Introduction

How Accounting Works in the U.S. for Small Businesses

• Bookkeeping: Daily transactions (sales, expenses, payments) are recorded using software like QuickBooks, Xero, or Wave, which are popular in the U.S. Businesses must maintain clear records for tax purposes and audits.
• Financial Reporting: U.S. businesses prepare standard reports like income statements, balance sheets, and cash flow statements, often following Generally Accepted Accounting Principles (GAAP).
• Tax Compliance: Businesses file federal income taxes with the IRS, plus state and local taxes, which vary by location. Sales tax applies in most states for goods and some services, with rates and rules differing by state.
• Payroll: If you have employees, you must withhold federal and state income taxes, Social Security, and Medicare, and file payroll taxes quarterly or annually.
• Record Retention: The IRS requires businesses to keep financial records (receipts, invoices, bank statements) for at least three to seven years, depending on the document.

The Role of Accountants in the U.S.

• Tax Preparation and Filing: Accountants file federal, state, and local taxes, ensuring compliance with IRS deadlines (e.g., April 15 for annual income taxes) and state-specific requirements. They also identify deductions and credits unique to the U.S., like the Qualified Business Income (QBI) deduction.
• Bookkeeping Support: They set up and maintain accounting software, reconcile accounts, and ensure accurate transaction records.
• Payroll Management: Accountants calculate employee withholdings, file payroll taxes (Form 941 quarterly), and issue W-2 forms for employees or 1099 forms for contractors.
• Financial Reporting: They prepare GAAP-compliant financial statements for internal use, lenders, or investors.
• Compliance: Accountants ensure adherence to federal laws (e.g., IRS regulations) and state-specific rules, such as sales tax collection or business licenses.
• Advisory Services: They provide guidance on U.S.-specific financial strategies, like managing cash flow or navigating tax incentives for small businesses.

How to Set Up Accounting in the U.S.

1. Select a Business Structure: Choose a structure (sole proprietorship, LLC, corporation) as it determines tax obligations. For example, LLCs file taxes as pass-through entities, while corporations face double taxation. Consult an accountant to align with U.S. tax rules.
2. Obtain an EIN: Apply for a free Employer Identification Number from the IRS website (irs.gov) for tax filings and banking.
3. Open a Business Bank Account: U.S. banks require an EIN to open a business account, which keeps personal and business finances separate, a key IRS expectation.
4. Set Up Accounting Software: Use U.S.-compatible software like QuickBooks or Xero to track transactions and generate reports. Most integrate with IRS and state tax systems for streamlined filing.
5. Hire an Accountant: Engage a CPA or bookkeeper familiar with U.S. small business taxes. Find them through local business networks, referrals, or platforms like Upwork.
6. Understand Tax Deadlines: Key dates include:
   • April 15: Annual federal income tax filing for most businesses.
   • Quarterly Estimated Taxes: Due January 15, April 15, June 15, and September 15 for self-employed individuals or businesses with variable income.
   • Payroll Taxes: Quarterly (Form 941) or annually (Form 940 for unemployment taxes).
   • State Taxes: Vary by state; check with your state’s revenue department.
7. Collect and Remit Sales Tax: If your business sells goods or taxable services, register with your state’s tax authority to collect sales tax and file returns (monthly, quarterly, or annually, depending on the state).
8. Maintain Records: Keep digital or physical copies of receipts, invoices, and bank statements for at least three years, as required by the IRS for audits.

U.S.-Specific Accounting Considerations

• Federal vs. State Taxes: Federal taxes apply nationwide, but states have unique rules. For example, California has a high state income tax, while Texas has none but requires a franchise tax.
• Sales Tax Variability: Each state sets its own sales tax rates and rules. Some states, like Delaware, have no sales tax, while others, like New York, have complex local add-ons.
• Payroll Complexity: U.S. payroll involves withholding federal and state taxes, plus Social Security and Medicare contributions. Accountants ensure compliance with forms like W-2 and 1099.
• Tax Deductions: Common deductions include business expenses (e.g., rent, supplies), home office costs, and mileage. Accountants maximize these within IRS guidelines.
• Audit Risk: The IRS may audit businesses with inconsistent records or high deductions. Accurate bookkeeping is essential.

Tips for Newcomers

• Learn U.S. Tax Terms: Familiarize yourself with terms like EIN, W-2, 1099, and Schedule C (for sole proprietors).
• Use IRS Resources: Visit irs.gov/businesses for guides on taxes, EIN applications, and compliance.
• Check State Rules: Research your state’s tax authority website for sales tax, business licenses, and state-specific filings.
• Leverage Software: U.S.-focused accounting software simplifies tax calculations and filings.
• Network Locally: Join U.S. business groups or chambers of commerce to find accountants familiar with your industry.
• Consult Regularly: Meet with your accountant quarterly to stay on top of taxes and compliance.

Resources

• IRS Small Business Tax Center: irs.gov/businesses offers tools, guides, and tax forms.
• Small Business Administration (SBA): sba.gov provides resources on U.S. business operations.
• State Revenue Departments: Search for your state’s tax authority (e.g., revenue.[state].gov) for local rules.
• Local Support: Community organizations or SBA offices offer workshops for newcomers.

Conclusion