Bookkeeping & Write-up

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.

COLA's were first paid in 1975 as a result of a 1972 law. Prior to that, benefits were increased irregularly by special acts of Congress. Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans will increase 3.6 percent in 2012. The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January 2012. Increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2011.

Generally, cash, petty cash, supplies, prepaid expenses, accounts and notes receivable, inventories and any other item that can be converted into cash within one year are classified as current assets. Cash is any medium of exchange that a bank will accept at face value. Notes Receivables are claims against debtors evidenced by a written promise to pay a certain sum of money at a definite time to the order of a specified person. Accounts receivable are claims against debtors which are less formal than note receivables that arise from sales of services or merchandise on account.

Employers must give or mail employees' copies B, C and 2 of Form W-2 on or before January 31st of the following calendar year. A W-2 must be issued if there was any withholding or wages that exceeds the amount of one exemption ($3,700 in year 2011) or to any employee you paid more than $600 in one year or to any person you paid an amount for services if your entity is a trade or business. An employer may be subject to penalties for noncompliance.

The Employer's Quarterly Federal Tax Return (Form 941) for the 1st period January-March is due by April 30. The Employer's Quarterly Federal Tax Return (Form 941) for the 2nd period April-June is due by July 31. The Employer's Quarterly Federal Tax Return (Form 941) for the 3rd period July-September is due by October 31. The Employer's Quarterly Federal Tax Return (Form 941) for the 4th period October- December is due by January 31st. If all the taxes were timely deposited for the current quarter, then the due date is extended 10 more days. If the 941 reports are not filed timely, there is a late filing penalty. There is also a penalty for late paying with associated interest on the balance due.

If the tax liability for a quarter is less than $2,500, it may be paid with the quarterly filing of Form 941. If the withholding is $2,500 or more, then it must be deposited on either a monthly or semi-monthly basis. The IRS will notify you each November as to whether you are a monthly or semi-monthly depositor. The IRS uses a one year look back period ending the preceding June 30th.

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.

Beginning 1/1/11 you must use electronic funds transfer to make all federal tax deposits for employment taxes, corporation tax's and excise taxes. Forms 8109- and 8109-B Federal Tax Deposit Coupons cannot be used after 12/31/10. Generally electronic funds transfers 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.

Unlike Social Security, there is no limit on wages or earned income for Medicare purposes. 1.45% is withheld on every dollar one makes. The employer is required to match this withheld amount.