The importance of accurate and timely bookkeeping cannot be stressed enough. When a self-employed person shows up with receipts or a list and the numbers are rounded to the nearest $50 or $100, I know their bookkeeping is not in the best shape.
Keeping good books is important for so many reasons and involves making sure your income on your taxes matches your bank statements, accurately tracking expenses so that you get all of the deductions you deserve, being able to prove your business purchases to the IRS in an audit, tracking money paid to sub-contractors for 1099 reporting at year end, and accurately tracking sales tax if applicable.
There are several bookkeeping programs, both online and desktop based, that can help you achieve good bookkeeping. Quickbooks is the most popular but Xero and Wave are online options gaining popularity in that market.
The most accurate bookkeeping happens when your bank statements match your tax return and your sales tax returns (if applicable). That means your income (both business and personal) is recorded in accounting software accurately and matches the deposits on your bank statements. Recording your expenses and reconciling them to your bank statements is helpful because it ensures that every deduction is maximized and categorized. It also ensures that the purchase of equipment is captured and loan payments recorded.
We can help you with bookkeeping and teach you how to do it yourself. Regardless of which route you take, you will benefit from solid record keeping.
Having a good relationship with your tax accounting is essential. I hear from so many people, “Taxes stress me out” and “Ugh, I just hate this time of year.” Or, the cringe-worthy, “Guess what I did?!” But by working together we can make the process of taxes much easier on you and us.
I realize that this process does not come without work. You have to gather all your documents, track your donations, add up your medical expenses, etc. But, by asking us questions before making tax-related decisions we can make future tax time less painful both emotionally and financially!!
Calling or emailing before you purchase an investment property can save heartache and money. Is the timing right during the year to maximize deductions? Can you rent the house for enough money to cover the expenses? If not, can you afford the negative cash flow monthly? What is a deduction and what has to be amortized?
Calling or emailing before you start a business and decide on an entity type is so important. So many people log onto LegalZoom and type away without knowing what they are signing up for. The entity type LLC is tossed around like it is a gift from above; however, that may not be the best choice for your company. Maybe for a year or two a sole proprietorship is better– or an S Corp. There are benefits and consequences for each type of entity; discussing it ahead of time can save both time and money down the road.
Sitting down with your accountant and letting them know what has been going on can help fill in the gaps in tax information. Did you have a baby? Did a parent pass away and leave you money or property? Is a child entering college? Did you sell your house or buy a second house?
There are so many pieces to the tax puzzle, and dropping off information and running away as fast as you can is usually not the best option. Stay and talk awhile. Have a cup of coffee and let us know what’s going on. That benefits all of us in the long run.
If you are self-employed or drive for your employer, you know how tricky it can be to properly track fuel, mileage, repairs, and insurance for tax write offs.
The reality is, according to the IRS, we need to track mileage no matter what. They want to know what portion of our driving is business and what portion is personal. This determines the percentage of actual expenses that are a write off if you choose to claim them.
Mileage vs actual expenses is determined the first year you purchase a vehicle and is normally carried forward for the life of the vehicle. There are some exceptions but this is “the norm.” This brings up the discussion of how many miles you drive. How many are business vs personal? Are gas prices increasing? Does your vehicle require a lot of maintenance? Do you mostly drive around town or have a large territory?
Bottom line is, track your miles. Then discuss with your tax preparer which scenario is most beneficial. There are apps (both free and for a nominal fee) for your smart phones as well as paper mileage logs (which can be picked up at our office).
This is where the information about tax planning becomes important. If you know ahead of time, you can make those decisions and have the information available for your tax preparer to determine your deductions.
Summer is the perfect time to start tax planning!
Tax planning means that we use your income and expenses from this first half of the year and project what the second half will be like; saving you money when you file your taxes next year.
Will you have an increase in income? Will you be adding labor to your company? Do you know if you can afford to add employees or move to a new building? Do you need to purchase new equipment? Will you be expanding your family?
All these questions (and more) can change your tax situation. We can determine if a change in withholdings is necessary or if there is an estimate due. Give us a call or send an email and we can make an appointment or communicate online. Making an estimate in June or July, and again in September, can save you penalties and interest come next April.