Income Tax Services

Business tax Preparer

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Limited liability company (LLC). A limited liability company (LLC) is an entity formed under state law by filing articles of organization. Generally, for income tax purposes, a single-member LLC is disregarded as an entity separate from its owner and reports its income and deductions on its owner's federal income tax return. For example, if the single-member LLC is not engaged in farming and the owner is an individual, he or she may use Schedule C.

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Sole proprietor.

A sole proprietor is someone who owns an unincorporated business by himself or herself. You also are a sole proprietor for income tax purposes if you are an individual and the sole member of a domestic limited liability company (LLC) unless you elect to have the LLC treated as a corporation.​

Sole proprietor or independent contractor.

If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C (Form 1040 or 1040-SR) to figure your earnings subject to SE tax. SE tax rate. The 2019 SE tax rate on net earnings is 15.3% (12.4% social security tax plus 2.9% Medicare tax).

​​Independent contractor.

People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public generally are independent contractors. Also, people who provide a service generally associated with the sharing (or on-demand, gig, or access) economy, such as ride-sharing, may be treated as independent contractors. However, whether they are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the person paying for the work has the right to control or to direct only the result of the work and not how it will be done. The earnings of a person who is working as an independent contractor are subject to self-employment tax. For more information on determining whether you are an employee or independent contractor, see Pub. 15-A, Employer's Supplemental Tax Guide.

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Recordkeeping.

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This part explains why you must keep records, what kinds of records you must keep, and how to keep them. It also explains how long you must keep your records for federal tax purposes. A sample recordkeeping system is illustrated at the end of this part.

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Why Keep Records?
 
Everyone in business must keep records. Good records will help you do the following. Monitor the progress of your business. You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success.
 
Prepare your financial statements.
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You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. An income statement shows the income and expenses of the business for a given period of time.
 
A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Identify source of receipts. You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. Keep track of deductible expenses. You may forget expenses when you prepare your tax return unless you record them when they occur.
More information IRS pub.583
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Supporting Documents.
Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain information you need to record in your books.
 
It is important to keep these documents because they support the entries in your books and on your tax return.  Keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense.
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Gross receipts.

Gross receipts are the income you receive from your business.
You should keep supporting documents that show the amounts and sources of your gross receipts. Documents that show gross receipts include the following.
Cash register tapes.
Bank deposit slips.
Receipt books.
Invoices.
Credit card charge slips.
Forms 1099-MISC.
 
Inventory.

Inventory is any item you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for inventory. Documents reporting the cost of inventory include the following.
Canceled checks.
Cash register tape receipts.
Credit card sales slips.
Invoices.

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Expenses.

Expenses are the costs you incur (other than the cost of inventory) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following. 

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