Category Archives: Tax Organization

Facing the Giant

Facing The Giant – Bookkeeping

You’re an entrepreneur looking to expand your business and turn your passion into your livelihood, and ideally profit. Delegating and outsourcing are probably keywords in your vocabulary, giving you more time for the big adventure of delivering stellar customer satisfaction.

Surprisingly, some entrepreneurs still neglect the accounting, intentionally or not, risking the very life of the business. Some reasons we have heard are:

  1. Lack of organization or plan
  2. Lack of financial understanding
  3. Lack of time
  4. Lack of funds or believe they cannot afford
  5. Lack of trust sharing financial information

Fortunately, there are easy answers to all these reasons. Every entrepreneur who is thinking about, or who is a new or existing business owner has resources in their local area to tackle reasons 1 and 2 above:

For those who may align with reasons 3 and 4, the key lies in setting your up your books correctly from the start, a professional bookkeeper can do it in about an hour. Software/banking automation is the second key to eliminating the time excuse.

As to affordability, if the business has completed the setup and automation, you may only need a professional monthly review of 1-3 hours on average, based on the volume and complexity of your business. If you prefer a professional do the bookkeeping, and the books have been set up as above, 20-25 hours a month may be just fine. Alternatively, a hybrid situation where you split the duties with a professional, could save you money as well.

Finally, we understand that sharing financial information is personal, not to be taken lightly. Make a list of what is important to you, such as communication, accessibility, skill,  insurance, and, is there an Engagement/Non-Disclosure Agreement.  Interview several professionals in order to find the best match.

MJB’s Bookkeeping Solutions, LLC, is ready to help you face the Giant and create your clear economic path. We look forward to an interview with You.  Contact Us Today.

Get Acquainted: The 2018 IRS Withholding Calculator Has Launched

Are you feeling anxious about how the recent Tax Reform will affect your finances?  Did you know that there are several helpful tools at the IRS.gov website to help you navigate the questions about your particular tax situation? Ease the stress and check out the easy to use  Interactive Tax Assistant for topics including Claiming Dependents, Your  Filing Status, Pensions and IRAs, Credit Eligibility and more.

The latest, the  2018 Withholding Calculator has just been launched. Some key changes included are:

2018 Standard Deductions (Personal Exemptions Eliminated):

  • Single or Married Filed Separately- $12,000
  • Married Filing Jointly- $24,000
  • Head of Household- $18,000
  • Over 65 or Blind, add $1300 per person

2018 State and Local Taxes– The itemized deduction is limited to $10,000 for both income and property taxes paid during the year

2018 Misc Deductions– Gone , including unreimbursed Employee expenses and tax prep and investment fees

2018 Child Tax Credit– $2000 per child to age 17; $500 available for other Dependents

One final tip, be sure to review my blog on reviewing withholding. If you have any questions, or need assisting with organizing your business or personal books, Call or Email MJB’s Bookkeeping Solutions, LLC  for a clearer economic path.

 

Tax Triggers For Reviewing Withholding

Change is inevitable, right?

When was the last time you looked at your tax withholding?  With the recent changes to 2018 Tax Laws, there is no time like the present to complete a W4 Worksheet or similar to avoid under withholding for the current year. Whether an Employee or Business this applies to you.

Do you file  “complex returns” including Schedule A itemizing,  multiple jobs, or major life changes like marriage, divorce, new child, adoption, death of a spouse and/or the start of a new job?  Did you start a new business? These especially warrant a review.

Plan now for the 2018 changes to the Standard Deduction, deductions going away or being limited,  increases to certain credits, and changes to 401K and IRA contributions.

To help with this task, the IRS will be releasing a 2018 W-4 withholding calculator available on the IRS.gov website, soon.

Contact  MJB’s Bookkeeping Solutions, LLC  for help with organizing your personal or business books for a clearer economic path.

Keeping The Edge

As with any game in sports, it’s rare that a good offense wins without a good defense to back it up. Your finances are no different.

So how often should You analyze your “game” to determine any weaknesses and reposition resources as necessary? Once a month is the best practice, subject to the unexpected, a flag that could put Your income at risk and elevate expenses.

Having an “A” game in place is good, and having a plan “B” is also recommended for reasons noted above. Here are a few tactics on how to fortify Your game plan:

  • Are there other possible revenue streams You could implement
  • Ideally you already have and are using a budget, and make sure You include Owner Draws in the budget
  • Document all cash purchases to capture any deductible personal or business expenses
  • Save consistently for rainy day and/or the emergency funds
  • Be as debt free as possible, pay off credit cards regularly if possible
  • Rotating credit cards and paying them off affects credit scores in a positive way

Accountancy is all about the numbers, achieving offensive/defensive balance, and being able to quickly adjust to change.

MJB’s Bookkeeping Solutions will work the sidelines to assist You in creating a clearer economic path, so that You can spend your effort and time on what is important.  Call, Email, or Make an appointment for Your No Obligation Consultation Today.

Classifying transactions

Pinpointing Your Niche: Classes…QuickBooks Style

September has arrived and many are sharpening pencils as well as skills. If you are managing multiple revenue streams and looking for a good way to assess what is working  and what is not, grab your favorite note taking device and explore the ABC’s of “Classes”, and how it might provide you a clearer economic path.

Maybe you need to track product and service lines in detail. QuickBooks Classes differentiate transactions by departments, locations, product line, service type or other defining category relevant to your business or personal finance preference. QuickBooks keeps it easy and clean using the same chart of accounts across all Classes. Run a report and you will quickly see the line of business metrics.

When setting up Class Tracking think about

  • How do you want to see your business segmented on your financial reports? Classes will capture not only income and expense, but also assets, liabilities, and equity transactions.
  • Be consistent in how you enter class information on registers to be sure that your financial reports are accurate.
  • Need additional specifics? Set up “Sub-Classes” under the main Class.

Once you have mapped out your system you will have the ability to analyze your business finances from different perspectives…using built in reports “by class”.

When you might use Classes

  • A business with two or more locations – like a grocery store – could use to analyze the profitability of each location.
  • A contracting business with both maintenance and installation services may want to track the return on investment of each service separately. Or, perhaps need to track by a single family, commercial, or renovate and sell investment property.
  • A Non-Profit will track income and expenses by grant, event or project.
  • A Property Management Company might track by tenant within a single location, or for each property location.
  • A service business may be interested in tracking the location of current clients, in order to increase marketing in an untapped area.

You want to know if you are getting paid for your hard work – where, how much and when your money is coming and going, and most importantly what’s left for you.  Class tracking is a great tool to do this.

If you have questions about classes or other accounting questions, please contact me or make an appointment now, to ensure that you are focusing your hard work, passion and commitment for creating value in the right direction.

Looking for an organized way to manage your personal or business finances, and save time preparing various tax returns like Payroll, Sales Tax, and State and Federal Tax Returns?

Anyone, business or individual, can use QuickBooks for this purpose, and get organized with less paper and shoebox clutter.  We will customize the learning to You, whether a beginner or beyond. For the beginner we start with a few items like:

  • Easy Installation (The Wizard)
  • Homepage (The Roadmap)
  • Customize for your individual or business with preferences and settings
  • Create Invoices for Customers & Bills from Vendors
  • Basic Financial Reports

For those beyond, sessions will tailored to your specific questions.

Call  or Email Today for more information, or to get started with Your organized financial future. You work hard and deserve more freedom to choos how You use your time.

The Vitals, Heart of a Personal or Business Operation

Have you ever considered that accounting is the health sustaining organ of an operation, and that its health has an impact on success or failure? An operation will survive when there is sufficient cash flow, however, what about when expenses are exceeding the income for a prolonged period? Perhaps an analogy will help clarify this concept.

The human heart is divided into two flow systems, which continuously pump oxygen and nutrient rich blood to sustain life. The Income flow from the organs and tissues of your body enters the right side of your heart, pumps to the lungs to remove waste and recharge with oxygen, and returns into the left side of your heart. The flow then Expenses to all parts and organs, ensuring oxygen and nourishment for your body to work efficiently.

Finances also have two flow systems, Revenue (income) and Expense (outgo). To gain a better understanding of financial health, a tool is also used that helps identify where the transactions are going and that’s the Chart of Accounts (COA). Arteries and capillaries organize and direct your blood on a path to where it’s needed, the COA organizes your finances in a way so that you see how your cash flows, and determine if the income/outgo flow is healthy.

Independent of the operation type, size, industry, or structure all use a chart of accounts, generally organized the same with bank accounts, assets, liabilities, equity, income, and expenses. From there, the unique personal or business aspects will determine the necessary customization of the COA.

  • Bank: where cash is deposited (petty cash, checking, savings, mma)
  • Asset: bank accounts, accounts receivable, or other current assets (prepaid expenses or loaning money to someone for example), and fixed assets (major purchase like furniture and equipment).
  • Liability: accounts payable, loans or lines of credit, credit cards, security deposits from customer, sales or payroll tax.
  • Equity Account: track money invested in or money taken out by owners or shareholders.
  • Income: money earned from sales of product or service, residual income, commission.
  • Expense: categorizes money spent immediately during normal operations, not purchased as accounts payable (office supplies, rent, advertising, utilities, etc.).

Company finances can be very complicated, however, with the proper tools it is very possible to keep track of your operation’s health. Whether you are using the old-fashioned paper and pencil or using accounting software, it is vital to know where the money is coming from, and where it is going. Categorizing expenses properly gives insight into ways to adjust and improve health, and assists in getting every tax deduction entitled to.

As you would seek out professional advice to ensure that your body’s heart is functioning properly, consider the professional advice of a professional bookkeeper or accountant to safeguard the heart of your business.

To Your Health

Small Business Accounting Pitfalls

There are so many things to keep in mind when you own a small business. Details ranging from inventory to order fulfillment are just the baseline concerns. If you’re a brick and mortar business, your overhead includes a lease, utilities, and maybe additional employees. If you run an online business, your overhead includes the cost of parking your domain somewhere, maybe an email management system. Regardless of whatever kind of business you own, though, you will have to make sure your books are in order.

Keep it separated.

It’s true that you will spend money out-of-pocket to start your business. You’ll also most likely spend out-of-pocket to bolster up your business in the first few years. Until you start turning a profit, pretty much everything you have will go into the business.

In spite of what seems like an endless flow of your personal cash into supporting your business, though, you should still keep your personal finances and your business finances separate. Creating a separate business checking account is a good way to compartmentalize and organize your business. Not only is good accounting policy, it’s also a way to help you mentally compartmentalize and look at your business in a critical and objective way.

Anyone who starts a business has to have passion and drive. Without it, there’s little point to making all the necessary sacrifices. But the truth is, it’s just not enough to be passionate about your business idea. You have to be able to look at the business and make decisions as objectively as possible.

Keeping it as separate from your personal finances as possible is a solid first step towards helping yourself do this.

Pay attention to the kind of business credit you get.

Depending on the kind of business you started, you might need seed money to build inventory, or to float your overhead for the first few months — or longer. There are all kinds of options and all kinds of institutions that might be able to help you., from banks to credit unions to even crowd sourcing. Be sure you pick the one that’s right for you; and, if you can, at all costs, try to avoid seeding your business using a credit card. If you find yourself unable to pay it back, it could seriously hurt your chances to access other kinds of funding.

Keep it organized.

Disorganized record keeping is the death knell of small business. If you’re forward thinking enough, you already set how to organize and store your important records. But even if you didn’t think about that in the beginning, it’s not too late to start now. Take the time to go back through your records and organize them. Yes, it’s a pain. Yes, it takes time, which is a commodity that’s already in short supply. Yes, it means some headaches, depending on how long you’ve put off going through and organizing your records.

But it will be worth it. And, it’s also a good lesson for you that will have more good returns than bad.

Update your books on a regular basis… more than just monthly.

You are the heart and soul of your business. But your books are the blood and bones. Keeping your books up-to-date isn’t the sexiest way to spend an evening; but it will give you the confidence you need to make objective decisions.

It may seem like updating your books monthly would be enough, and it may well be enough for a well-established business. If you’re just starting out, however, the ebb and flow of your business isn’t all that stable. The more you put your eyes on your books, the better chances you have to succeed later. It’s not enough to keep your receipts. Add them in weekly, or even bi-weekly. Keep an eye on your receivables and sales. If your business has heavy overhead, it’s even more important that you update your books regularly.

Don’t confuse sales with profits.

You’ve made a few sales, satisfied a few clients, and gotten a few more. Good for you! But if you’re just starting out, be sure to remember that sales aren’t profits. You don’t get to call it profit until after you take out business expenses – if for no other reason than to take pressure off your personal pocketbook – and quarterly or annual taxes.

It’s good to be passionate and important to be excited about your business. But don’t start trying to roll around in profits before they actually start rolling in.

Don’t be afraid to consult a professional.

It’s okay to admit you’re over your head in certain aspects of your business. That doesn’t mean you have to throw in the towel. A smart business owner knows it’s important to sometimes find someone who knows a little more about some aspect of the business. Because in the end, owning a successful business is as much about learning and evolving as it is relying on common sense.

Last minute tax tips for small businesses

As the April 18th deadline for filing taxes looms on the horizon, you may be in the enviable position of having already filed your tax return. If you haven’t already filed, however, as a small business owner or entrepreneur you are probably working overtime to get it done. Depending on the kind and size of business you run, you might have a tax preparation professional do your taxes for you. But you may be just starting out and want to save the expense; if that’s the case – and even if it’s not – there are a few things to keep in mind.

1. Know what you owe

As a small business, you should probably be paying your taxes quarterly. These payments can be easy to forget, though, especially if you are a sole proprietor working in the creative economy or the gig economy.

If you did make your final quarterly payment on January 15th, make sure you take that into account when you file. Take the time to deduct any levies or account for any late fees and penalties the IRS may impose if you happened to miss a payment.

2. Accelerate or defer.

Many sole proprietors use cash basis accounting – which means they report income when payments are received. Depending on the kind of business you have, you might consider scheduling your billing so clients can pay early in the new year for work you completed late in the previous year.

The advantage to this is that you’re getting income early in the year.

However, if you had a successful year you could accelerate your deductible expenses. There are a few things you can do to help relieve your tax burden if you plan ahead, such as:

  1. making extra charitable donations,
  2. renewing professional journals and licenses before the year ends, or
  3. replacing old business equipment.

If you are in the position to, you might also consider

  1. prepaying your state income tax,
  2. selling an investment property at a loss, or
  3. selling securities at a loss.

If you’re a small business owner or entrepreneur, there’s nothing you can do about taxes. They are as much a part of your business as your customers or client base. The trick to making it all less odious, though, is to be proactive. Think ahead early in the year so the end of the year doesn’t hit you any harder than it needs to.

Timely Tax Tips for Freelance Workers

There is a cost to the freedom you get being a freelance worker. While you can probably fudge on office-appropriate attire and set your own start time (Sleeping late can be a viable option!), there is one thing you can’t avoid if you hope to be successful.

Taxes.

When able to, a lot of freelancers prefer to hire an accountant. There are a lot of things to keep track of; and while tax law for freelancers really is a lot of common sense if you think about it, the problem is that there is really a lot to keep in mind. As a freelancer, you are your own employer. In addition to the usual responsibilities of a working adult — the electric bill, the water bill, the gas bill, and your rent or mortgage – you are also responsible for your obligations as your own employer. This means paying into Social Security and Medicare, and perhaps setting up a retirement account.

We’ve already talked about the self-employment tax . It’s important to keep in mind that because you are both and employer and an employee, that you are responsible for the Employer and Employee portions of Social Security and Medicare, 15.3% of earnings. It’s true that you can offset earnings with deductions; but you need to be as careful about what you pay as you are about what you don’t pay.

Here are a few things to keep in mind that will help you stay organized.

  1. Don’t trust your 1099.

If you earn $600 or more from a client, that client should send you a 1099-MISC. It’s very important that you compare. Look at Box 7 on your 1099-MISC and compare that number to the number you have in your records. If your client claims they paid you more than your records state, go through the steps to verify and get a new 1099.  Remember: the tax burden is on you, not your clients. The IRS won’t annoy them with phone calls and letters. They will annoy you.

  1. Get a separate bank account.

Yes, you work for yourself. It’s your money and if you’re making less than $600 total, you may not need a separate business account. If freelancing is your primary source of income, however, you really should consider getting a separate account. This will save you headaches when looking up transactions. If you use accounting software like QuickBooks, having a separate account will make it easier to download information to plug into your books. It also makes it easier to track business expenses for deductions.

  1. Pay attention to Estimated Tax.

As a freelancer, you will probably have to pay taxes quarterly instead of just once a year. You’re also an employer, remember?

If you’ve been freelancing for more than a year, you can get a good idea of what you should plan on paying by using one of several easy to use calculators on line such as:

http://www.bankrate.com/calculators/tax-planning/self-employed-business-tax-calculator.aspx

or

http://quickbooks.intuit.com/r/free-self-employment-tax-calculator-quickbooks/

It’s not always easy being your own boss. But it’s not impossible. And if you are the kind of person who enjoys the autonomy, then the additional responsibility is part and parcel. The trick is to be as careful with your books as you are with the work you do, and to be smart about it.