How to Get Your Small Business Tax Ready | Final Review

February 1, 2013, Filed under: Bookkeeping,Taxes,Tips — Evlyn @ 9:00 am

 

In our last segment we discussed making sure your balance sheet is correct. The seventh and last step in getting your small business tax ready is conducting a final review.

 

Below is a list of areas of review to confirm your numbers are accurate:

  • Review the equity section of the balance sheet.
    • Check to see if all amounts that where taken out of the business for personal use have been accounted for as draws by you the owner.  This includes transfers of cash and cash withdrawals from the business bank accounts or petty cash.
    • Check to see if you have accounted for the dollar value of any product or items purchased by the business that you used personally.  This dollar value should also be put into the draw account.
    • Review certain expense accounts
      • Office and other supply expense accounts for items that have a useful life of more than one year
      • Repairs and maintenance for items with a high expense that should be viewed as an improvement rather than a repair
      • Miscellaneous expense:  If you have an account you use for items you aren’t sure of what category they should go into, you will need to have an explanation of what these are so they can be properly recorded on your tax return.

 

Congratulations! You now have the proof and documentation necessary to have your 2012 tax return done accurately and properly.  My advice for you is to start preparing now for the 2013 tax season.  If you proof the numbers regularly, preparing for next year’s return will be a lot easier.

 

If you have any questions regarding getting your small business ready for the 2012 tax return season, contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

 

 

How to Get Your Small Business Tax Ready | Balance Sheet

January 30, 2013, Filed under: Bookkeeping,Taxes,Tips — Evlyn @ 1:33 pm

 

In our last segment we discussed correctly reporting your business assets. The sixth step in getting your small business tax ready is making sure your balance sheet is correct.

 

The balance sheet is a valuable tool in the course of running your business.  The balance sheet shows dollar values for what you own, what you owe and what is left over for you personally.   For these accounts you can find one or two pieces of paper that prove the numbers are accurate.

 

Assets Include:

  • Proof that all sales and cost of goods are recorded and accurate
  • Cash and bank accounts:  If you don’t reconcile with your bank statement, you need to start!  Reconciling with your bank at year-end shows that all items on the bank statement are accounted for in your bookwork.
  • Accounts receivable:  This is money due to you from clients or customers.  This shows that all sales are recorded in your paperwork.
  • Inventory:  If you sell product here is where you show total of anything on your shelves for sale
  • Fixed assets:  These are the depreciable items. Some examples of fixes assets are equipment, furniture, building, and vehicles.

 

Liabilities include:

  • Proof that all purchases and expenses are recorded and accurate
  • Accounts payable:  The amount owed to your creditors
  • Sales tax and payroll taxes collected and owed to the government agencies  (January reports prove these amounts)
  • Business notes and loans payable, lines of credit, business credit card balances :
    • Credit card receipts from January through December should be recorded in expenses on date purchased and recorded in a credit card payable account. When payments to the credit card are made they are recorded in the credit card payable account.  The balance in this account should be equal to what the credit card statement says at year end.
    • Notes and loans should also be reviewed at year to prove that the balances equal balances per bank, showing that interest expense was recorded properly.

 

Balance sheets items take one or two pieces of backup paper to prove their accuracy.  If your assets and liabilities are correct, chances are so are your income and expense.

 

Do you have additional balance sheet questions? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

 

How to Get Your Small Business Tax Ready | Business Assets

January 28, 2013, Filed under: Taxes,Tips — Evlyn @ 1:25 pm

 

In our last segment we discussed maximizing your home office tax deduction.  The fifth step in getting your small business tax ready is making sure you are correctly reporting your business assets.

 

Business assets are found on your balance sheet and not the profit and loss statement. These business assets are items which will be useful for more than one year.  The IRS has determined that certain items purchased for use in business will not need replacing for several years, and depreciation calculates the portion of the cost that can be expensed in the current year.

 

Business assets include:

  • Tools and equipment
  • Office furniture and equipment
  • Buildings
  • Vehicles

 

When reporting your business assets, you will need:

  • Total cost of the item including all expenses needed to put the item into working order
  • The date you began using the item in your business
  • Whether the item was purchased new or used

 

The paper work for business assets along with a copy of the annual depreciation schedule from your tax return should be kept in your current year filing system until the year in which the item is disposed.

 

When a business asset is disposed, you need the date and any money received if sold or how the item was disposed of if it was not sold.  Paper work from purchase and sale of item is included as backup in that year’s tax return.

 

Do you have additional business asset questions? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.
 

How to Get Your Small Business Tax Ready | Home Office Deduction

January 25, 2013, Filed under: Taxes,Tips — Evlyn @ 9:00 am

 

Last time we discussed accurately reporting all of your business expenses. The fourth step in getting your small business tax ready is making sure you are maximizing your home office tax deduction.

 

If you have an area in your home that you use only and regularly for business purposes, and you have no other outside office available for this purpose, you may be able to claim business use of home.

 

Here is what you will need to determine your office in the home deduction:

  • Total square footage of your home office. This is the space specifically used for business.
  • Total square footage of entire home

The total square footage of your home office the entire home will be used determine the percentage of the expenses you can deduct.

 

These home office tax deductions include:

  • Mortgage interest
  • Property taxes
  • Rent: If you do not own your own home, how much do you pay for rent?
  • Home or renters insurance:  Break out if any additional premiums are due to business
  • Repairs and maintenance:  Separate total for those directly related to your business space and those related to your whole home
  • Utilities: These include the utilities which are necessary for your business, such as electric, heat, internet, and trash. Do not include your phone line into the house unless it is a cost directly related to your business (i.e. long distance business calls or a second separate business line).

 

If you own your home you will also need the basis (cost plus improvements) of your home and the value of the land.  These are used to determine how much depreciation will be used for the business use area.  This item will need to be tracked yearly as it will be needed when you sell your home for capital gains.  If you decide not to take depreciation, it will still need to be calculated upon the sale of your home because the IRS doesn’t care if you took the deduction but only that it could have been used.

 

Please note that the business use of the home cannot create or increase a negative income.  The portion not used in the current year will be added to the next years home use deduction until used in full.

 

Do you have additional home office tax deduction questions?  Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

How to Get Your Small Business Tax Ready | Reporting All Business Expenses

January 23, 2013, Filed under: Taxes,Tips — Evlyn @ 1:04 pm

 

Last time we discussed how to calculate the cost of goods sold to determine your gross profit.  The third step in getting your small business tax ready is ensuring you have accurately reported all of your business expenses.

 

Business Expenses

All expenses incurred to run your business should be tracked and reported on your tax return.  Some business expenses are very straight forward, others are not.  Below is a quick check list of the most often used tax deductible business expenses:

  • Advertising : All forms of marketing including  website, radio or television media, print, show or conference displays
  • Sponsorship Advertising:  If your name is included in the promotional materials for a non-profit event, or displayed on sports team information showing you as sponsor, get a copy of the materials and keep it in with your receipt for sponsorship money
  • Fees Charged for Networking Events:  If the cost includes a meal, this cost should be recorded in meals and entertainment.
  • Continuing Education and/or Seminar Expenses
  • Insurance:  Only business insurance goes here. This does not include auto, health or disability
  • Rent:  The amount paid for business space or for equipment.  This area needs to be addressed at year end for 1099-Misc possibilities.  Rent paid to any individual or business for $600 or more needs to be issued a 1099.
  • Interest:  This includes business loans interest. However, if credit card finance charges were incurred, these charges need to be reviewed to determine if personal finance charges were included. Do not include the personal finance charges.
  • Bank and Credit Card Fees
  • Supplies:  Supplies should be broken down by group:
    • Cleaning supplies
    • Office supplies which include computer supplies, postage, paper, pens
    • Supplies used In the course of your business. These would include trade books or magazines, and items that are needed for use for your particular type of business.
    • Professional fees:  Legal, accounting, computer, consultants.  Review totals for 1099-Misc needs. Make sure to include the portion of your tax preparation fees that are directly related to the reporting of your business.
    • Taxes and License Fees:  Personal property tax paid to the county. Use tax paid on the sales tax return and sales tax if included in the total sales reported.

 

There are several other expenses to review:

  • Mileage: 
    • Review your mileage log for vehicle business use expense. The standard mileage rate is 55.5 cents in 2012 and 56.5 cents in 2013
    • You will need the total miles driven in the year along with total business miles driven to determine your mileage deduction.  If you have any W2 income, you will also need to know how many miles to and from your job.
    • Cell Phones:  Cell phones or other expenses for items that are used both personally and for business.  You need to track total use and business use to get a percentage for calculating the amount deductible for business.
    • Meals, Entertainment and Travel Expenses
      • You will need to answer the following questions:   with whom, where, business reason why, when and how much.
      • If you are traveling, include agendas or other information that proves business travel time frames.

 

Do you have additional business expenses questions? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

How to Get Your Small Business Tax Ready | Reporting Cost of Goods

January 21, 2013, Filed under: Taxes,Tips — Evlyn @ 12:58 pm

 

Last time we shared that reporting all income is the first step in getting your small business tax ready. The second step in ensuring that your costs of goods are reported accurately.

 

How to Calculate Cost of Goods Sold

 

Cost of goods sold is where you take into consideration your inventory.  Your tax preparer uses three numbers to compute cost of goods:

  1. Beginning year inventory
  2. Plus  current year purchases
  3. Less end of the year inventory

You should take inventory of product and goods on hand at least once a year.  Do this close to year-end at around the same time each year.

 

If you purchase any items for personal use, as give-a-ways, or samples keep track of these so the dollar total can be subtracted from the cost of goods and put into supplies or other appropriate areas.  Also remember, that if these items when purchased did not include sales tax, to include the value of all items on your sales tax return in the use tax section.

 

Other areas included in this section of your financial statements are:

  • Subcontract and employee labor used in the production process of items you sell
  • Packaging costs used for items (i.e. containers and labeling used for items you produced)

After calculating all costs related to the items sold, subtract total from sale which will give you a gross profit.   Gross Profit / Sales should be compared with your mark up.  Gross profit shows how much you made on the sale, and gives you the amount left to distribute between your pocket and business expenses.

 

Do you have additional cost of goods or gross profit questions?  Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

 

How to Get Your Small Business Tax Ready | Reporting All Income

January 18, 2013, Filed under: Taxes,Tips — Evlyn @ 10:42 am

 

In the next few weeks will be focusing on getting your small business tax ready. We will provide professional tips to help small business owners prepare to file their 2012 taxes.

 

The first step in preparing your businesses taxes is to report all of your earned income.

 

Reporting All Income:

 

All money received for sales need to be deposited into your business checking account.  Deposit totals for the month should equal monthly sales.  If you make a deposit that isn’t sales, keep the slip and other paperwork showing what the deposit was; in an audit this will be needed to show why deposits don’t equal sales.  This also applies to any deposits you make into your personal account.  If the deposit isn’t going to be reported as income on your tax return you may want to document where the money came from and file with your tax return.

 

1099s received show income for services provided to your business customers that total $600 or more.  Compare each 1099 to your recorded sales to each customer to verify the total.  This is becoming more important as it shows whether all sales have been reported properly.

 

Issue with 1099s:

  • If you receive credit card payments as well as cash/check payments, carefully review the 1099 Misc for total cash payments received for service.
  • Since 1099Ks will show all sales paid for by credit card, you don’t want these payments included on the 1099 Misc or you will have double the sales reported to the IRS.

 

Your total sales should be higher than the total reported on 1099s.  The only way sales should equal 1099 reporting is if – you only do business with other businesses and you never bill for less than $600.

 

Do you have additional questions about getting your small business tax ready?  Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

 

 

Simple QuickBooks Tips – Part IIII

October 30, 2012, Filed under: Quickbooks — Evlyn @ 11:31 am

Customize QuickBooks with these simple changes.

 

QuickBooks View

Have you setup your QuickBooks icon bar or does it still have the numerous QuickBooks elements pictured? You will find customizing your icon bar under the heading View. With this tool you can take off the icons you won’t use and add items you will use. For example:

    • Add write checks, enter vendor bills, and make customer invoices. – saves time with only one click to open.
    • Add calculator, use register and find – keeps these useful tools available at all times.
    • Add backup – a great way to remember to backup your data any time you do any major transaction entry or payroll so you don’t lose your information. Back up your data on a USB flash drive and take with you.

 

Another Open Windows List

  • This is handy if you are like me and have numerous items open at all times
  • The open windows list is a side bar that does just that – it lists what items are open so you can find what you want without closing or minimizing all the windows

 

Additional QuickBooks Questions

Do you have additional questions regarding QuickBooks?  Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

Simple QuickBooks Tips – Part III

October 23, 2012, Filed under: Quickbooks — Evlyn @ 11:19 am

Customize QuickBooks with this simple change relating to 1099s.

 

1099s in QuickBooks

Companies that provide services to your company may require 1099s at year end.  Preferences is where you need to turn this on and setup the accounts that you want checked for preparation of the 1099s.

Some of the accounts most often used for 1099 companies are:

  • Rent, storage rental, equipment rental for Box # 1
  • Professional fees including legal, subcontractors, repairs/maintenance, website design for Box #7

Don’t forget the W9 form you need to have on file for each service provider.  Get the form here  http://www.irs.gov/pub/irs-pdf/fw9.pdf  and see my blog on W-9s at http://eauclairebookkeeping.com/2012/10/01/form-w-9/

 

Additional QuickBooks Questions

Do you have additional questions regarding QuickBooks?  Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.

Simple QuickBooks Tips – Part II

October 16, 2012, Filed under: Quickbooks — Evlyn @ 11:01 am

Customize QuickBooks with these simple changes.

QuickBooks General Tab

  • If you are a tab person, that’s great. But if you are continually hitting enter instead, like me, on the general tab you will find a check box for pressing enter to move between fields. The only drawback is you need to use the F keys or mouse to save transactions.
  • Annoyed by the noise? The general tab turns on and off the beeps.
  • Opening the drop down lists when you start typing, for quicker choices in name and account areas.

QuickBooks Reports

Did you know you can get reports in both accrual and cash? Preference setup gives you opportunity to choose which type you want most often. You can also choose to have the reports update automatically after any transaction changes. Both of these features are under Reports & Graphs.

QuickBooks Email Options

You can email different forms out to your clients from Quickbooks either through their site or through you Outlook email. Under Send Forms you can customize your cover letter.

Some example emails are those that go to customers, vendor purchase orders, reports to your tax professional or bank, or payroll. Carefully setup what information to display on pay stubs if you choose to email pay stubs to employees for obvious reasons. Sensitive items like social security numbers, addresses, etc. can be suppressed from the forms.

Additional QuickBooks Questions

Do you have additional questions regarding QuickBooks?  Contact me at 715-379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.