It’s that time! For some you may have filed an extension for your 2020 taxes but water break is over, it’s time to get back in the game and tackle these 2021 taxes! If you didn’t take that route and looking to file net year… this is for you too!
Give or Obtain Your Personal Information (ID, SSN…)
Same for Your Dependents or Spouse
Download Those Bank Statements
Gather Those 1099s (Robinhood, Savings, Contract Work…)
Keep Receipts (Nowadays most receipts are digital)
Refer to your Bookkeeping or Spreadsheets on your Annual Expenses (better to have proof)
Track Your Commute to & from Work!
Do them Yourself or Outsource
File & Pay by the April 15, 2022
If you’re like most business owner in America, you will owe taxes when you file! Planning ahead is vital, because you may end up having to pay more with an installment plan, if you can’t cover the cost completely. It’s widely known, that ro be on the safe side, you want to save at least 15% of your business income to cover your taxes.
Stay Tuned on How you can Lower Your Tax Liability in the last Quarter of the Year!
There are numerous legal ways to deduct your business expenses during for Halloween season. You can deduct Halloween candy, decorations, anything that you can make BUSINESS-RELATED.
How to Write-Off Candy
The simple trick a lot of businesses use is the branding method. They take something that they want to use for their business and put their logo on it. A great example would be buying candy or other promotional products that you want to give to your clients or the community, then attaching your business card or something with your company image on it.
Deductible business expenses are considered to be ordinary and necessary. Boosting sales, creating client connections and will overall promote your business. If you decide to host a company Halloween party like “The Office”, that’s not dedutible. YOU HAVE TO HAVE MORE THAN JUST EMPLOYEES THERE, for these expenses to be tax deductible. Clients, Potential Clients and Family should be invited to get that write-off.
Alright, the party is over, what do you do with excess candy? You can donate the unused candy to Nonprofits and other tax-exempt organizations, according to the IRS. More deductible Halloween expenses follow the same guidelines as candy.
Sadly, individuals or W2, wage earners can not deduct these expenses.
Create Your Own Records (Payroll, Invoices, Debts)
Give Access to Financial Accounts or Bank Statements
Answer Bookkeeper’s Questions about scope of your business
Prodive with necessary info to understand your business process
Give previous tax returns
Bookkeeping is one of the oldest professions in the world! They offer support and guidance for any type of business.
Bookkeeping is recording and assigning financial transactions, journal entries, posting to ledgers and so much more. Bookkeeping is determing what systems to use, software to use, and essentially what expenses need to go. Bookkeepers are the tires to a car or the key to the door.
It’s that time! For some you may have filed an extension for your 2020 taxes but water break is over, it’s time to get back in the game and tackle these 2021 taxes! If you didn’t take that route and looking to file net year… this is for you too! If you haven’t already… HowContinue reading “Stay Ready so You Don’t Have to Get Ready”
There are numerous legal ways to deduct your business expenses during for Halloween season. You can deduct Halloween candy, decorations, anything that you can make BUSINESS-RELATED. How to Write-Off Candy The simple trick a lot of businesses use is the branding method. They take something that they want to use for their business and putContinue reading “Halloween Tax Deductions”
The process of doing your own or giving someone else the responsibility is tedious and can be time consuming. Going At it Yourself Learn the Basics for Your Industry Choose an efficient accounting software SEPERATE YOUR PERSONAL AND BUSINESS Create Your Own Records (Payroll, Invoices, Debts) Outsourcing? Give Access to Financial Accounts or Bank StatementsContinue reading “How does Bookkeeping work?”
By enlisting a Bookkeeper or even an Accountant, not only are you helping to grow their business but it’s their job to help you grow yours! Alot of people believe they need an Accountant as soon as they start a business and in some cases that’s true, but not having anyone is worse. Based on the few clients I endured while I was a W2 wage earner, 37% had to pay penalties to the IRS as of the beginning of 2021.
No One’s Saying You Can’t …
By outsourcing, it means you, the business owner is at a level where it’s no longer smart to do your own books! Not every business is scalable but, every business has the potential to grow. Of course, you can do it yourself as well!
Behind every good business is a great entrepreneur, behind them is a financial expert.
Bookkeeping hels a business stay in full control of it’s finances, overhead and taxes. Bookkeepers free your time while Accountants do far more than letting you focus on other things. Poor bookkeeping or none at all, is the leading reason business fail. It’ not exciting but it’s necessary.
Do you dread doing your books? At Assist And Align you won’t have to stress nor worry when it comes tax time. By maintaining balanced financials throughout the year your financial journey will be smooth and simple in the end!
You need a Bookkeeper that has a clear understanding on how to help small businesses. What makes one a bad Bookkeeper? It’s fairly simple…
Things to Watch Out For…
Takes a While to Respond Back
There’s nothing more frustrating that someone not getting back to you in a timely manner. It should not take your Bookkeeper more than 3 business days to get back to you! There are some exceptions like, vacation, emergencies, things of that nature, but if your Bookkeeper is not meeting your needs in a good time, they may be doing the bare minimum, something unethical, etc. It’s okay to demand transaprency, especially when it comes to your money!
Don’t Know the Ins and Outs of Bookkeeping
It’s imperative that you don’t choose the cheapest person you can find, becuase you may “get what you pay for”. Finding an experience Bookkeeper may be harder than one knows. Bookkeepers are not “one size fits all”, just as not all businesses are the same. Getting a professional who is an expert in your field is your best option. Make sure they’re certified, educated or experienced.
Don’t Give Access to See Your Books
This is a major red flag! As the business owner, you should have access to the software and your books regardless of if you pay the subscription. It’s not safe to work with a Bookkeeper that gatekeepers or is so secretive of their work. It makes transparency impossible!
Not asking the Right Questions
There should be a system in place to ask necessary questions. Question along the lines of identifying the problem or challenge , type of business, more detail about business, number of accounts and types, and expectations…
Slow to Produce Financial Statements
Your Bookkeeper should provide access to financial statements for the prior month, no later than the middle of the next month. This is important, because it can become annoying to ask your Bookkeeper for these statements when you need them and they take a while to produce them. You Bookkeeper is doing their job when you know when to expect these documents without having to ask.
Don’t Provide Suggestions
Businesses should provide better business practices willingly, because happy client makes a happy bookkeeper. Its their job to consult with you on new policies that may affect your business as well as ways to save your money.
Accounts Aren’t Balanced, Organized and Updated
By this point, the is a deal breaker. If your account aren’t ready for the next cycle by the middle of the next month, you’re better off keeping the fee you pay your Bookkeeper and paying your kid to do it for you. It’s never okay to be behind on your books! Your business can’t grow or scale if you don;t have clean books; you’d have to wait to get funding, wait to find out your sustainability and you won’t be able to plan for the future.
This is the overall goal of Bookkeeping! This information should be stored in a server from start to finish, or to when the business started making money.
Deadlines = Efficiency! When Bookkeepers are inable to work in certain paramaters, it shows that maybe they’re not in the right profession. Missing deadlines can cause late fees, penalties and a loss of business. This will slow the business down tremedously.
When you’re reaching out to professionals to help you with your business, the consultation, the meeting, any other factors that made the conversation possible, is tax deductible. Let’s say you use your personal cell phone for business, that business percentage of your phone is tax deductible.
So what does that look like?
By using your data plan and phone to reach out to professionals, customers and vendors for your business, the business portion of the total usage is deductible. This applies to a home office, car + car expenses, health insurance, and so much more.
Everyone wants to pay less money in taxes, to best achieve this, seek the professional guidance from tax, accounting and bookkeeping experts! By consulting with an advisor, they will save you money and the money you pay them will lower your taxable income! It’s a win, win!
Check Out the IRS updated link, on all business expenses that you can report!
Today only, coffee shops and franchises have promo codes and offers on COFFEE!
iS cOFFEE a tAX DEDUCTION?
As a small business owner, you CAN deduct coffee as a business expense if:
~ Coffee is reasonable and necessary ~ You are tracking coffee expenses ~ Coffee is a fringe benefit employees ~ Purchased and provided to business employees ~ Coffee is provided to improve productivity ~ You host a business meeting in person over coffee ~ Coffee is provided to provide a better work environment ~ You’re Buying for your home office
Coffee for the office is tax deductible!
Now, if you’re a w2 wage earner, coffee is not a tax deduction. If you get coffee on the way to work, it’s not a business expense.
Bookkeeping is recording financial transactions or information that pertains to business operation. It entails creating a filing system that categorizes income to the appropriate accounts as well as differentiating types of expenses.
Businesses and individuals need bookkeeping! People do this without even realizing it’s bookkeeping. Examples are when someone creates a budget or system that tracks money going in and out of the account, so they can be better prepared during tax season.
In most cases a business has a bookkeeper to stay in compliance, manage cash flow, perform multiple clerical duties and tell how the business is performing. By tracking the money that comes in and out, it leaves little room for error and fraud. Bookkeeping tells the business owner and individuals how much they will owe or get back from taxes. Not only that, bookkeeping is the proof behind the numbers.
Bookkeeping also entails knowing some tax laws; what’s tax deductible, what are the limitations, and usually paying payroll taxes. Bookkeepers prepare invoices, financial statements, pay bills on behalf of the business, reconcile bank and loan amounts to provide up-to-date balances.
Bookkeeping is a subcategory of Accounting. Bookkeeping as apposed to Accounting doesn’t deal with auditing . There is a common misconception that bookkeepers don’t do taxes, and some do, some don’t. According to the law, anyone over the age of 18 can prepare tax returns. Taxes are complex and require extensive research, knowledge and understanding.
Two Types of Bookkeeping
One entry is made for each transaction into a journal or log.
Only one account is affected; the account balance will increase. or decrease.
It’s easy to maintain with little requirements; favorable among small businesses.
Two entries are made; a debit and a credit.
Two or more accounts are affected and the entry must balance.
These are usually called Journal Entries.
This is a great system to avoid error.
Bookkeeping is necessary in every business! It’s the recording of a business’ financial transactions from accounts having anything to do with business. Bookkeeping and Accounting work closely together to ensure your business is in compliance and ready for tax season. With software like QuickBooks, single entry bookkeeping makes managing your books easier!
If you’re looking to start or have recently started a business, you’re probably wondering…
~ How do I, if I need to register my business? ~ What are the different business types? ~ Which business structure should I choose? ~ What are the pros and cons of ________?
There are numerous business entity types; sole proprietorship, partnerships, limited liability company, corporations, non-profits, cooperative and more. Choosing correctly matters because the main factors correlate with how you plan to grow and develop your business. Before we get into differentiating there are a few more things to consider…
Difficult to set up or operate
The tax advantages and disadvantages
Potential Legal Liabilities
Difficult to Liquidation Business
Raising more money as business
Regulations to keep business active
How much bookkeeping is required
What happens to business upon death of owner
This is simplest type of business, sole pros are operated by one person and they’re so easy to set up! This is for people who don’t see the need to worry about personal liability. But, the downside here is THERE IS NO separation from business and owner. Sole Pros are most chosen!
~ It’s easy because it doesn’t require the filing of any papers ~ You’re only taxed once on the personal tax return ~ Unlimited legal liabilities ~ Harder to establish business credit and capital (lenders) ~ Banks are hesitant, you’d have to use personal funds
This is for businesses that have more than one owner and at most 20 people. Just like sole pros, they’re easy to form. Its always advisable to get partnership agreements in the case one partner dies and for distribution purposes. Partnerships are usually successful when its clear who brings what to the table. There are two different types of partnerships: General & Limited.
~ General: A general partnership is one in which all of the partners have the ability to actively control and manage the business. In this instance, every partner is allowed to make business and legal decisions (if there’s no partnership agreement), THERE’S EQUAL AUTHORITY. There’s no limit on personal responsibility for business debts, similar to a sole pro. For example, a partner could lose more than just their investment.
~ Limited: REQUIRES A PARTNERSHIP AGREEMENT. The business and sometimes info on the partners has to be filed with the secretary of state. The difference between the two partnerships is that limited has both general and limited partners. Limited is the one who does not have total responsibility for the debts of the partnership. The most a limited partner can lose is his investment in the business. Technically, they’re more or less an investor in the business, they don’t make management decisions or have authority to run the business.
In a limited partnership, they also must have at least one general partner. The general partner(s) is responsible for running the business. They are the ones with control over the day-to-day management of the business. They’re the ones that have the authority to make legally binding business decisions. General partners are also subject to unlimited personal liability for the debts of the business, just like sole pros!
LLC (Limited Liability Company)
This business type is the commonly chose when separating business from personal. Unlike Sole Pros, their assets are protected in the instance of legal liability. The owner of the LLC goes to the IRS and chooses how they want to be taxed (sole pro, partnership or corporation).
~ Not required to have annual meetings, board of directors or a limited number of shareholders ~ Some disadvantages: legal and accounting costs are higher than proprietorships. LLCs have to file articles of incorporation with the state ~ In most cases an LLC will no longer exist when the owner dies, unless stated otherwise in the operating agreement
Suppose your business is growing and you need to attract more lender and investors. A corporation is a legal entity that’s completely separate from the shareholders who own stock in the company. It has the authority to enter into contracts and buy and sell property. A corporation can sue other parties but can also be sued.
There are two types of corporations, s-corps and c-corps!
~ C-Corp:Double taxation refers to how income earned by a regular corporation is technically taxed twice: once when the corporation earns income, and again when it distributes dividends to its owners (who then pay taxes on those dividends. Why mention it? Because C-Corps get taxed twice! The flat tax rate is 21% for C-Corps!
Fun Fact: The closest tax rate to 21% for W2 Wage Earners is 22%
Out of the two, C-Corps are the most complex! YOU NEED A LAWYER TO GET ESTABLISHED. Owners don’t have personal liabilities for debts of their corporation. A shareholder only risks the amount of their investment in the company.
~ Has more access to financial resources ~ A corporation can sell stock to raise capital ~ Can obtain bank loans or issue bonds for long-term financing ~ Better able to attract more talented and skilled employees than proprietorships
~S-Corp: S Corporations combine the tax benefits of proprietorships and LLCs with the liability protection of C Corps. They avoid double taxation by passing income through to the owners. The structure of an s-corp protects the personal assets of the shareholders. Lenders are more willing to make loans to S corps.
~ Must file articles of incorporation with the state ~ Can’t have more than 100 shareholders ~ Can only have 1 class of stock ~ Fringe benefits provided by the company to shareholder-employees are taxable as compensation ~ Must pay Income taxes (Self-Employed: 15.3%)
Be sure to look at my business starting checklist!
When it comes to spouses who want to do business together, the IRS is like… do whatever you want to do, call it what you want just make sure if you want to be a partnership, then file a 1065 (which is…), in most cases if they don’t incorporate or form an LLC, then it’s a general partnership, treated like a sole pro. In some cases one person is seen as the sole pro while the other spouse is legally an employee. Another option is the qualified joint venture, basically a sole pro with two owners. Only for sole pros who are married filing jointly!
So, I said all that to say this, choose wisely! But if you don’t you can always change it for the next year, you just can go back to what you originally chose for 5 years. My opinion, if its just you and you’re just seeing how it goes, form a sole pro but if you want to protect yourself cause life is unpredictable, then form an LLC or a corporation.
Not all businesses need an Accountant and not all businesses need a Bookkeeper.
I’m going to break it down in the way that I understand, Bookkeepers are the Paralegals while Accountants are the Lawyers. Bookkeepers are the Nurses, while the Accountants are the Doctors. Bookkeepers are the Graphic Designers, while Accountants are the Software Developers.
No federal regulation requirement
Bachelors Degree is required
Cost of Service
Albeit similar, they are far from the same! Bookkeepers manage the daily financial tasks of business transactions, recording and categorizing financial transactions, create financial statements, process payroll, pay bills, reconcile bank accounts, invoices to client and classify deposits. For some companies, bookkeepers partner with Accountants within the client’s company.
While on the other hand, Accountants are the experts. There are numerous specialties in Accounting; Tax, Financial, Government, Management, Forensic, Cost, Public, Audit & etc. Accountants manage and oversee the bookkeeping set up. There are two types of Accountants; Non-CPA & CPA accountants.
A bookkeeper can not call themselves an Accountant! There is a lot of confusion when it comes to taxes, but Bookkeepers can prepare and file taxes for small businesses to the IRS. Although they are both two different functions, some Bookkeepers can efficiently and effectively manage both your taxes and your books! Which is primarily why it’s important to find a someone who knows about your type of business.
According to the IRS, to legally prepare taxes for others or businesses, one needs a PTIN from the IRS. A PTIN is necessary to become an enrolled agent as a tax preparer in the United States. A PTIN stands for Preparer Tax Identification Number.