Q: I am starting a new business and am looking for an accountant – what questions should I be asking? How should my business be structured?
A: The structure of your business (corporation, partnership, limited liability company or sole proprietorship) is a commonly asked question. Each person’s situation is different and choosing the right structure for your business is important. If you choose to be a corporation, you would need an attorney to complete the incorporation with the State. Your CPA would obtain the taxpayer identification number from the Internal Revenue Service. And complete the registration for taxes with the State. The taxpayer identification number is needed in order to open a bank account, file income tax returns, payroll tax returns and, if applicable, sales tax returns.
What type of Taxes do I need to file?
At a minimum each business reports their revenue and expenses to the federal and state governments annually. If your business has been established as a sole proprietor or a single member LLC, this information is included in your personal income tax return (1040) which is due each year on April 15th. A six month extension can be filed and the due date would become October 15th. Keep in mind that the tax is still due by April 15th. The extension is only an extension of time to file, not pay.
If your business has been established as a C Corporation or S Corporation, the tax returns are due on March 15th. A six month extension can be filed and the due date for the tax return becomes September 15th.
If your business structure has been established as a general or limited partnership or as a limited liability company, the tax return is due on April 15th each year. A five month extension can be filed and the due date for the tax return becomes September 15th.
Please keep in mind that estimated tax payments need to be made throughout the year and that all tax liabilities must be paid in full by the initial due date of the returns. The federal and state governments charge penalties and interest for late payments and late filings.
With regard to NJ, on the anniversary of the date that the business was registered with the State of NJ, an annual report needs to be completed on line. This registration contains the information about the company and the company’s owners. There is an annual fee of $50.
If your business will have employees, you will need to register for payroll taxes with both the federal and state governments. Deposits should be made for the employee withheld and employer payroll taxes on whatever basis is appropriate and dependent on the amount withheld. . At the completion of each quarter (March, June, September and December), there are payroll reports that need to be filed: Federal 941, NJ-927 and WR-30.
What information do I need to give to my accountant?
The accountant needs information in order to prepare tax returns. A tax return is required annually. It is always best to provide summarized information that is categorized to the accountant. This should enable the accountant to quickly review and complete a tax return. Our firm recommends using QuickBooks to record income and expense items. It can be used like a checkbook to record deposits and checks written. Each transaction includes an account field. The summarized transactions are categorized into a Profit and Loss statements report (January 1st to December 31). QuickBooks also has an easy way to use the bank reconciliation feature.
If your new business will have employees, there are several forms that need to be completed and retained by you (the employer). The W-4 form indicates the number of exemptions that will be used for the withholding purposes. Additionally, the Employment Verification Form (I-9) needs to completed. These forms should be kept in the employees’ personnel folders along with the employment application. New Jersey has a requirement that they be notified about a new hire in a company. This needs to be reported to the State of New Jersey within 20 days after the employee is hired.
Bank accounts can only be opened after the company has been registered and a taxpayer identification number has been received. One bank account should be opened that will receive the income deposits and pay the expenses. A second bank account is recommended for payroll tax payments.
What other services does an accountant provide?
Accountants prepare financial statements, consulting services, and business valuations, to name a few. Financial statements are usually prepared in conjunction with a bank loan. Accountants can assist in preparing analyses that can be used for revenue growth, cost savings and tax planning.
How do you charge your fees?
This is a good question to ask anyone from whom you will be receiving services. Each business has a methodology for charging for their services. Accountants usually charge based on the amount of time expended. This includes preparation of accounting records (if not completed in QuickBooks), tax returns (both income tax and payroll taxes), and consulting services, such as the time spent on the phone requesting clarification or discussing items needed to complete returns.
Establishing a working relationship with your CPA involves on-going communication and will result in a rewarding partnership that will assist with the running of your business.
Kim Forrester, CPA/CGMA is a member of the certified public accounting firm of Levine, Jacobs & Company, LLC. She can be reached at firstname.lastname@example.org