Frequently Asked Questions

What are the different types of business ownership & which is best for my individual situation?

Basically, there are three types of business ownership, Sole Proprietorship, LLC or Partnership, and Corporation.

Sole Proprietorship is best if you want to get into business right away, and you are not worried about being sued, or your business continuing on after you die. 

LLC is best if you plan to invest in real estate, if you have partners, or if you want to protect yourself from being sued but don't want the hassle of having yearly corporate meetings and other paperwork.

A corporation is best if you are worried about being sued, you want your business to last forever, and you want to make your own money by selling shares of stock.
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What is the best method for business record keeping? 

The best method is one you can stick to. Because any method is good when you are not busy, But problems can occur when you are busy making money.

Then the stakes are higher. Which means you may not be able to keep every transaction in your head. Or you may not have time to review things and keep records manually.

You may be also dealing with larger amounts of money.  Which means the risk and consequences of being audited by the IRS are greater.

In other words, your record keeping system will be tested.

This is an area where you will probably be better off talking to us about it. You get a FREE customized system just for you with AAIME membership! 
Call our FREE Hotline for help 312-358-7073

How can I get Uncle Sam to help pay my business start-up expenses? 

There are two ways. One is for
• Employed people who don't get a tax refund, or their tax refund is smaller than the Federal tax withheld (Box #2 on your yearly W-2 form).
• People who are self-employed.

If you are employed, you should start your small business immediately (which means start claiming your business income and expenses on your personal taxes- US Form 1040.) Because business owners get to claim many more deductions on their taxes than employees.

Deductions such as car expenses; and in some cases home expenses like rent, lights, gas, water, Internet, or property taxes and depreciation if you own your home.

The second way is for people who are unemployed. If you are not working you should incorporate. Because then your losses stay in the corporation for up to 20 years until your make a profit. Offsetting profits with losses means you don't have to pay taxes. Thanks Uncle Sam!
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How to let your business bank statement help do your bookkeeping

Start a business bank account and put all of your income, especially cash, in it. Order checks and a debit card from the bank. 

Pay bills with checks. Buy stuff for your business with the debit card or checks. If you must pay cash for a purchase, get a notebook and write all cash purchases in it. The date, amount, what the cash bought and who the cash went to. Why? Because you won't remember!

Keep all business related receipts! Make sure to download all your business (and personal with business transactions) bank statements to your personal computer and back them up. Because, you must keep any business related bank statements for three years from the date you file your taxes.

If your business needs money from you, write a check from your personal bank account and write "Loan" on the check memo. The Loan will show up on your personal bank statement.

Bring or email your bank statements, receipts, and cash journal to us at tax time. This way, you get all the deductions you are entitled to.
Call our FREE Hotline for help 312-358-7073

What ways are there for me to invest in my new start up in order to qualify for tax advantages?

Are going to receive an employment W-2 at the end of the year?

If the answer is "Yes",

Then the next question is, "Do you normally get all of the amount in your W-2's box number 2 Federal Tax Withheld, refunded back to you?

If the answer is "Yes", then you have no tax advantages to receive by investing in your new startup.

Because when you spend tax deductible money on your business, you DO qualify for refunds on taxes withheld, or estimated taxes paid. But if you have already received a refund on these funds, then there is no more money to get. Because, you can't receive a tax refund or Credit for simply starting or having, a business.  

If your answer is "No" then you don't get back all your W-2 box number 2 Federal Tax Withheld. Which means you need the tax deductions owning a business gives you in order to qualify for a bigger refund.

Start a new business, or figure out what you need for your current business.

Invest in your business. Buy new equipment, supplies, pay for professional advice, advertising, real estate, use your car for business etc.

You will receive tax deductions for the money you spend on your business, which could qualify you for a bigger tax refund. Not only that, but your investment(s) could set you up for a more profitable business in the near future.

Do you have 1099 or Independent Contractor income? If "Yes", then the answer is the same. The difference is, you probably don't have any income tax withheld or estimated taxes paid.

You should start a new business, or invest in your current business in order to qualify for business tax deductions.

Buy new equipment, supplies, pay for professional advice, advertising, real estate, use your car for business etc.

You receive tax deductions for the money you spend on your business, which could qualify you for a lower tax bill. Not only that, but your investment(s) could set you up for a more profitable business in the near future.

Because what you need to realize here, is that if you have non-employee income of $400 or more in a year, you are subject to Self Employment Tax. 

Self Employment tax is like the Social Security and Medicare deducted from wage earners. But the main difference is, employers pay half of their employee's Social Security and Medicare payments. Self employed people must pay it all.

Therefore if you are self employed, and want to save on Self Employment tax, you must spend money in tax deductible ways on your business. 
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What are your costs for tax preparation?

AAIME’s published rates for tax prep from https://aaime.org/membership

Taxes & Bookkeeping Cost Bookkeeping: $45/hour & $0.45 each item. Tax Preparation with FREE E-File:
• Personal Taxes $75 for US1040; plus $75 per hour with the first 1/2 hour FREE; plus $19 for each additional form like Schedule C or State tax return.
• Business Taxes such as 1120, 1120-S, 1065, 990, 990-EZ, LLC, cost 1% of gross income, minimum $350.

Let's assume that 
You are filing business taxes for the first time. You have W-2, business, and real estate income. Your record keeping for deductions is not good. You also need to understand the tax rules. All of this will take extra time. That’s why we charge 1% of business income.

For example,
if your LLC income last year was $50,000, then your tax preparation would cost a minimum of $500 ($50000 x .01).

But remember $500 is just an estimate. If you need your taxes prepared different ways, so that you get a better understanding of how taxes work, then your cost will be more.

Also, the following rules you must clearly understand:
• If you and the IRS agree on your Income, but do NOT agree on your Deductions, then the IRS can disallow your deductions. You must then pay any penalty and interest on unpaid taxes. That’s it. The Statute of Limitations (how long the IRS can come after you) on deductions is 3 years.
• If you and the IRS do NOT agree on your Income (you understate your income) that is called Tax Evasion. Tax Evasion can land you in jail. There is NO Statute of Limitations on tax evasion.

Final Words of Wisdom
• Money you pay to your accountant is tax deductible.
• Federal taxes you pay to the IRS are NOT tax deductible.

As a result, most people pay good accountants in order to owe less taxes.
Call AAIME at 312-358-7073.