by Cyrus Berdan | Jan 15, 2019 | Bookkeeping, Budget, Business Accounting, Entrepreneur, Finances, Investments, Ledger, Taxes |
Tax season is like the shadow in the alley or
the monster under the bed. You know it
is there, but you’re afraid to look and see what it actually is. Most people are intimidated by taxes, they are
certain that they are complicated, and because of this fear, they don’t learn
everything they can about taxes. What
you don’t know can really hurt you. Taxes
don’t have to be frightening, they just need to be a combination of being
organized (or as close to it as you can get) and a little record keeping. Many small businesses elect to have a tax
professional do their taxes because they don’t know what they are doing. We are all very uncomfortable with the idea of
making a mistake and I like the reassurance of knowing that someone I trust to
do a good job is working on my taxes. But the question for me, like most small
businesses, is what do I need to bring my tax pro to make sure that they have
all the information they need to do the job accurately?
It is time to prepare
Think of tax season as you would think of
running a marathon. You don’t start
sprinting, you keep a calm and steady pace to reserve your energy for as long
as possible, then sprint at the end. When
we are here in January, it is time to sprint. Here are some of the things you’ll want to
hand over to your tax pro to ensure accurate reporting. Remember, they can only work with what you
Income Statement – This means any earnings
that you had, bring the records for them. Your bank account, your PayPal ledger, any
online software you used to invoice that kept record of incoming funds, any
checks you cashed, all of it. It is your
responsibility to know what you made, and this is the whole foundation of what
you’re going to need in order to file your taxes properly. After all, it is an income tax. Not going to
do you much good if you don’t know what you made, is it?
Receipts and records of expenses – The beauty
of being a business owner is that you can write off business expenses. All of that beautiful stuff comes with a
caveat: you have to be able to show what you spent, usually in the form of a
receipt. For expenses under $75, you
don’t HAVE to show a receipt, but you need to explain what the expense was and
when it occurred. This is when you need
to put your record keeping hat on. It doesn’t matter what method you use, but
use one, whether it is snapping a picture of your receipt and putting it in a
special file on your phone, or the old school shoebox. You need to be able to show what you spent
your money on if you are writing it off as a business expense.
Assets – If you acquired any assets for the
business that have appreciated or depreciated in value, you need to report that
as well. Those expenses are deductible and anything that is deductible is your
friend. Keep these records and turn them over to your tax professional along
with everything else.
Payroll reports – If you have hired anyone, it
is time for you to break out your payroll report! What have you been paying
them, and how? Bring along the
appropriate tax documents, such as w-2s or 1099s so you can have your records
Home office – Do you have a home office? Did
you know that you can write off a portion of your rent or mortgage if you do? The IRS allows this, but it also pays close
attention to what you are reporting. Bring
the pertinent information, such as the square footage and the amounts you pay
to the accountant so they can determine if this is a good deduction for you to
Inventory reports – Does your business sell
items or goods? You need to bring a report with the number of items and the
value of each.
Loan documentation – Do you have a business
loan? That goes on your list of liabilities which can offset the assets your
EIN, and your filing status – Are you
incorporated? Are you an LLC? Are you a Sole Proprietor? All of those filing
statuses have different requirements and different documents. Know what your
filing status is in order to get your taxes filed correctly.
Advertising – Did your business run any ads
this year? This is one of the expenses you need to include that can be easy to
forget. Don’t forget to include whatever
you spent from your advertising budget in your expense reports.
Travel – Travel is an expense, but we need to
talk about it separately because there is a lot involved in travel expenses. Are you ready to make the most of your travel
deductions? Here’s what you need to have receipts for:
- Did you drive or fly? You’ll need
to have mileage report or receipts of your expenses.
- Lodging – Where did you stay? That
is an expense that needs to be recorded.
- Uber/Lyft/Taxi – Did you drive
around the city or pay a service to take you? Keep those receipts and write it off!
- Meals – Be certain to keep all of
the receipts for your meals while you are traveling for business and you’ll
have another receipt to add to the shoe box.
Gathering all of your documents may be
intimidating but you are going to be able to get into practice so you can
ensure your coming year that you will have no issues with filing. Your tax professional will always be available
to provide guidance on what you should be recording by way of expenses, how
long you should be keeping records, and what pieces of information are going to
be most useful to them. Be certain to respond in a timely fashion to help them
complete your projects on time, and tax season will be a lot less stressful
from now on!
As always, if you need help, click the contact
link and help will be on its way
by Cyrus Berdan | Dec 18, 2018 | Bookkeeping, Budget, Business Accounting, Entrepreneur, Finances, Investments, Ledger |
If you’re like most growing businesses, you are likely inexperienced or strugglingin the areas of accounting and finance. Don’t be embarrassed, you’re not the only one. Even if you’re accustomed to balancing a perfect budget at home, that doesn’t mean much when it comes to the dailynecessity of running a business ledger. Let’s not even get into having to keep trackof expenses, wages, or capital. By now your head is hurting and you don’t havetime for the things you love but that’s okay. Businesses like mine are there to help you geton your feet and maintain a sense of calm in the financial storm. If you have no idea where to start, use theseideas as a great beginning point to begin your journey to solid business financial practices. All of these tipsare wonderful to start with, and they will help you to build a foundation fromwhich all of your future financial decisions will be easier.
Your money and your business’ money
can’t play together
Just pretend your money and your business money are oil and vinegar. They don’t mix; at least they shouldn’t. When you’re a busy entrepreneur it is easy tograb whatever card is handy and swipe it without paying much attention. It is all your money, right? Well, here’s the thing. If you’re attempting to grow a business, the business needs to have money to grow on, right? If you constantly use your business as a wayto supplement your personal finances, you are doing it wrong. Why can’t you mix your business and yourpersonal expenses? Well, from a bookkeeping standpoint, it is confusing and makes reconciliation difficult. There are rules and laws about what can beconsidered a business expense, and it helps you with your taxes when you don’thave to spend hours sorting out what money went where and what type of expenseit was.
You need a budget
Just like you require a budget to maintain your household expenses, your business needs a budget to keep on going. Are you advertising? You need a budget for that. Are you planning on taking a business trip? You need a budget for that. Without a budget, your business will come upshort, and you will be pulling money from your personal expenses (a big no-no) in order to meet your business’s needs. A budget doesn’t mean that you have to have abig chunk of money in place, in fact, if you are just starting out, it ishighly unlikely that you will have access to a lot of capital.
Don’t become a big spender
When we become successful in business, many times our first inclination is to takethose profits and go celebrate with them. Just like our personal finances, you have to be certain not to spend frivolously as a business owner. Yes, we love having some extra money to playaround with, but what good does it do us when we have a business emergency comeup? What if you have a slow month? What if you have an opportunity come up that you need extra money to take advantage of? Look, it is good to celebrate your wins, but add those into your budget and celebrate in a controlled way. This will keep your money growing.
While you don’t want to take all the money from your business, in all likelihood youhave placed a good chunk of your own personal funds into your business. Now it is time for you to get some of yourmoney back. Make certain that you are budgeting every money to spend some money on yourself. Again, this is not your license to take everypiece of profit out of your business, but it is just a good practice to payyourself first. You’re putting yourblood, sweat, and tears into your business and your business needs to pay yousome of that back.
Be wise with your investments
Part of the problem for small business owners is that they are afraid of using their money to invest in products and services that will take them to the next level. If that isn’t their vice, they’reinvesting in too many services because they are afraid to learn how to managesome aspects of their business alone. Neither one of these approaches is a good one. We need to find a way to achieve some balance. Instead of being hot or cold with your investments, find a way to get a good balance going. If you have the time and the skill to learn how to do something yourself, do so. If you have something you don’t do well, or just can’t force yourself to do, have someone else do it for you so you can concentrate on the aspects of thebusiness you ARE good at.
Don’t procrastinate if you’re in
If you see there is a financial issue coming up that you can get on top of, do notwait until it becomes a disaster. It’s never good to avoid any problems we see as long as possible. What you don’t want as a business owner is for those problems to bite you in the butt and put your business in a place that will be difficult for it to recover from. If you have a sharp eye on your finances, you know what you are capable of and what you are not. It is going to be important for you to be realistic about which way the wind is blowing. Don’t be embarrassed about being in a slight financial bind. It can happen to anyone, and if you address it quickly, it is more likely to be a small problem thatwill blow over, versus a long-term issue that will hurt your business.
Being a small business owner doesn’t mean you have to morph into a financial guru overnight. What you’re going to need is a solid budget, some wise investments, and some common sense. Use these tips as a starting point, and definitely plan on getting the advice of a seasoned financial expert to help you with everything that you can’t figure out on your own.