Bookkeeping & Write-up

Yes. Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Use E-File at www.irs.gov/efile and (EFTPS) the Electronic Federal Tax Payment System at www.eftps.gov or call EFTPS Customer Service at 1-800-555-4477.

Restaurants employing at least 10 people must make a special report to the IRS of income and allocated tips. In 2010 the IRS assumed tip income of 8%. The allocated amount is shown on an individuals’ W-2 as tip income.

The Education Jobs and Medicaid Assistance Act of 2010 signed into law August 10, 2010 repealed the Advance EITC. After December 31, 2010, workers can not receive Advance EITC in their paychecks. Advance EITC is also known as AEITC or AEIC. Workers who received Advance EITC or AEITC on their paychecks need to file a tax return to report the amount received.

If your son is under 18 years old, then he is considered a worker not covered by Social Security. Other workers not covered by Social Security include most federal employees hired before 1984, Railroad employees with more than 10 years of service, and employees of some state and local governments that chose not to participate in Social Security. Speak to your local CPA if there is a question of whether a worker is covered by Social Security.

For 2012, the maximum taxable earnings amount for Social Security (OASDI) taxes is $110,100. There is no limitation on taxable earnings for Medicare's Hospital Insurance (HI) taxes.
The Social Security tax rate for employees is 4.2 percent through the end of the year.
The Social Security tax rate for employers is 6.2 percent.
The Medicare tax rate is 1.45 percent for employees and employers.
For Self-Employed individuals, the Social Security tax rate for self-employed is 10.4 percent through the end of the year. The Medicare tax rate is 2.9 percent for self-employed.

The kind of recordkeeping system depends on your business and industry. Your local CPA can provide you with many options. When deciding what is necessary and what is not necessary the following questions should be asked: How will this record be used, how important is this information likely to be, is this information available elsewhere in an equally accessible form. A separate business checkbook is highly recommended for any operation. Too many people comingle their personal and business accounts. There are various "one write" or automated systems available to help simplify the record keeping function.

The importance of keeping adequate, legible, complete records cannot be stressed enough. Without records, you cannot see how well your business is going and where it is going. All business transactions should be documented with checks or credit cards. Undocumented cash transactions should be avoided if possible. At a minimum, records are needed to substantiate your tax returns under federal and state laws, including income tax, social security and sales tax laws. It also is necessary to document and substantiate your transactions when you need to request credit from venders or loans from lending institutions. This documentation is also necessary should you wish to sell the business.

Beginning 1/1/11 you must use electronic funds transfer to make all federal tax deposits for employment tax's, corporation tax's and excise tax's. Forms 8109- and 8109-B Federal Tax Deposit Coupons can not be used after 12/31/10.
Generally electronic funds transfer are made using the EFTPS system. If you do not use EFTPS you can arrange for a trusted third party to make deposits on your behalf such as a payroll service or financial institution.
To enroll in EFTPS visit www.eftps.gov or call 1-800-555-4477 1-800-555-4477 . Speak to your local CPA about assisting you in signing up to the Federal Tax Payment System.

If you’ve made the determination that the person you’re paying is an independent contractor, the first step is to have the contractor complete Form W-9 (PDF), Request for Taxpayer Identification Number and Certification. This form can be used to request the correct name and Taxpayer Identification Number, or TIN, of the worker. A TIN may be either a Social Security Number (SSN), or an Employer Identification Number (EIN). The W-9 (PDF) should be kept in your files for four years for future reference in case of any questions from the worker or the IRS. A penalty can be levied against you, the employer, for omission of this information on certain forms.