Everything is confusing at the beginning. You have enough to worry about working your business day-to-day. Start by carefully reading the Client Manual then just call your Account Representative at 1.800.879.6605 and we will walk you through everything and help you every step of the way. Call anytime with any question. We are here to help you. We work for you.
EIN stands for "Employer Identification Number". An EIN is a taxpayer number that identifies your corporation exactly like your Social Security Number identifies you. Every corporation must have an EIN:
to file your corporation taxes
to open bank accounts
to borrow money
to pay yourself a salary
to receive payments of monies due your corporation
An EIN is not difficult to get. DSA Tax & Bookkeeping will be happy to do it for you and send you your number as soon as you are incorporated. Just one simple IRS form to sign and we will get you an EIN. It is good as long as you own your business and you never have to reapply. Let us help you, it's easy.
A Corporation is an artificial entity created by State Law, owned by one or more Shareholders and run by a President and other executive officers. "Sub-Chapter S" is a reference to a provision in the Internal Revenue Code that allows a small business with less than 35 shareholders to avoid all corporate taxes. All profits made by the corporation are passed on to the shareholder either as a salary or as shareholder's earnings.
If you run a small business your corporation can be owned 100% by you. One shareholder, that's you. One President, one Vice-president, one secretary and one treasurer, all you.
Being an S Corporation is an easy step once you have been incorporated. DSA Tax & Bookkeeping will prepare an IRS application called a Form 2553, where you as the sole shareholder, elect to be treated as a small business corporation and will never be required to pay any corporation income taxes.
Sole Proprietors vs. Corporations
Operating as a sole proprietor is a little simpler to understand for you and is less paperwork for DSA Tax & Bookkeeping than if you incorporate. However, you are giving up some real tax savings being a sole proprietor and it is riskier if you are ever sued. As a sole proprietor all of your personal property can be taken away by one lawsuit. Always make sure you have plenty of insurance.
Anytime! You can incorporate anytime and start operation as a corporation immediately. Many people like to wait to the beginning of the year and start the year fresh as a corporation just to keep things a bit simpler but that is really just a personal decision. Call DSA at 1.800.896.1213 and we can help you incorporate!
Being incorporated gives you two great advantages over operating as a sole proprietor.
1. Limited Liability. This means that all of your personal property is protected if you ever find yourself in a lawsuit involving your business. This is a real and true benefit and one that alone is worth the change.
2. Tax savings are almost always very significant and can save you much more in tax savings than the extra cost of DSA Tax & Bookkeeping service.
We here at DSA are real advocates of incorporation. Call us and let us discuss it with you. We can do everything for you and make it simple to understand and simple to do.
If you have a corporation the IRS requires you pay a "reasonable salary" to yourself and payroll tax is due on that salary. Each quarter we prepare a Form 941 and the state equivalent (if applicable) and mail it to you with instructions to pay the payroll taxes due. These payments represent your liability as an employer and employee for taxes due on your quarterly salary. We will send you a Form 941 every quarter to pay this tax (due March 31st, June 30th, September 30th and December 31st each year). At the end of the year, we will prepare and mail you your W-2, showing your wages and these payroll taxes that have been paid.
If you are incorporated all the money you make above the "reasonable salary" is also taxable but at a lower total rate than your payroll. This is one of the biggest tax advantages to being incorporated. Let's take the example where the business makes $45,000 in total. When you send us your Monthly Report we will apply part of the money you pay yourself to "salary", usually about $20,000, and the remainder as "profit". So, after you pay your payroll tax on the first $20,000 you will owe just income tax (no Social Security tax) on the profit. We will send you our estimate of how much to set aside for this tax every month and forms to pay this Estimate tax every quarter (Form 1040-ES due each January 15th, April 15th, June 15th and September 15th).
It's a bit complicated but we basically take your Monthly Report that you send us and make an estimate of both Federal and State that should cover your taxes based on your income and expenses. Estimated payments are recommended, based upon your business income. We will mail your a 1040-ES voucher for the Federal payment and state equivalent voucher (if applicable). If you want a more detailed explanation feel free to call DSA!
Absolutely, this is a great deduction for a person in your business. To qualify for a Home Office deduction, a space in your house must be used "regularly" and "exclusively" for business. DSA will calculate the percentage of your house that you use as your office, based upon your dimensions. The expenses you can include consist of insurance, repairs, utilities and any other cost of maintaining your home. Mortgage interest and real estate taxes will be added on your year-end return. Also, since you will visit your "Home Office" every morning before driving to your supplier, your drive to the depot is now considered tax deductible business miles. The rate to which these miles are deductible changes frequently but DSA will always get you the most tax savings allowable.
You can deduct all the miles you drive your personal vehicle on business related trips if you take advantage of the Home Office deduction. The rate to which these miles are deductible changes frequently. Please see page 8 of the Client Manual.
When you signed up with DSA Tax & Book we gathered all the information we needed to properly take tax deductions for your truck and distributorship. Assets you own, like a distributorship or a vehicle or a handheld computer all create deductions called "depreciation", or "amortization" depending on the asset. This depreciation expense greatly reduces your final tax bill. If you have loans on any business assets, the interest on those loans is a business expense. If ever you buy a new vehicle, a new piece of territory (or sell either) or take out a different loan, please submit a Major Change Form that you will find in the Forms Book or on our website.
If you have a part time worker be sure to look over the Merchandiser Agreement and the Service Contract (both found in the Download Forms section) on this site or in the Forms Book. If you use these forms or similar agreements, these helpers should be treated as independent contractors so you have no payroll tax liability. Make sure to get their name, address and social security number. At year-end you will have to issue this contractor a form called a "1099" so he or she can pay their own taxes. Please keep in mind 1099's have to be issued no later than January 31st. At year-end please call DSA at 1.800.879.6605, so that we can send you blank forms for your use or request them through the Order Supplies link within your client area.