Updated July 1, 2015
Business Tax Preparation in Chicago Illinois normally involves three different categories; Income, Payroll, and Sales Tax Return Preparation. Many new customers will say, “Chris, I only need you to do my business and personal income tax returns.” But what they don’t understand is that all three are bound together. In other words, if you have a problem with one, you may have a problem on all three.
It certainly is not terribly difficult to do a sales tax return, but it can be difficult to do one properly. Where do you put the out of state deliveries? Where do you put sales of a service? Where do you put the products sold to charities, governmental agencies, or other tax exempt entities? Should you report your sales on a cash or an accrual basis?
Sales taxes returns in Illinois by definition are cash basis returns. In other words, your sales figures are not based on your receivables, but rather on your receipts. If your sales tax returns over a year do not match the sales figure put on your income tax return, then you could face an audit. If the difference in the sales figure is based upon the income tax return being done on an accrual basis rather than a cash basis, then you should be able to prove that difference. When the State of Illinois comes in they don’t just audit sales tax. They audit all of the taxes that they collect. In other words, they will look at Sales, Payroll, Use, and Income Tax. And sadly, they normally go back at least six or seven years. These audits are nightmares.
Payroll tax issues are a very different problem. Normally payroll tax issues come as a result of either the improper use of independent contractors or problems either with filing or paying payroll tax returns. But, the most common issue is with the contractors.
Under existing tax law, if you are paying an individual rather than an entity, they probably should be treated as an employee rather than an independent contractor. This is one of the most rapidly changing portions of Federal Tax Law. The various governmental agencies started enforcing these laws a few years ago in order to collect more money for the underfunded governments and to close the social security funding gap. Please refer to my article titled “Employee versus independent contractor determination IRS common law rules” on The Accounting Solutions Ltd. website for further information on the rules regarding this issue.
Sometimes, just sending out 1099’s that are in the name of an individual will trigger an audit. Certainly sending out a W-2 and a 1099 to the same social security number inside the same tax year can trigger an audit as well. It is most difficult to explain to any examiner how a worker’s taxation status changed inside any tax year.
Either way, the deduction taken for payroll on the W-2’s and 941’s should match the deduction taken on the income tax return for labor in that given year. All of these returns go into the same agencies. Its very easy for The IRS or The State to check and match these numbers off of the returns. When they don’t coincide, they will assume that you are doing something wrong and probably send out an auditor.
Let’s not forget that even if you have a professional payroll service doing your payroll, you could still have a problem. Payroll services make mistakes rather often.
The main point of this article is that all aspects of Business Tax Preparation are inextricably linked. The main job of an accountant is to protect their client. We do that by making sure that everything is being handled correctly, no matter who does the work.
If you are having problems on business tax preparation in Chicago Illinois or with your accounting in general, we would love to help. I love hearing from my readers, and can be contacted at
Additional Accounting Articles and information on my firm can be found at
Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.
Updated July 1, 2015