“What is an IRS Account Transcript and Why Do I Need One?”
During the pandemic, we began requiring all clients to submit a copy of their IRS Account Transcript along with their Tax Organizer and other annual tax prep documentation. Initially, this was to confirm the amounts of stimulus payments and child tax credit payments. But what we found was that it was a great way to confirm how much the client paid to the IRS for quarterly estimated taxes — and to make sure we credited the payment to the correct tax year. As such, we now always require a copy of this particular transcript — and wish we’d done so all along! It’s free, reasonably easy, and reliable. In the end, it saves the clients (and us) a load of potential headaches.
It’s important to note that there is more than one type of transcript, and each meets a different need. For example, if you’re trying to prepare a tax return for a prior-year and need a list of all the informational documents filed with the IRS that are associated with your SSN, you’d want a Wage & Income Transcript. For more info on how to do that, and the various types of transcripts out there, please see the comprehensive article I wrote for MSN on the topic.
An Account Transcriptlists information on payments and credits posted to your account throughout the year, such as quarterly estimated tax payments. The best news where downloading any transcript is concerned? All you need is a photo ID, a mobile phone with a camera, an email address, and an Internet connection.
Keep in mind that the IRS will not email you a transcript; you must go online and create or log in to your account and download it. There are email scams out there that entice folks to click on a link or attachment with the promise of an IRS Online transcript – don’t fall prey.
“How Can I Download My IRS Transcript?”
1. From the IRS website, you’ll need to create an ID.me account. (This is the most involved of the steps, but thankfully you only have to do it once; moving forward, you’ll simply sign into the same account each time.) The ID.me website uses facial recognition to confirm your identity, so you’ll need your phone to take a selfie.
If you need help creating your ID.me account, the ID.me Help Center spells out the process very clearly. You can also watch this video or review these written instructions if you want to review the process first.
One note: if you were using the old IRS account system, you won’t be able to log in with your previous IRS username and password anymore — the IRS sunsetted that program in early 2023 and now you need to use the ID.me system. At this point, most of our clients already have ID.me set up, but this may be new to you if you’ve never downloaded a transcript before.
2. Once your account is created, log in, go to the IRS’s Get Transcript page and click the “Get Transcript Online” button.
The IRS “Get Transcript Online” starting page
3. Select the reason you need a transcript (it’s fine to just select “Other”).
The IRS “Get Transcript” tool reason-selection screen
4. Leave the Customer File Number blank and click “Go.” The screen will display all four (or five, if you have non-filing years) transcript options and the available years.
IRS “Get Transcript” tool – sample options for available transcripts to download
5. Under “Account Transcript”, click the tax-filing year (the top line of the lower-left box — “2023” in this example).
6. After you select your transcript, like magic, a PDF will pop up in a new tab of your browser with all the information you need. (Or it will say “No record of return filed,” if nothing has posted yet.)
7. Print the file to PDF and save it somewhere safe, along with the rest of your tax season documents.
(And if you want to get deep into the weeds, NASFAA has an amazing “Tax Transcript Decoder” that compares the fields on a tax return to the fields on a tax return transcript, and Saving To Invest had fun with highlighters when creating a legend for each row on an account transcript. Tax nerds unite!)
“What About State Information?“
Each state has its own idiosyncrasies, and many have their own system — but quite a few states are using the same software company, so they often look and act similar. Our firm is located in Chicago, so to get a list of the estimated tax payments you’ve made to the state of Illinois, go to https://mytax.illinois.gov/?link=1040EPy (without logging in) and enter your SSN, Name, and the tax year in question.
If you also made payments from a corporation or partnership, you’ll need to log into your company’s MyTaxIllinois business account to get those.
“Now What Do I Do With These Files?”
Seriously? You make sure to use your accountant’s secure file transfer system to send them your PDFs. Please do not ever email sensitive documents. It puts both you and your CPA at risk.
Click the image to watch an excellent 20-minute overview video of the IL Secure Choice Program.
There have been rumblings in the news for quite some time now about small businesses being required to provide retirement plans for their employees — but most owners seem to be turning a deaf ear, presuming that their small size exempts them from the requirement.
Not so! There is a phased-in approach to the State of Illinois’ new plan, and this November (2023) is going to catch a bunch of folks unprepared, as the requirements will extend to any business with five or more employees.
That probably means you — and if this sends you into a panic, no fear… we’re going to outline what the requirements are and will offer a couple of suggestions for getting into compliance.
What Is Illinois Secure Choice?
It’s a combination of legislation that requires most employers to offer a retirement plan to their employees — and a system that fills the gap for employers who do not currently offer retirement savings via payroll deductions.
In the words of the Illinois Department of Revenue, “Secure Choice is a program administered by the Illinois Secure Choice Savings Board for the purpose of providing a retirement savings option to private-sector employees in Illinois who lack access to an employer-sponsored plan.” Check out this excellent 20-minute video for an overview.
Enacted in 2015, the Illinois Secure Choice Savings Program Act has been phased in over many years, starting with companies with many employees, and working its way to those with very few staff by comparison.
Wave One began in 2018, and included employers with 500 or more employees. Wave Two, in 2019, included employers with 100‑499 employees, and another wave later that same year included employers with 25-99 employees. The deadline for wave Four — employers with 16 or more employees — was Nov. 1, 2022. The deadline for wave Five, employers with five or more employees, is Nov. 1, 2023.
Why Is Illinois Making Small Business Owners Do This?
Research has shown that Americans are 15 times more likely to save for retirement when it’s done through a payroll deduction at work. With more than 50% of us unprepared to retire when the time comes — even taking Social Security into account — the state decided that one way to address this problem would be to offer a program that helped the 40% of employers who do not offer a retirement plan a way to auto-enroll its team members into making payroll deductions into a Roth IRA.
Since it is estimated that most of us, when we retire, will need around 70-80% of pre-retirement income, the need to save is essential. The stress that it places on the social safety net when folks do not have sufficient funds to care for themselves after they stop working is enormous, so it’s not surprising that the state decided to facilitate individual savings through their workplaces.
It’s worth mentioning that the gap in retirement savings disproportionately affects workers at small businesses, lower-wage workers, people of color, and women. According to AARP, among businesses with 10-24 employees, nearly 59% of workers are not covered by a workplace retirement plan, and for businesses with fewer than 10 employees, that figure is nearly 73%.
Are Employees Being Forced To Save For Retirement?
No. Although the program starts with auto-enrollment, employees may opt-out (or back in) at any time, just like the majority of 401k plans out there. And as a reminder, the employer is able to offer their own 401k plan instead of IL Secure Choice; there is no obligation to participate in this particular program, as long as another qualified plan exists.
The default option for program participants is to enroll in a target-date Roth IRA with a 5 percent contribution rate. Participants can choose to change their contribution level or fund option at any time. Accounts are owned by individual participants and are portable from job-to-job.
Is The State of Illinois Going To Manage My Retirement Plan?
No. Investments are held in a separate trust outside the Illinois Treasury and are managed by private-sector investment managers. Acensus, a private-sector financial services firm, administers the program, which is overseen by a public board chaired by the Illinois State Treasurer. Each employee gets their own IRA account, which like any other IRA, belongs to them and is not associated with which employer or job they have.
If your company (or non-profit) has been in business for two or more years, has five or more employees, and does not already offer a qualified retirement plan, then you have two choices:
start offering a qualified retirement plan (more on that later); or,
participate in the Illinois Secure Choice program.
Supposedly, Illinois Secure Choice was not intended to replace or compete with traditional employer-sponsored qualified retirement plans, like 401(k), 403(b), SEP and SIMPLE programs. So if you’ve been thinking about starting one of those for your company — especially if you are interested in being able to sock away more retirement money for yourself than an IRA allows — this is the time to adopt a plan for your business, rather than signing up for IL Secure Choice.
That said, the fees and employer contributions involved in these types of plans can be prohibitive to many small businesses, which is one of the reasons the IL Secure Choice program was developed. The three “hurdles” that employers deal with that prevent them from having a retirement plan are 1) the administrative burden, 2) fees, and 3) fiduciary liability. The program was designed to reduce and, as much as possible, eliminate these concerns.
What Do Employers Need To Do To Comply?
Employers need to do the following:
Choose whether to establish a qualified retirement plan or facilitate IL Secure Choice.
Register your organization at employer.ilsecurechoice.com by the state-required deadline (or note that you are exempt because you already have a qualifying plan). All employers should receive a “welcome notification” email or letter with an Access Code; use this to register or inform them of your exemption.
If facilitating IL Secure Choice:
set up account portal
submit and maintain employee roster
submit employee contributions every pay period
keep employee lists up-to-date
reconcile the employee contributions liability account each month and annually (to make sure the correct amounts have been both withheld and submitted)
Why Would We Choose To Sponsor A Qualified Retirement Plan (401k/403b) Instead of Illinois Secure Choice?
Our company, like many others, has chosen to offer a 401(k) plan instead of IL Secure Choice. Why?
We are fans of increasing our own retirement contribution limits well beyond what can be saved with an IRA-based plan like IL Secure Choice (generally $6,500);
The competitive advantage of offering a plan that includes employer contributions (not allowed with IL Secure Choice) is significant in our field of work;
We love the ease of not having to maintain employee lists or submit contributions (more on this below).
With Gusto, our preferred payroll provider (my referral link gets you $100 or more when you run your first payroll), and Guideline, our preferred retirement plan, the two systems sync with each other, so there’s no need to maintain employee lists or submit contributions — it all happens automatically. This is a huge administrative burden lifted for us. (Plus, our clients receive the first five months of Guideline fees free of charge, so that’s an added bonus.) This alone certainly isn’t worth it for your company when deciding which path to choose, but if you’re also eager to increase your own retirement contributions as a business owner, and to distinguish yourselves as a desirable employer in a competitive labor market, then in my opinion, it’s a no-brainer.
This came up in the Q&A in my state rep’s presentation (see the bottom of this post for the link), and the response was that although by statute, penalties can certainly be assessed, the goal is not to punish employers who are trying to do the right thing. Right now they are focused on outreach, education, and trying to ensure they are reaching employers who are required to comply. As long as you register as soon as you discover that you missed the deadline, you should be fine. Otherwise, employers that do not comply could face penalties of $250 per employee for the first year and $500 per employee for each subsequent year.
What Options Do My Employees Have For Investing?
Lots. And they’re good — the board who developed this program really was thoughtful in their design. To learn more, please watch the video I referenced at the beginning of the post, as this is meant to be a guide for employers who are trying to suss out their requirements. If you’ve already decided to go for it and facilitate the IL Secure Choice Plan, then you should definitely watch the video to learn more. It’s only 20 minutes long, you can do it!
How Do I Onboard And Submit Contributions?
Again, this blog post is meant to help employers sort out their requirements and get their bearings. To learn how it all works, please watch the 20-minute video referenced at the beginning of the post. (Honestly, if you can’t even watch a short video, then you’re really not going to like the administrative overhead of facilitating the program, and might want to consider going with the Gusto/Guideline combo I mentioned earlier.)
Where Can I Learn More?
The FAQ on the Illinois Secure Choice website is astounding in its comprehensiveness. Check it out. If you have a question, someone has likely already answered it there.
And if that all wasn’t enough for you, check out the most excellent version of this same presentation that was offered by my state rep’s office in December of 2022. It’s the same presenters of the slideshow portion as above, but there are also other participants that offer more context, and a very long and informative Q&A. They’ve granted me permission to share it here, and you can use passcode Vd*Uqgn2 to view or download the zoom recording.
Click the image above to access a zoom recording of the IL Secure Choice webinar — Passcode: Vd*Uqgn2
They truly did a great job with both the presentation and the Q&A and I encourage you to watch the whole thing while you’re reviewing the program details on the IL Secure Choice website.
Good luck navigating the system (if you are one of our clients — please reach out and we’ll help you), and congratulations on helping your employees save for retirement!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
There are multiple options for paying personal quarterly estimated taxes. You can: have your tax preparer create vouchers that you then print and mail with a check; prepare your own vouchers for the IRS and IL DoR; or pay online.
Since March 2020, agencies have had so many challenges with paper-mailed checks and vouchers that we are encouraging everyone to make all tax payments online.
The due dates for estimated quarterly taxes are approximately: 1Q: April 15 2Q: June 15 3Q: September 15 4Q: January 15 — however for state taxes, especially for cash-basis filers and those in states with PTE tax, we recommend making the final payment by December 31st.
For the Illinois Department of Revenue (IDOR), go to the MyTax Illinois site. If you already have an account for sales taxes or another reason — do not log in, unless you are making business tax payments. Then click the “> Make an IL-1040, IL-1040-ES, or IL-505-I payment” link (see screenshot above).
Next, follow the instructions for making a quarterly estimated tax payment; it will make you enter your personal information (SSN, etc.) and ask you what kind of tax payment you wish to make.
It may require you to enter your driver’s license information or your AGI from a past tax return to confirm identity and get your IL-PIN.
Then it will take you to a Payment Information page.
You’ll want to select “IL-1040 Estimated Payment” and enter your tax year. Make sure it’s for the correct year and quarter — this is very important. The example below is for the fourth quarter of 2021.
Then, enter your payment information and click the Submit button.
It will require you to enter and confirm your email address before clicking OK.
Make sure to print the confirmation screen, even though they will send you an email receipt — every once-in-a-while IDOR fails to push the request through, and the amount is not debited or recorded. If you have the print-screen, you can prove you attempted to pay it on-time and that the mistake was theirs.
It will also include a confirmation code, the date/time of the request, the reporting period and amount, and bank withdrawal information. You can click “Printable Confirmation” or just print the webpage to pdf.
Please make sure to note how much you paid to each agency and on which dates — and let your tax preparer know this information as well. Securely uploading copies of the final confirmation screen to your tax preparer or bookkeeper is a great practice, so they can easily store the info in your file.
And if you use QuickBooks or another bookkeeping program, please make sure to enter the quarter, year, and “estimated tax” so that you or your bookkeeper or accountant or tax preparer can make sure it’s applied to the correct year, and for the right type of tax.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Chicago businesses should take a moment to review upcoming changes before year-end.
The Chicago Department of Business Affairs & Consumer Protection (BACP) was designed to “license businesses and public vehicles, provide business education and access to resources, enforce the Municipal Code, and protect consumers from fraud,” which means that sometimes they have to create and enforce ordinances and regulations that are a bit arduous or challenging for small businesses. But in the public interest, we need to take a moment to review the annual changes and requirements to make sure we have everything in order. (Besides, the penalties for willful ignorance are no fun.)
With that in mind, here are some things you’ll need to make sure to take care of before ringing in the new year.
Illinois Department of Human Rights Sexual Harassment Training For the record, this one is state-mandated, not just city-wide. The Illinois Workplace Transparency Act requires all employers to comply with the sexual harassment prevention training by December 31, 2020, and thereafter must provide annual training to all employees. As of July 1, 2020, the Illinois Human Rights Act defines “employers” as those having one or more employees (replacing the prior threshold of 15 or more employees in Illinois for most types of discrimination). This means that every employer in Illinois must comply with this sexual harassment training requirement, for all employees working in Illinois, regardless of their status as part-time, intern, or temporary. There is no requirement to train independent contractors, though it is recommended.
Chicago Minimum Wage Back in 2014, the city implemented a gradual increase of the minimum wage. It applies to any employee who works at least two hours in any two-week period. As of July 1, 2022 the minimum wage in Chicago is $14.50 per hour for employers with 4 to 20 workers, and $15.40 per hour for employers with 21 or more workers. Tipped workers have a minimum wage of $8.70 for employers with 4 to 20 workers, and $9.24 for employers with 21 or more workers. If a tipped worker’s wages plus tips do not equal at least the full minimum wage, the employer must make up the difference. BACP offers a one-hour-long free webinar on the ordinance.
Chicago Paid Sick Leave This ordinance went into effect on July 1, 2017, and was so poorly-written that folks are still confused. It applies to any business or individual that employs at least one “employee” and has a facility within Chicago’s city limits (though Cook County followed suit a few months later and has a similar requirement). The term “employee” covers anyone who works at least 80 hours within a 120-day period (20 hours a month). – For hourly employees, paid sick leave accrues at one-hour for every 40 hours worked. Salaried-exempt employees are presumed to have worked 40 hours/week. – Employees are capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit. – Employers must permit employees to carry over half of their accrued leave, to a maximum of 20 hours of unused sick leave each year (40 for employers with 50 or more employees). – Employers are not required to pay out any accrued but unused sick leave upon employment termination.
Illinois Secure Choice Retirement Savings Plan State law now requires every Illinois employer with 16 or more employees to either offer their own retirement program, or to sign up to help staff contribute to personal IRAs via Secure Choice. As of November 1, 2023, this obligation will extend to employers with 5 or more employees.
Aside from the administrative burden, there are no costs to small businesses owners. The program facilitates saving for retirement — but is still limited to the IRS’s annual $6000 cap ($1k higher for those 50 and up), increasing to $6,500 in 2023. (For those interested in a higher limit, I strongly recommend Guideline 401k plans for small businesses, which use low-cost Vanguard Admiral Shares — my own clients have the first five months of plan fees waived.)
(I’ll be providing a breakdown and analysis of the plan and the info-session in an upcoming blog post. Spoiler alert: I’m mostly pretty happy with this legislation! –This doesn’t happen often.– However, most sole proprietors will want to make sure to implement their own savings plan simultaneously, since they won’t be eligible to participate; and many others will prefer the 401k approach due to higher limits.)
State Unemployment Insurance Contribution Determination Rate If you have employees, you should normally have received a letter from IDES with your 2023 unemployment rate determination by now, but they are running behind and the letters won’t be posted on mytax.illinois.gov until January 5th, 2023. As soon as they do, you will need to update your payroll company’s records with the new unemployment tax rate, or it can cause expensive problems with reporting and reconciliations in the future. I wrote a blog on how to do this if you’re using Gusto for payroll.
HAPPY NEW YEAR, CHICAGO SMALL BUSINESSES: WE WOULDN’T BE A WORLD-CLASS CITY WITHOUT YOU!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
On June 27th I woke to find dozens of notifications from MyTax Illinois in my email inbox — one for each and every client of ours who files sales taxes.
Just in case you got one or more of these yourself and haven’t logged in to check it out yet, here’s what it looks like —
It doesn’t give you much to go on — just a sort of “hey we saw you’re registered to file sales taxes, so you should read these four bulletins which may or may not apply and you’re unlikely to understand anyway” note.
But, if you dig through the bulletins you’ll find two in particular that could be important to a small business owner. One of them I covered in a recent blog post — Illinois Grocery Sales Tax Reduced by 1% For The Next 12 Months — it’s only likely to apply if you sell groceries that qualify for the low-tax food rate.
If you want to skip my rant and go to the section on what a small business owner should do next, scroll down to the next line in bold.
While I’m super-supportive about giving working families a break on prices — this is a terrible way to do it! It costs small businesses more in accounting and bookkeeping work than it could possibly save anyone.
It requires a small business owner — already overworked and without sufficient staff, and having in most cases barely survived the pandemic and still scraping to get by — to paw through every item in their Point of Sale system and change sales tax on an item-by-item basis. It’s hard enough to change sales tax amounts on a department-by-department basis… but item-by-item? Honestly, it will cost them so much more to figure this out than anyone will ever save on this “holiday”. And worse are the folks who don’t keep inventory in an automated system. They are stabbing in the dark and have no way to implement it at all. I just have to hope they don’t get audited by IDOR.
To make matters worse, the guidance says that the retail selling price per clothing item must be less than $125, and that supplies must be used by students in the course of study, in order to qualify. It’s simply impossible to program any Point of Sale system to create a sales tax discount on certain dollar-amounts of products and not others, or to change the sales tax rate on an individual item for some sales but not others (i.e., only after finding out that it will be used in the course of study at school). If small business owners are going to be able to comply with any of these rules, it will have to apply to all sales of a certain product — not just some sales.
This type of well-intentioned law — like the bag tax, carbonated beverage tax, and ill-fated sweetened beverage tax — has my full support from a social perspective. But they are so poorly-worded, difficult-to-enact, and misguided, that no small business could ever properly implement any of them cost-effectively.
This is just like that. Well-intentioned but completely out of touch and indicative that our representatives don’t have a clue what’s going on “on the ground”.
I received a hilarious text from a client when she read the IDOR notice:
Texts from a client when she read the IDOR notice.
As an aside, I wrote my state rep and begged him not to support this kind of thing in the future, and to work with other elected officials to find more reasonable, sustainable ways to provide relief to hard-working families, without crushing small business owners along the way. His response was truly wonderful, and he apologized profusely for not involving stakeholders in the last-minute rush to get it passed.
“Looks like we really did a terrible job here. You’re absolutely right that this was an example of government decision making at its worst. I think in the abstract these are largely good ideas, but looking at that guidance, it’s clear that implementation is going to be a nightmare. You have my word that I’ll try to do a better job of asking questions like “yes but is this feasible?” or “how much of an administrative burden is it placing on our small business owners?” when we’re contemplating things like this in the future.”
What does this mean for you, the small business owner? What are your next steps?
Follow these steps, in order, to determine what actions to take:
Step 1 – Check this list to see if you sell any products on it:
The great news is, that if you don’t sell any of these products, then you do not need to make any changes or do any extra work. However, I’d recommend rehearsing the phrase, “the sales tax holiday is only for back-to-school clothing and supplies, and as we don’t sell any items that would qualify, we aren’t able to offer you the 5% sales tax discount.” Because for sure there are going to be people who think that anything they buy during the 10-day period will be at a lower sales tax rate.
If you do sell products on the list above, then move on to the next step.
Step 2 – Identify all the products you sell that are on the list above. If any of the clothing items are priced at $125 or more, cross them off. Then make sure none of the remaining products you just identified are on this list of non-qualifying items:
Step 3 – Look at the items that made it onto your “qualified” list, and ask yourself who your clients generally are that buy these items — are they likely to be used for school? If the answer is definitely no, then again — no worries. You do not need to make any changes or do any additional work. (Except rehearsing that phrase from above and teaching it to your staff.)
However, if the answer is maybe or likely, then we’ve got some work to do.
Step 4 – If the answer is maybe, then you have to decide whether it’s worth your effort to go through your Point of Sale system and change the tax rate on each product that qualifies (and then change it back 10 days later) — or if you don’t have a POS system, if it’s worth it to figure out how to manually change the tax rate on each sale of one of these items, and to track how many were sold during the period of Aug 5-14. Because an alternative might be to just leave everything at the higher sales tax rate unless a customer specifically states that they are buying it for school use (you could even ask each customer who buys one of these items during that period if it’s for school use or not) — and then just give them a discount and write down the sale somewhere so that later on when you file your ST-1, you know how much to enter onto the Schedule GT so you get your money credited back to you — yes, I know that this means your cash drawer and your Sales Tax Payable accounts will be off. You can just have your accountant book an adjustment after the correct amount of tax is paid to the state. Or, in all honesty, you could even give them the discount out of the business’ own pocket and it would still be cheaper than reassigning tax rates in your POS system.
Step 5 – On the other hand, if the answer is likely, then you need to:
Create a new tax rate in your POS system called “holiday rate” that is 5 points lower than the current sales tax rate (in Chicago, 10.25% — so the new rate will be 5.25%). Hopefully your system allows enough rate slots to accommodate this. If not, maybe consider the approach outlined in Step 4.
After close of business on August 4th, assign that new rate to all the items that qualify.
Make a note to reassign the old rate to all those items after the close of business on August 14th.
Be sure you can run a report of all the items that sold at this rate, since you’ll need to declare that total on a separate tax form (Schedule GT) when you prepare your monthly sales tax return (ST-1).
If you do not have inventory or non-inventory sales-taxable items stored in your POS system — or if you have a cash register instead of a POS — then you’ll need to look at how you charge sales taxes to each item and come up with a plan that mimics the approach I just outlined. For example, if your system allows you to manually edit the sales tax rate on a sale-by-sale basis, you could keep a list of all the qualifying items by the register, and simply adjust for each qualifying sale. The problem is that only some of the items get the discounted rate, so if this is how your system works, you’d have to run a separate sale for all the qualifying items and then one for the non-qualifying items. You also will need to keep a list of all the sales made at the lower rate, since as mentioned above, you’ll have to note those on a separate schedule when you prepare your sales tax return. And if your system doesn’t allow you to manually edit the sales tax rate, you’ll have to take the approach I mentioned earlier, whereby you just give the customer a discount and adjust the inaccurate books later, hoping it all comes out in the wash.
Step 6 – Once the time comes to file your monthly (or quarterly) ST-1 sales tax return, you’ll notice there is an additional form– Schedule GT, Sales and Use Tax Holiday and Grocery Tax Suspension Schedule. This was created for retailers to report sales of qualifying items sold during the sales tax holiday. Per IDOR:
Form ST-1 has not changed. Retailers should continue to report their normal taxable sales, including sales of qualifying items, on Lines 4a and 4b, Lines 6a and 6b, or Lines 12a and 12b, of Form ST-1 and will then use Lines 2a and 2b, Lines 3a and 3b, or Lines 4a and 4b on Schedule GT to calculate a credit against the tax reported on those lines for the tax they are not collecting during the state sales tax holiday.
So you’ll report the sales of these items, on which you charged the lower tax amount, on Schedule GT and it will flow onto your ST-1 as a credit so that you’re not remitting more to the IDOR than you collected.
Whichever approach you take, make sure to rehearse the phrase, “the sales tax holiday is only for back-to-school clothing and supplies, and as we don’t sell any items that would qualify, we aren’t able to offer you the 5% sales tax discount.” Lots of folks read the headlines, but not the small print.
Hopefully this was all clearer to read than it felt to write it! And please make sure your state representative knows how you feel about having had to think about it in the first place. Small businesses have enough to deal with these days!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
State and county taxes are still in place, meaning that in the City of Chicago, the tax on groceries went from 2.25% down to 1.25%.
Interestingly, medical products and devices — which are usually taxed at the same low rate as groceries — will remain taxable at their usual rate instead of getting the additional 1% suspension.
For retailers, this means that all “grocery low-tax” departments will need to have the tax reduced in Point of Sale systems, but not in medical/drug departments or grocery high-tax (alcoholic beverages, food consisting of or infused with adult use cannabis, soft drinks, candy, and food that has been prepared for immediate consumption).
There are also signage requirements for retailers. Per the IDOR’s May bulletin:
Retailers, to the extent feasible, shall include the following statement on any cash register tape, receipt, invoice, or sales ticket issued to Retailers, to the extent feasible, shall include the following statement on any cash register tape, receipt, invoice, or sales ticket issued to customers: “From July 1, 2022, through June 30, 2023, the State of Illinois sales tax on groceries is 0%.” If it is not feasible for the retailer to include the statement on any cash register tape, receipt, invoice, or sales ticket issued to customers, then the retailer shall post the statement on a sign that is clearly visible to customers. The sign shall be no smaller than 4 inches by 8 inches. A printable sign will be available on our website at tax.illinois.gov.
In related tax news, the same state budget also provides automatic $50 income tax rebates for individuals who made less than $200,000 in 2021, $100 for couples filing jointly who made less than $400,000, and $100 per dependent claimed in 2021, up to three. Additionally, the Illinois state earned income credit will increase from 18% to 20% of the federal credit, and eligible homeowners will receive property tax rebates equal to their 2021 property tax credit, up to $300.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
The annual scheduled increase in Chicago’s minimum wage goes into effect on Friday, July 1, 2022. The Chicago minimum wage is tiered for large businesses with 21 or more employees, and small businesses with 4-20 employees. Since reaching $15 per hour in 2021, the minimum wage for larger employees increases annually according to the Consumer Price Index or 2.5%, whichever is lower. The minimum wage for small businesses continues to increase towards $15 per hour by 2023.
As of July 1, 2022, the Chicago minimum wage will be:
$15.40 for employers with 21 or more employees (including all domestic workers, regardless of the number employed)
$14.50 for employers with 4-20 employees
The minimum wage for tipped employees will be $9.24 for employers with 21 or more employees, and $8.70 for employers with 4-20 employees (employers must make up the difference between any tips received and the applicable minimum wage for non-tipped workers.)
Anyone age 24 or younger employed by, or engaged in employment coordinated by, a nonprofit organization or government agency will see a minimum wage increase to $12.00.
Employers that maintain a business facility within the City of Chicago or are required to obtain a business license to operate in the City are required to pay their employees at least the Chicago minimum wage. Additionally, any employee that works two hours or more in the City within a two-week period must also receive at least the Chicago minimum wage.
Chicago BACP recently presented a free hour-long webinar called “Employer Responsibilities Under Chicago’s Minimum Wage Ordinance”, available here.
Employers in “covered industries ” (see below) to post work schedules with at least 14 days’ notice, an increase from the previous 10 days’ notice.
Employees will need to earn less than $29.35 per hour or $56,381.85 per year to gain protection under the Fair Workweek Ordinance.
Covered industries include building services, healthcare, hotel, manufacturing, restaurant, retail, or warehouse services.
Chicago businesses are required to post the Minimum Wage Notice and Fair Workweek Notice at their business. The notices will be available to workers and business owners in English, Spanish, Polish, Simplified Chinese, Tagalog, and Korean by July 1, 2022. Employers that violate the minimum wage ordinance can be fined $500 to $1,000 per day for each offense.
Chicago BACP recently presented a free hour-long webinar called “Employer Responsibilities Under Chicago’s Fair Workweek Ordinance”, available here.
Sexual Harassment Law Updates
As of July 1, 2022, all employers in the city of Chicago must have a written policy on sexual harassment. Additionally, employers are required to display a public notice advising of the prohibition on sexual harassment where employees can see it, and there are increased training requirements. A model policy, written notice, and training templates are available by visiting Chicago.gov/SexualHarassment.
Recent updates to the law include:
Adding sexual misconduct to the definition. Sexual misconduct is defined as any behavior of a sexual nature which also involves coercion, abuse of authority, or misuse of an individual’s employment position.
Requiring all employers to have a written policy on sexual harassment. The written policy must be available in the employee’s primary language within the first calendar week of starting employment.
Increasing the statute of limitations from 300 to 365 days.
Create flexibility to notify a respondent up to 30 days from the time of complaint (compared to 10 days currently), to mitigate any retaliation such as denial of a reasonable accommodation request.
Requiring additional annual training for all employees including the one hour of prevention training aligned with State requirements and one hour of bystander intervention. Supervisors and managers are required to have an additional one hour of training.
Increasing the penalty for individuals or businesses that participate in discriminatory practices in the workplace including sexual harassment. The penalty is increasing from $500 – $1,000 per violation to $5,000 – $10,000.
It seems not all small business owners are aware of the responsibility to provide Chicago workers paid sick leave. It applies to any business or individual that employs at least one “employee” and has a facility within Chicago’s city limits (though Cook County now has a similar requirement). The term “employee” covers anyone who works at least 80 hours within a 120-day period (20 hours a month). – For hourly employees, paid sick leave accrues at one-hour for every 40 hours worked. Salaried-exempt employees are presumed to have worked 40 hours/week. – Employees are capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit. – Employers must permit employees to carry over half of their accrued leave, to a maximum of 20 hours of unused sick leave each year (40 for employers with 50 or more employees). – Employers are not required to pay out any accrued but unused sick leave upon employment termination.
Even the least expensive version of Gusto Payroll allows for a sick pay plan, and it’s not hard to set up and track (see instructions here).
Reminder that if you sign up and run Gusto using my link, you’ll get a free trial period… and after running your first payroll you’ll receive a $100 Visa gift card! My clients instead will receive a 15% discount for the life of the plan.
And a final point: all Chicago worker protections are enforced by the BACP Office of Labor Standards (OLS). The OLS is dedicated to promoting and enforcing Chicago’s labor laws, including Minimum Wage, Paid Sick Leave, Fair Workweek, and Wage Theft Ordinance. The BACP OLS webpage offers informational materials on Chicago’s Labor Standards Laws.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Last year we began requiring all clients to submit a copy of their IRS Account Transcript along with their Tax Organizer and other annual tax prep documentation.
The initial issue was that not everyone kept the Form 1444 notices regarding how much stimulus was received. Why would this matter? If a taxpayer did not receive the full amount, then they are entitled to recoup the difference on their annual tax return. (But don’t worry: if you received too much, you don’t have to pay it back — unless it was obtained fraudulently.) Not only does this issue remain for 2021, but the problem is exacerbated, because now we also have child tax credit payments to track — some folks received advances while others decided to opt out (and unlike stimulus payments, any excess child tax credit payments may have to be repaid).
In addition, we’ve also noticed quarterly estimated taxes are often reported incorrectly by clients — especially with additional complexities due to recent state legislation to get around federal limits on deducting state taxes.
We’ve come to the conclusion that the best solution to these concerns is to continue to ask clients to download their annual Account Transcript and provide it to us via secure upload. It’s free, reasonably easy, and reliable.
Instructions for obtaining the Account Transcript for folks who have already registered for an IRS online account follow — if you did this last year, you don’t need to follow all the steps in last year’s post about how to create an account. Just sign in to the system and you should be golden.
(Yes, the IRS will ask you to create a new ID.me account “as soon as possible” and you won’t be able to log in with your existing IRS username and password starting in summer 2022. But for now, no need to create a new account in the new system — the old one works just fine.)
You’ll need to select the reason you need a transcript.
In this case, you would select “Other”.
4. Leave the Customer File Number blank and click “Go”.
5. The screen will display all four types of transcript options and the available years.
6. Select “2021” under “Account Transcript” (the box in the lower-left).
Make sure you are selecting the right kind of transcript — in this case you want an Account Transcript. (Click here for information on what each of the types of transcripts are.)
And like magic, a pdf pops up in a new tab of your browser with a letter from the IRS — and if you scroll down to the bottom, there’s section detailing all the transactions you need.
At this point, print the file to pdf and save somewhere safe, along with the rest of your tax season documents.
What about state information?
To get a list of the estimated tax payments you’ve made to the state of Illinois, go to https://mytax.illinois.gov/?link=1040EPy and enter your SSN, Name, and the year (in this case 2021).
If you also made payments from a corporation or partnership, you’ll need to log into your MyTaxIllinois business account to get those.
Done! Let the tax return preparing begin!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
JOINT READINESS SUMMIT: This Friday, February 4 from 9:00AM to 4:00PM
Join the City of Chicago, Cook County, and State of Illinois leaders as well as other experts to learn about what it takes to be “ready” to apply for grants and contracts funded by American Rescue Plan Act (ARPA) and other economic recovery funding streams.
This event will take place via Zoom and will be simultaneously streamed on YouTube. Meeting information will be sent via email prior to the event. ASL interpretation and closed captioning will be provided.
Learn about the Chicago Recovery Plan — the City’s plan to amplify once-in-a-generation federal funding to create an equity-based investment strategy to catalyze a sustainable economic recovery from the COVID-19 pandemic. The funding under the Chicago Recovery Plan, which includes funding from the American Rescue Plan Act and over $600 million in local bond funds, is allocated alongside all other available resources in the City budget to maximize this opportunity over the next 3-5 year funding period. The initiatives and strategic priorities that make up the Chicago Recovery Plan were a result of several stages of community engagement and input during the 2022 budget development process. The list of current funding opportunities can be found here: Funding Opportunities (chicago.gov)
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
The step-by-step instructions I painstakingly wrote up earlier this year for making business replacement income tax estimated and extension payments are now out-of-date, because IDOR revamped their MyTaxIllinois website in September (grrrrr). So here are the basic instructions (screenshots are coming soon, but this will have to do for now):
— Log into the business’s My Tax IL account — On the ‘Summary’ tab, look for the ‘Business Income Tax’ section — Click on the link for ‘View more account options’
There are two ways to do it from here; the first is: — In the ‘Account Options’ section, click the link for ‘Make An Estimated Payment’ — Select the period you want to pay (which is 12/31/2021 for tax year 2021 — choose a later period if paying estimated taxes for 2022) — Click the first ‘Add Payment’ hyperlink in the Payment Schedule table for each payment you would like to schedule. — If your payment information is saved in MyTax Illinois, then in the ‘Choose’ tab you can select the dropdown under ‘Payment Channel’ — Otherwise, select ‘New’ and enter your company bank info. — In either case, on the right where it says ‘Payment’, you can change the payment’s debit date and enter the amount. — Click Submit, and re-enter your password for security purposes
Alternatively: — In the ‘Periods and Submissions’ section, click the link for ‘View Account Periods’ — Click the 12/31/2021 link so that your payment is applied to tax year 2021 (or a later period if paying 2022 estimated quarterly taxes) — In the upper right corner of this page, click the ‘Make A Payment’ link — Select the ‘Bank Account Debit’ link — Click the IL-1120-ST Payment link (ST denotes a “Small Business” payment) — Enter the amount you want to pay in the Amount and Confirm Amount fields — Click Submit, and re-enter your password for security purposes
Congrats, you did it!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
