Bank finance articles and tips

The Business Assets

Assets are economic resources that are owned by a business and are expected to benefit the future operations. In most cases, the benefit to future operations comes in the form of positive future cash flows. The positive future cash flows may come directly as the asset is converted in to cash (collection of receivable) or indirectly as the asset is used in operating the business to create other assets that result in positive future cash flows (building, and land used to manufacture a product for sale). Assets may have a definite physical form such as buildings, machinery, or an inventory of merchandise. On the other hand, some assets exist not in physical or tangible form, but in the form of valuable legal claims or right; examples are amounts due from customers, investments in government binds and patent rights.

Do you own a small business and pay workers to perform services for you? If so, are you wondering whether to give them a W-2 or a 1099-MISC? Read on to find out.

The short answer to this question is simple: It matters a lot. And there's a lot at stake here, so do not take this issue lightly.

The question of what tax reporting form to give your workers is just the tip of the iceberg of a huge issue known as "employee vs. independent contractor." If your workers are employees, they should receive a Form W-2. If they are independent contractors, they should receive a Form 1099-MISC.

Why does it matter? It matters because if you've been paying your workers as employees, you should have been issuing paychecks and withholding income taxes (federal and state) as well as payroll taxes (Social Security and Medicare tax) from those paychecks. You should have also been paying these taxes to the appropriate government agencies over the course of the year. Depending on the amount of withholdings, you can be required to make payments weekly, monthly or quarterly. In addition, if you have employees you should also be calculating and paying federal and state unemployment tax, which can also be due every quarter.

If you own an S Corporation, you must file Form 1120S every year to report income and expenses to the IRS. Part of Form 1120S is a balance sheet. Read on to find out whether you have to complete this report in order for the tax return to be complete.

First, let's review the purpose of a balance sheet - it is a financial report that lists the asset, liability and shareholder's equity accounts. It is found on page 4 of Form 1120S and is known as Schedule L.