Unfortunately for all small businesses struggling to figure out how to reprogram their POS systems for a cocktail that uses one ounce of ginger ale… the sweetened beverage tax is back and will be implemented this Wednesday, August 2nd. Get ready NOW.
Category Archives: Illinois
‘Pop Tax’ Gets Blocked By Cook County Judge
Huge, breaking news! I’ll update my original blog post accordingly and keep you updated as I learn more. Read the short article here:
July 1, 2017 – New Cook County “Sweetened Beverage Tax”
Update 10/7: The tax is likely to be repealed next week, effective December 1.
http://www.thedancingaccountant.com/?p=653
Update 7/29: The tax is back, starting this Wed, Aug 2nd: http://www.chicagotribune.com/business/ct-cook-county-soda-pop-tax-lawsuit-20170728-story.html
And in related news: 1,100 layoffs anticipated after Cook County soda tax blocked — Chicago Tribune
6/30/17 — BREAKING NEWS — A judge has temporarily blocked the new tax, until at least July 12th. I will post an update here as soon as I have one.
Our local governments have done it again. After the headache of figuring out and implementing the bag tax earlier this year, we now have Cook County’s new Sweetened Beverage Tax. This, by the way, is in addition to the soft drink tax and fountain drink tax that exist at the city level, and a proposed tax at the state level:
“The tax levied in this Article shall be in addition to any other taxes.”
I won’t go into the debate on the social merits of the tax and how successful or unsuccessful this new tax is likely to be regarding public health. And I won’t argue about what the real underlying reason behind the tax is — be it economically-, socially- or politically-motivated. I also won’t comment on how many find the tax regressive, disproportionately hurting the poor.
What I will go into are the challenges in administration, implementation and complexity that transactional taxes such as this tend to be, especially for small businesses, and I’ll try to explain as simply as possible what the requirements are for different types of businesses in meeting this new ordinance.
What is the new Cook County Sweetened Beverage Tax?
Starting July 1, 2017, a $0.01-per ounce tax is imposed on the retail sale of all “sweetened beverages” in Cook County.
How will it be imposed?
(a) Distributors of bottled/canned soda and of “syrup”/powder to make soda will charge the tax to their retail customers; and,
(b) Retailers will pass the tax along to their consumers.
So far, pretty simple. The challenges lie in the definitions, the requirements, and the implementation.
Let’s start with definitions.
We all think we know what a sweetened beverage is, and what a syrup is. We’re wrong.
A sweetened beverage 1) is non-alcoholic, 2) is either carbonated or non-carbonated, 3) is intended for human consumption, 4) contains sweetener (caloric or non-caloric), 5) is available for sale in a container or through the use of “syrup” or powder. Not too confusing.
Here’s what a sweetened beverage is NOT, however…
Obvious: 100% natural fruit or veggie juice, infant formula, beverages for medical use, meal replacement beverages.
NOT OBVIOUS:
* beverage with >50% milk or milk substitute;
* beverages to which a purchaser can add, or can request that a retailer add sweetener;
* any “syrup” or powder that the purchaser himself or herself combines with other ingredients to create a beverage.
But wait… it gets more interesting. The reason I keep putting the word “syrup” in quotes is that it has its own definition:
“a liquid mixture, containing any caloric sweetener or non-caloric sweetener as an ingredient, intended to be used, or actually used, in making, mixing or compounding a sweetened beverage by combining the syrup with one or more other ingredients using a beverage dispensing machine.”
Did you catch that last bit? If the syrup is not used or intended to be used to make a sweetened beverage “using a beverage dispensing machine“, then it’s not syrup, and therefore doesn’t make a sweetened beverage. (This does not apply to powders, which are still subject to the tax if hand-mixed.)
This means that specialty coffee and cocktails are not taxable unless they are pre-packaged in a container. The FAQ points out that “in general, the ordinance taxes ready-to-drink beverages”.
As ridiculous as these definitions are, the good news here is that businesses that hand-mix syrups for coffee, tea, soda, milkshakes, cocktails, etc… are off the hook for this tax — in potentially more ways than one.
How will the tax be administered?
- Distributors must register with the County by July 31st. The distributor will then receive pre-printed tax returns (there is no online option for filing this tax).
- Distributors will charge the tax to their retail customers starting July 1st.
- Distributors will file a monthly return with the County (even if no tax is due) by the 20th of each month and remit the tax (just like state sales taxes).
- Retailers must pay the tax charged to them by the distributor on their vendor invoices.
- If a retailer purchases sweetened beverages from a distributor that is not registered, they must self-register and remit the tax to the County. This is just like the bag tax situation. There is a list at the bottom of the County Sweetened Beverage Tax webpage noting registered distributors. As with bag taxes, if you are a retailer, make sure you are buying your product from a registered distributor.
- Similarly, if a retailer produces their own sweetened beverages, they must register and remit the tax to the County.
- Retailers must charge the tax to their customers — the ultimate consumers of the sweetened beverage.
That last item is especially important. This is not like the bag tax, which a retailer can choose to absorb instead of passing along to the consumer. The sweetened beverage tax must be passed along to the ultimate purchaser.
“It shall be deemed a violation of this Article for any distributor or retailer… to otherwise absorb the tax.”
Including the tax in the sales price without violating city, state and federal laws
This is the part that — aside from the definitions — I am finding most challenging for my small business clients.
Initially it was easy: similar to the liquor gallonage tax (an excise tax), a distributor could just charge the tax to the retailers, who then simply adjusted their prices upwards to cover the extra cost of goods, without specifying how they were passing the cost along to their customers. In fact, the sweetened beverage tax ordinance specifically states that both the distributor and the retailer must include the tax in the sale price of the sweetened beverages, syrup or powder.
“It shall be deemed a violation of this Article for any distributor or retailer to fail to include the tax imposed in this Article in the sale price of the sweetened beverage, syrup and/or powder…”
Then the County (who some have accused of a disastrous rollout of this tax) was challenged by the City of Chicago, State of Illinois, and Federal Department of Agriculture.
1) The City of Chicago has a law that requires all taxes to be listed separately for consumers. From the County’s FAQ on the sweetened beverage tax:
“Q: The tax folded into the selling price may violate the City of Chicago’s requirements on what must be included on labels/receipts. Is the County working with the City on this? A: We have looked at the City requirements and do not believe this violates their labeling requirements. While the tax should be included within the shelf price, the tax may be separately stated on the receipt or invoice.”
Well, which is it? I don’t know a single small business that has a Point-of-Sale system advanced or complex enough to both include the tax in the sales price on labels and receipts, as well as separate the tax on receipts. This is a serious issue to which a solution has not yet been found. As a result, on June 13, 2017, the County was forced to amend one of their revenue regulations (2017-2) modifying the original ordinance (there have already been four such regs, two of which have been updated or amended).
“Understanding that distributors and/or retailers may need additional time to program their POS systems to allow for the tax to be reflected in the menu/advertised/shelf sale price, distributors and/or retailers will have an additional 6-month period, until January 1, 2018, to comply with the display requirements laid out in this regulation.”
2) The State of Illinois prohibits any tax to be levied on top of another tax. If retailers followed the County’s requirement to include this tax in the sales price of the sweetened beverage, then that would mean that the Chicago Soda Tax and the IL Sales Tax would both be charged on top of the County Sweetened Beverage Tax. Same situation as #1 in that the “solution” is to delay the requirement to reflect the tax in the sales price.
3) The initial solution to both (1) and (2) above was to make the soda tax a line-item at the point of sale, but “it ran afoul of the Department of Agriculture, which advised it was against federal law to tax transactions paid for with benefits from its Supplemental Nutritional Assistance Program (SNAP).” The Department of Agriculture stated that the soda tax “could be applied to SNAP purchases so long as it wasn’t imposed at the point of sale.” This caused the County to release Revenue Regulation 2017-3 on June 6th, which gives retailers these options:
Where a purchaser uses SNAP benefits to purchase sweetened beverages, the retailer must do one of the following:
1. If the sweetened beverage tax is separately stated on a retailer’s cash register receipts, the POS system should be programmed not to charge the tax when SNAP benefits are used.
2. If the sweetened beverage tax is included in the selling price on a retailer’s cash register receipts, the POS system should be programmed to reduce the price by the amount of tax when the beverages are purchased using SNAP benefits. If this programming is not possible, the retailer must put in place a procedure whereby a purchaser who uses SNAP benefits can receive an immediate refund at the customer service desk or other location within the retailer’s premises.
In both situations above, the retailers should be given a credit for these tax exempt purchases on the next bills from their distributors. Distributors will be permitted to claim a deduction on their monthly sweetened beverage tax return for the amount of the credits provided to retailers.
Really. That sounds convenient for everyone involved.
What is the tax charged on? Does ice count? What about free refills? What about donated and sampled beverages? What about alcohol mixers?
The tax is charged at the rate of 1-cent-per-ounce, which is easy for pre-made beverages delivered in containers (bottles, cans, etc.). This is more challenging for syrups and powders (and remember, it’s only considered a syrup — and therefore a sweetened beverage — if it’s run through a beverage machine). The tax is applied to the total amount of beverage that the product will make per the manufacturer’s directions. It doesn’t matter if you make it differently — you apply the tax based on the volume it would make if you followed the instructions. I know. Yes, really.
As for ice: “the retailer should charge tax on the ounces sold. The addition of ice is at the discretion of the retailer/customer and does not affect the amount of tax due.”
Free refills are even more fun. The retailer must determine how much of the tax amount should be added to the sale price of the original beverage. So if you offer one free refill, you have to charge twice the tax on the original beverage sale, assuming the person will get a refill. Not fair, but easy. However, if you offer unlimited refills, how in the world do you estimate how many they will drink? The County says estimates are not acceptable. Good luck.
As for donated and sampled beverages — “the business that opens the beverages for self-use or samples or donates the beverages is the end user”. This means that if the product qualifies as a sweetened beverage, and the distributor or retailer donates or opens the beverage for floor samples or samples to potential customers… then that distributor or retailer is responsible for paying the tax on it.
If alcohol mixers themselves meet the definition of sweetened beverages (usually this would mean a canned, bottled, or fountain soda pop of some sort), then that portion of the drink — that many ounces — should have the tax charged on it. But not syrups added to a drink, since those would be hand-mixed. This should be fun!
Floor Tax Return – What is it and when is it due?
From the Sweetened Beverage Tax FAQ: “All businesses must begin collecting the tax on July 1, 2017. Because retailers may have inventory on that date that they obtained before the tax was in effect, they must remit the tax before collecting it from their customers. Accordingly, retailers must take inventory of bottled sweetened beverages, syrup and powder in their possession on June 30, 2017 and remit tax on those items directly to the Department by August 20, 2017 along with a floor tax return (will be posted on the DOR website). After July 1, 2017, retailers will submit the tax to registered distributors.”
A copy of the Floor Tax Return can be found in the “Downloads” section on on the right-side of the County webpage on the new tax.
It’s actually really easy to fill out — the difficulty is in figuring out how many ounces of product you need to declare (if you’re using syrup or powder, that is).
Refunds, Spillage, Product Preparation
A reduction of 5% of the calculated tax will be applied by distributors of syrups and powders to the vendor invoices sent to retailers, to account for spillage and product preparation. I am unable to tell from the County’s information whether distributors will do this automatically or if the retailer has to request it.
Retailers can request refunds from their distributors resulting from the return of product by a retailer (as well as breakage and spoilage), or due to tax-exempt sales to SNAP recipients, or sales outside of the county, etc. The distributor must refund the tax amount to the retailer before applying for a refund from the County — potentially putting them into a challenging cash flow situation.
Any claim for a credit or refund must be filed on forms provided by the County — but no more than four years after the situation which caused it to happen.
Timeline
March 1, 2017 – “Sweetened Beverage Tax ordinance goes into effect; distributors will receive information beforehand about registering with the Cook County Department of Revenue.” Supposedly. If they don’t know you’re a distributor, you won’t get anything. Or you may receive something because they think you’re a distributor, but you’re not. If you don’t get what you need, or if you get something and it doesn’t apply, immediately contact the County at revenuecompliance@cookcountyil.gov.
June 30, 2017 – “Sweetened Beverage Floor Tax inventory date; retailers must take inventory subject to sweetened beverage tax in which tax was not previously collected.”
July 1, 2017 – “Sweetened Beverage Tax goes into effect; retailers and distributors must begin collecting tax.”
August 20, 2017 – “Retailers must remit to the Department its floor tax return and payment.” (This refers to the inventory taken June 30th, on which tax to a distributor was not paid.)
August 20, 2017 – “Distributors must remit to the Department its tax payment and monthly return reflecting July 2017 activity.”
Main Sources: Sweetened Beverage Tax | CookCountyIL.gov and Sweetened Beverage Tax FAQ | CookCountyIL.gov — On these sites you can download the original ordinance, all related revenue regulations, all forms, and you can view the lists of registered distributors and products qualified as medical beverages.
Please remember that I’m not an attorney, I don’t work for the County, and I’m just doing my best to read, understand, and interpret the ordinance and related websites and resources for my own clients. None of this should be considered legal advice. If you have any questions, I encourage you to email revenuecompliance@cookcountyil.gov.
Chicago Bag Tax “Floor Tax Return” Due March 3rd
Just a reminder that the “floor tax return” for the Chicago Bag Tax is due this Friday. Don’t risk a $100 fine — take a look at my comprehensive guide to the bag tax and get this off your “to-do” list asap. Please share far and wide with other small business retailers in Chicago; I’ve found very few how-to resources, and none that break it down step-by-step, and I’d love for my research for my own clients to be of use to other small business owners.
City of Chicago New Checkout Bag Tax Effective 2/1/17
UPDATE 2/17/17 — I spoke to Jennifer at the City of Chicago, and she was able to answer many of my outstanding questions. I’ve updated the original post with these edits.
UPDATE 2/12/17 — a retail client highly recommends buying bags wholesale from Howard Packaging in Skokie; her sales rep is Marc Moder. She says, “My vendor is charging the tax… I will happily refer anyone to them. The owner of the company apparently loves dealing with small businesses and undercutting Uline prices.”
I’m all for taxation as a way to effect public policy. But it has to be manageable. It’s amazing how challenging it can be to follow the rules for collecting and remitting a particular tax. Take the City of Chicago’s new “checkout bag tax”, for example. Great idea — encourage folks to bring their own bags by making it more expensive to use a bag given to them by the store.
This new tax replaces a ban on “flimsy” plastic bags which targeted chain stores, who quickly found a loophole in providing higher-quality “reusable” plastic bags. But now it affects paper as well as plastic, and small business as well as big box chains. (See a great DNA Info article on the topic, here.)
And unfortunately, the rules surrounding this new ordinance are complex, and for most businesses, will be impossible to follow to the letter.
Here’s what I understand about how it’s supposed to work (please note that I’m not an expert and don’t work for the city — but unlike most folks, I forced myself to read the entire ordinance and all the information I could get my hands on, as well as called the City of Chicago’s Department of Finance to get clarification):
(Steps One and Two are to get retailers “caught up” with the tax for bags that are already in stock.)
1. For starters, each retailer must count all their bags — paper AND plastic — in stock at the end of day on January 31, 2017.
2. Then retailers pay the tax in advance on this existing inventory.
Supposedly, licensed retailers were mailed a “Floor Tax Return” by the City before December 31, 2016. If you did not receive one, but you do use bags, email revenuedatabase@cityofchicago.
A couple of important notes when filling out this return —
a) Once they get a copy of the return to you, you’ll see that you have to include your “Department of Finance Tax Account Number”. This is located in the bottom-left corner of your business license, under the mayor’s signature.
b) On Page 1, Section 1, Line 1, where it asks for the number of checkout bags on-hand, only note the number of bags that a) you intend to use in the City (if you sell at conventions in the suburbs, for example, don’t count those), and b) don’t fall under one of the exceptions (e.g., separating frozen goods, produce or bulk items, household products; selling to SNAP recipients — see #6 below).
c) If you’ve called your bag wholesaler and have determined that they either do or do not intend to charge the city bag tax moving forward, it’s a good idea to note this information on the bottom of Page 1 of the Floor Tax Return, in Section 2, where they ask for the wholesaler’s information. The city will be following up with these vendors, trying to convince them to charge the tax.
Fill out and mail in the Floor Tax Return with a payment of 5-cents per bag by March 3, 2017 (7-cent tax minus a 2-cent credit for your troubles). It’s a $100 fine if filed late — even if you had zero bags in stock at that point (but you do use them); even if your store did not sell or use checkout bags prior to February 1, 2017 (but you plan to in the future); and even if the store decides NOT to use any bags moving forward (but you used to). If you didn’t use bags before the tax and won’t use them moving forward, you’re exempt from filing the form.
The floor tax return, site schedules (a page for each of the retailer’s various locations — must be filled out even if there is only one), and payment must be mailed to:
Chicago Department of Finance
City Hall, Room 107
121 North LaSalle Street
Chicago, IL 60602
(The rest of the steps are how this will work moving forward.)
3. Wholesalers of paper AND/OR plastic bags (not retailers) must register with the City by February 1, 2017.
4. Wholesalers of paper AND/OR plastic bags (not retailers) must charge their customers (the retailers) 7-cents-per-bag minus a 2-cent credit for the retailer’s effort, and remit that 5-cents-per-bag to the City using Form 2737. (I don’t know of any clients who received this, and I cannot find a copy online; I presume the City only sends it out if they determine you are a bag wholesaler.)
5. The retailers pay this net 5-cents-per-bag tax as part of the invoices from the wholesalers for buying paper AND/OR plastic bags.
(This is where it gets complicated.)
6. There are a million exceptions for bags that are exempt from the tax — so the retailer will need to apply to the wholesaler for a credit for each of these exceptions, to be applied to the next invoice — but how in the world are they going to be able to track them or document them in case of a City audit? Examples include:
Paper and plastic bags ordinarily intended and designed for use by customers inside a store to:
– package loose bulk items, such as fruit, vegetables, nuts, grains, candy, cookies or small hardware items
– contain or wrap frozen foods, meat or fish, whether prepackaged or not
– contain or wrap flowers, potted plants or other damp items
– segregate food or merchandise that could damage or contaminate other food or merchandise when placed together in a bag
– contain unwrapped prepared foods or bakery goods
As well as:
– plastic bags with a retail price of at least fifty cents ($0.50) each
– bags that are used to carry items purchased with SNAP (food stamps)
Retailers should take a credit for these tax-exempt paper and plastic bags on the next bill received from their wholesalers. The wholesaler in turn should claim a credit for the tax amount refunded to their retailers on the next monthly payment to the City. On this topic, the City says, “It shall be presumed that checkout bags sold or used by wholesalers and stores are subject to the tax imposed under this chapter until the contrary is established. The burden of proving that such checkout bags are not taxable hereunder shall be upon the person so claiming.”
7. The retailer is permitted to pass along the 7-cents-per-bag tax to the end consumer, in which case the bag tax needs to be stated separately on the receipt to the consumer; I recommend that retailers work with their accountants or bookkeepers to make sure this is set up correctly in their POS systems. The City has provided a lovely placard to post for your customers so they understand what’s going on.
(Remember, this is a 7-cent tax minus a 2-cent credit for the retailer’s troubles, so the amount collected from consumers is 7-cents, but the amount remitted to wholesale bag sellers or, in many cases, directly to the City, is a net 5-cents.)
8. However, the retailer may choose to absorb the cost themselves, in which case it does not have to be stated separately on the receipt.
(This is where it gets even more complicated.)
9. However, either way, it is the retailer’s responsibility to make sure that their wholesalers who sell them bags are in fact charging them the bag tax. But this has a couple serious drawbacks:
(a) If the retailer buys bags online or in a non-traditional outlet, the chances are pretty low that the wholesaler will be registered to collect and remit sales tax, leaving the retailer in the position where they have to do all of it voluntarily, filing Form 2737 with the City, which is even more time-consuming than the rules and process I noted above.
(Note: if you are a retailer in this situation, you must contact the City of Chicago’s Business Contact Center at 312-747-4747 or by e-mail at RevenueDatabase@cityofchicago.org to register to collect and remit the bag tax. However, I was told by the City Department of Finance that they would prefer not to have thousands of small businesses registering with them; they’d rather convince the wholesalers to charge the tax. They said if you don’t receive an affidavit from the City asking you to register, you’re off the hook as long as you’ve declared your wholesaler to them on the Floor Tax Return, step #2 above.)
However, to be safe — in the case where your wholesaler refuses to charge the tax — I recommend switching vendors. A client has recommended Howard Packaging in Skokie as one who both charges the tax and values working with small businesses.
(b) If the retailer isn’t passing the tax along to customers, then the entire point of the tax — to create an incentive for consumers to bring their own bags — is moot. It will just be a revenue-raiser for the City and nothing more.
Supposedly, there are ways to pay this tax through aldermanic offices and chambers of commerce (I will be shocked if this turns out to be true — please let me know in the comments section below if you hear of it), and those same groups have free reusable “ChiBags” available for retailers to give away to customers throughout February and March.
For the record, other non-taxable examples of bags and bag usage include:
– bags provided by a dine-in or take-out restaurant to contain food or drink purchased by the restaurant’s customers
– bags provided by a pharmacist to contain prescription drugs
– bags sold in packages containing multiple bags intended for use as garbage bags, pet waste bags or yard waste bags
– bags of any type that customers bring to a store for their own use or to carry away from the store goods that are not placed in a bag provided by the store
– newspaper bags
– dry cleaning or garment bags
– plastic liners that are permanently affixed, or designed and intended to be permanently affixed, to the inside of a particular bag
More info here:
– City of Chicago Bag Tax FAQ
– City of Chicago Bag Tax Summary
– City of Chicago Bag Tax Ordinance
And if you’re interested in the history of this fiasco, as well as how it affects small businesses, contributes to income inequality, and lines the pockets of the city and of big box stores — well, there’s lots of that here:
– Excellent “DNA Info” article on the topic
– Daily Herald article discussing policy matters
– Fuller Tax Blog “Complete Guide” to the bag tax
– Chicago Tribune article
Some Restaurants Adding Surcharge in Response to Minimum Wage Hike
Just read a well-written article about how some restaurants are dealing with the quickly-rising (after years of stagnation) local minimum wage, which was shared by one of my most respected restaurant accounting colleagues, Stacey Byrne. It hit home, as we’re dealing with many of the same issues in Chicago: my small business restaurant clients are committed to living wages and benefits for their workers, as well as a safe and inclusive work space, but their margins are already so narrow, in what is a famously competitive and labor-intensive industry; also, the discrepancy between the massive amounts front-of-house are taking home and the paltry amounts back-of-house are taking home is painful — many chef-owners make substantially less than their FOH staff, or are committed to trying to even out this inequity and internal struggle. Many of them are switching to service charges instead of tipping, or re-structuring so that back-of-house workers have customer interaction, and can therefore participate in tip pooling.
Definitely worth a read: California Restaurants Add Surcharge After Minimum Wage Hike.
And for a reminder on how tipping works, an earlier blog post: Restaurant Tipping — How It Works.
Fullerton/Milwaukee Small Business Improvement Fund — Learn How To Apply for a Grant for Capital Improvements
Do you have a small business in Chicago along Milwaukee Ave. from Armitage to Belmont? Please come to a meeting this Thursday from 9:30-10:30 am at Hairpin Lofts to learn about city grants to help pay for capital improvements!
A map of the TIF district is here — http://www.cityofchicago.org/city/en/depts/dcd/supp_info/tif/fullerton_milwaukeetif.html
Please spread the word.
Source: Fullerton/Milwaukee SBIF(Small Business Improvement Fund) Rollout Meeting
Chicago Business Workshops for February
| Business Workshops for February |
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All workshops are free and are located at the City of Chicago Department of Business Affairs & Consumer Protection – City Hall, 121 N. LaSalle St., Chicago, Room 805.
2/10: How to Obtain a Sidewalk Cafe Permit
3:00 to 4:30 p.m.
Presented by BACP, Small Business Center (SBC) – Public Way Use (PWU) Unit, Anthony Bertuca
Attendees will learn the Sidewalk Cafe Permit Application process, and the requirements which will assist in preparation to submit an application. The entire application process may take 30 – 45 days, and the 2016 Sidewalk Cafe Season begins on March 1st.
2/17: Understanding Employee Classification: Hourly vs. Salaried & Contractors vs. Employees
3:00 to 4:30 p.m.
Presented by Charles Krugel, a Management Side Labor, Employment & Human Resources Attorney
There are changes coming to the definitions of hourly & salaried employees (overtime eligible vs. not) & independent contractors vs. employees (W2 vs. 1099). Over the next few years, fewer businesses will be able to avoid overtime & classifying workers as W2 employees. Management side labor & employment attorney Charles Krugel will discuss these proposals, including enforcement, & answer any of your questions concerning these topics.
2/19: Setting the Groundwork
9:30 to 11:00 a.m.
Presented by Lema Khorshid, Fuksa Khorshid, LLC
There are many legal considerations to keep at the forefront of your mind before starting your new business. This presentation explores different sources to fund your business venture, basic principles of how to protect yourself in the claws of litigation, employment laws, lease agreements and how to implement a solid intellectual property plan.
2/24: C Corp, S Corp, LLC – Which Is Right for My Business?
3:00 to 4:30 p.m.
Presented by The Law Project
The Law Project’s Small Business Program offers legal support to entrepreneurs who are starting or have their own small businesses as a strategy to create financial independence. Since most entrepreneurs operate on a shoestring budget, obtaining legal advice is often unaffordable. This workshop will provide entrepreneurs with information about choosing the correct corporate structure for their business.
2/26: Tax Issues for Self-Employed Individuals & Businesses
9:30 to 11:00 a.m.
Presented by Eric Sternberg of the Center for Economic Progress & Yolanda Ruiz of the Internal Revenue Service
This workshop will give an introductory understanding of common tax issues that self-employed individuals often encounter. Participants will learn when they must file a tax return, how to identify worker classifications, how to prepare for an IRS audit, how to make quarterly estimated payments, and how to navigate the IRS website. Participants will benefit from the perspectives of both the individual taxpayer and the Internal Revenue Service.
Click here to view a full monthly calendar.
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Tax-time Resources for Clients
Information on tax return due dates, some answers to the most-commonly-asked questions from clients during tax season, and some additional resources I’d recommend; enjoy!
The IRS will begin accepting individual tax returns on January 19. Of course, most taxpayers won’t receive their information returns (Forms W-2, 1099, 1098, 1095, etc.) until the first week of February, so at our firm (which specializes in small businesses and more complex individual returns) we typically wait to file until February 6th.
Corporate tax returns (both C- and S-Corps) are due by March 15, and partnership tax returns are due April 18th. (Spoiler alert: stay tuned for an upcoming post on due date changes for next year that will line these up better with individual tax due dates and extensions.)
Individual tax returns are due April 18 (Saturday, April 16, 2016 is Emancipation Day in the District of Columbia, and the holiday is observed on Friday, April 15… this pushes the tax deadline to Monday, April 18, since the IRS deadlines never land on weekends).
Some important tax-time resources for IRS and Illinois taxpayers:
Where’s My IRS Refund — https://www.irs.gov/Refunds
Where’s My IDOR Refund — https://mytax.illinois.gov –> Click on Individuals –> Click on “Where’s My Refund?”
Look Up IDOR Estimated/Extension Tax Payments — https://mytax.illinois.gov –> Click on Individuals –> Click on “Look up my estimated/extension payments”
Order an IRS tax return transcript online — https://www.irs.gov/Individuals/Get-Transcript
Order a copy of a prior tax return — https://www.irs.gov/pub/irs-pdf/f4506.pdf
Make An Online Payment to the IRS — https://www.irs.gov/uac/EFTPS-The-Electronic-Federal-Tax-Payment-System
Make An Online Payment to IDOR — https://mytax.illinois.gov –> Click on Individuals –> Click on “Make an IL-1040, IL-1040-ES, or IL-505-I payment”
Where’s My IRS Amended Return — https://www.irs.gov/Filing/Individuals/Amended-Returns-(Form-1040-X)/Wheres-My-Amended-Return-1
2016 Standard Mileage Rates — https://www.irs.gov/uac/Newsroom/2016-Standard-Mileage-Rates-for-Business-Medical-and-Moving-Announced
The Affordable Care Act and your tax return — https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Health-Care-Law-and-Your-Tax-Return
Contact the IRS by phone — https://www.irs.gov/uac/Telephone-Assistance
Contact your local IRS Office (long lines; don’t recommend it) — https://www.irs.gov/uac/Contact-Your-Local-IRS-Office-1
Restaurant Tipping – How It Works
UPDATE 11/12/2019 — in 2018, changes were made by the Department of Labor to allow tip pooling with back-of-house employees as long as the state does not have more restrictive laws. This article does a great job of summarizing the changes:
Do You Know Where Your Tip Money Is Going? – Eater
In recent discussions with clients and friends about this year’s change in Chicago minimum wage for tipped versus non-tipped employees (and how that intersects with minimum wage rules for tipped employees at the Federal level or in other states), as well as conversations about restaurant “service charges”, and how they differ from tips… I realized that many folks — even restaurant owners — don’t understand how tipping works from a business perspective, and may not be reporting their tips — or paying their employees — appropriately. I found this particular Chicago Tribune article from last year to give an especially good overview explanation:
How Restaurant Tipping Works – Chicago Tribune
Another site, the “Wiser Waitress,” writes from the perspective of employees — who unfortunately, often are misinformed or uninformed about their rights, about tip pools, about tracking and reporting and paying taxes on their tips. This site is not as well-written, and it’s not an Illinois-specific set of information, but it does cover many of the issues that tend to be sticky points. I also find it helpful to read from the angle of someone who is being taken advantage of — because, in my business, we’re always looking at the poor restaurant owner, who has to pay their employees more than they pay themselves. It’s interesting to see how waitstaff see it.
The Wiser Waitress – Wages & Tips
Lastly, but in some ways most importantly, the Illinois Restaurant Association has an excellent FAQ regarding various governmental, tax, and labor requirements that apply to restaurants. This organization is well-worth a membership if you are a restaurant owner or someone who works with restaurants. They offer different membership types with different benefits, and their website is quite informative:
Illinois Restaurant Association FAQ
Tipping, service charges, minimum wage, front of house, back of house… it’s all substantially more complex than you’d think. Make sure to learn the rules, track your tips (employees), tip payouts (employers), and educate others wherever you can.
UPDATE: I came across an excellent, two-part, detailed article from the Restaurant Accounting pro herself, Stacey Byrne, on the topic of “Accounting & Payroll Issues for Restaurant Tips and Service Charges” (Part One & Part Two), and want to share it here for you as well. Must-read resources for anyone doing restaurant accounting!