Loss from worthless securities • Keep record 7 years • Records on Assets • Keep record indefinitely

6. Length of Retention Recommendations • Employment Tax Records • Keep records at least 4 years after the date that the tax becomes due or is paid, whichever is later.

7. What recordkeeping system should I use? • Nothing in particular is required. Use a system that best suits you. • When Choosing a system, consider efficiency.

8. Retention Related Questions Where is the burden of proof? It is always on the employer

9. Retention Related Questions • Are the records connected to my assets? • What should I do with my records for non tax purposes?

10. Retention Related Questions • A good recordkeeping system should: • Help you prepare your financial statements • Identify the source of receipts • Keep track of deductible expenses

11. A good recordkeeping system should: • Help in the preparation of your tax return • Provide support for tax return claims

12. Recording Business Transactions • Journal • A book where you record each business transaction shown on your supporting documents. • Ledger • A book that contains the totals from all of your journals. It is organized into different accounts

13. Typical Small Business Recordkeeping System • Business Checkbook • Daily summary of cash receipts • Monthly summary of cash receipts • Check disbursements journal • Depreciation worksheet • Employee compensation record

14. Business Taxes • Income Tax • Annual income tax return filed by all businesses except partnerships. • Partnerships file an information return • Pay as you go system • Through withholding • Through estimated tax

15. Self Employment Tax • Social security and Medicare tax primarily for those who work for themselves • You must pay SE tax and file schedule SE (form 1040) if • Your net SE earnings were $400 or more • You had church employee income of $108.28 or more

16. Taxes as a result of employees • Social security and Medicare taxes • Federal income tax withholding • Federal unemployment (FUTA) tax

17. Excise Tax • Taxes on specific goods • Usually paid when purchasing the product

18. Checklist For Starting A Business • Things to choose • Business Structure • Sole proprietorship, partnership, corporation • Accounting method • Any method as long as it accomplishes the purpose of providing support for necessary documents and information crucial to strategic business decisions.

19. Checklist For Starting A Business • Things to get/understand • Employer Identification Number (EIN) • Social Security/IRS reporting requirements • Employer’s Tax Guide

20. Checklist For Starting A Business • Things to get/understand • Employment law guide (Department of Labor) • US Department of Labor rules and Regulations • State and Federal Regulation

21. Checklist For Starting A Business • Things to get/understand • Anti Discrimination Laws Equal Employment Opportunity Commission (EEOC) • Occupational Health and Safety Administration (OSHA) Regulations • Immigration and Naturalization Service (INS) rules and regulation

22. Checklist For Starting A Business Things to have new employees complete • Form I-9 INS • Form W-4 IRS • Form W-5 IRS • Things for employer to complete • Form 1040-ES or 1120-W IRS

23. Business Taxes • Income Tax • Self Employment Tax • Employment Taxes • Unemployment Insurance • Workman’s Comp • Excise Tax

24. Employer Identification Number (EIN) • Do you need an EIN? • Almost certainly you will need one. • If you have employees • Operate as a corporation or a partnership • File almost any tax return with the federal government

25. Employer Identification Number (EIN) • Do you need an EIN? • Almost certainly you will need one, • If you have a KEOGH plan • Are involved with trusts, estates, real estate, non profit organizations, farmers cooperatives, plan administrators.

26. Do you need an EIN? • As you can see you will almost certainly need one.

27. Employer Identification Number (EIN) • How to apply • Apply online • Call toll free number 1-800-829-4933 • Fax form SS-4 to the IRS service center for your state

28. Employer Identification Number (EIN) • How long will it take to get? • Depends on how you applied but slowest is mail, 4-5 weeks

29. Employer Identification Number (EIN) • What to do if report is due before you receive the EIN • Do not delay your report • Do not use your Social Security Number • Follow directions on IRS site.

30. Registering Your Business Name • Choose a name for your business • Catchy • Descriptive • Short • Register it with your county clerk. • Publish it in the paper as a DBA (Doing Business As)

31. Registering Your Business Name • If you are in a regulated profession, register with the Illinois Department of Professional Regulation. • Register with and receive a license from the Illinois Department of Revenue.