Ask Keryl

Business Taxes

Ask Keryl
Do businesses have to obtain the Taxpayer Identification Number (TIN) from vendors and keep it somewhere on file?
In general, businesses are required to obtain the TIN from vendors if they are required to file any return, document or other statement that calls for the Taxpayer Identification Numbers (TINs) of other taxpayers. Form W-9 (PDF). The business should also maintain the verification of these numbers in their records.
Under what circumstances am I required to change my Employer Identification Number (EIN)?
If you already have an EIN, and the organization or ownership of your business changes, you may need to apply for a new number. Some of the circumstances under which a new number is required are as follows: An existing business is purchased or inherited by an individual who will operate it as a Sole Proprietorship; A Sole Proprietorship changes to a Corporation or a Partnership; A Partnership changes to a Corporation or a Sole Proprietorship; A Corporation changes to a Partnership or a Sole Proprietorship; An individual owner dies, and the estate takes over the business.
Does a small company need a Tax ID Number?
A sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an Employer Identification Number. In this instance, the sole proprietor uses his or her Social Security Number as the Taxpayer Identification Number.
I recently formed a Limited Liability Company (LLC). The LLC has no employees. Do I need a separate Federal Tax ID number for the LLC?
No, you will not need a separate Federal Tax ID number for the LLC if you are the sole owner of the LLC and the LLC has no employees. If you are the sole owner of the LLC and the LLC has employees, you will need to get a separate Federal Tax ID number, if you choose to have the LLC report and pay employment taxes with respect to employees of the LLC. If you are not the sole owner of the LLC, you will need a separate Federal Tax ID number for the LLC.
Is an employer ID number the same as a tax ID number?
Yes, an Employer Identification Number, or EIN, is also known as a Taxpayer Identification Number, or TIN. A Sole Proprietorship that has no employees and files no excise or pension tax returns and a LLC with a single owner (where the owner will file employment tax returns) are the only businesses that do not need an Employer Identification Number. In these instances, the sole proprietor uses his or her social security number as the taxpayer identification number.
If my husband I own a business, is it considered a partnership?
No, a partnership is not formed.
Should I get a separate business account from my personal account?
Yes, because the funds should not comingle.
Does a business entity determine if you should file either individual or business returns?
Yes, it does because if you are consider a shareholder than you have to file the return with your personal taxes.
As a business owner, should you write yourself a check?
Yes, because you are an employee for the company.
Do I need a business license for my business?
Yes, you need a license to operate a business.
What are the different types of business entity?
Corporation, S Corporation, Partnerships, Limited Liability Company.
Should I incorporate my business?
Yes, it’s best to corporate a small business for protection. Just in case you are sued, the person has to go after your business and not your personal assets.
Can a LLC be filed as an S Corp.?
Yes, you can file a LLC as an S Corp. on your tax return.
Must a partnership or corporation file a tax form even though it had no income for the year?
A domestic partnership must file an income tax form unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes. A domestic corporation must file an income tax form whether it has taxable income or not.
How do you determine if a person is an employee or an independent contractor?
The determination is complex, but is based on who has the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time. There are three basic areas which determine employment status: Behavioral control; Financial control and Relationship of the parties. Generally, there is no tax withholding on this income. Thus, you may have been subject to the requirement to make quarterly estimated tax payments. If you did not make timely estimated tax payments, you may be assessed a penalty for an underpayment of estimated tax. Employees pay into the Social Security and Medicare trust funds, as well as income tax withholding, through payroll deductions.
Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
For a business to be classified as a sole proprietorship: Either the husband or the wife would be the owner of the business. Either of the spouses can work in the business as an employee. If a married couple who file a joint tax return elects to conduct their business activities as a qualified joint venture; The husband and wife must materially participate in the trade or business. The spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture. This is effective for taxable years beginning after December 31, 2006.