Accounting Hacks For Small Business Bookkeeping

What does tax time look like for your small business?

Are you calmly organised so that it’s just another date on the calendar? Or, are you running around in mad panic trying to sort out all your paperwork?

It’s no secret that accounting and bookkeeping are some of the most maligned tasks faced by small business owners. Not many people leap out of bed with a cry of, “Bookkeeping, YES!”

Assuming that you’ve probably already set yourself up with a digital-based accounting software, here are some “hacks” to make your business bookkeeping more painless.

Categorize Expenses

Anyone who has spent hours (or paid their accountant several hours) to categorize all business expenses should appreciate this one. Setting up categories in your accounting software ahead of time is a huge time saver (and obviously a money-saver when you’re talking about paying an accountant!).

Most accounting software’s allow you to set up categories in the settings, which means as expenses come in, you simply need to assign them to a category. Much easier than trying to remember something 12 months later!

The categories you use will need to be specific to the tax authority you fall under, so you may want to consult with a qualified accountant in your area first to ensure you capture all relevant expense categories.

Some examples (which work for most places) may include: advertising, business fees, licenses and subscriptions, insurance, office expenses, rent, salaries, and telephone.

Another advantage to categorizing your expenses early is that you can clearly see which categories tend to be attributed with more spending. This can help you to identify early any areas which may be getting out of control.

Store Receipts Immediately

Most business owners tend to be clear on income, especially if you’re running an online business where all payments come in and are credited automatically by your payment software. However, it’s a different story when it comes to monitoring expenses.

If you’re digging through boxes, pockets, wallets, drawers, or vehicles looking for business-related receipts, you should know there is a much better way to keep on top of them.

Accounting software such as Xero or Quick-books allow you to take photos of receipts and immediately attach them to the expenses part of your bookkeeping. This means you can also categorize them immediately.

Another advantage of the photo option is that you don’t run the risk of receipts becoming illegible. Deterioration over time, especially on certain types of paper, can mean that you’re unable to read your older receipts at tax time.

If your accounting software doesn’t have this functionality, there are apps available to help you do this. Usually they also provide you with reporting and some of them will integrate directly with your accounting software if you prefer it.

Connect Bank Accounts and Credit Cards

The secret to more painless business bookkeeping is to automate as many functions as you possibly can. This means you should take advantage of features in your accounting software such as the ability to connect bank accounts and credit cards.

This functionality allows transactions to be pulled through and attributed automatically in your accounting software.

For this to be effective, of course you need to ensure that your business transactions only go through your business accounts and that no personal transactions go through.

Another point to note is that you need to ensure that the type of files your bank provides are compatible with what your accounting software accepts. (Or that you choose an accounting software which accepts the type of file your bank provides). Common file types are CSV, QIF, QFX, QBO and OFX.

Reconcile Weekly

It’s all about getting into good habits really. We know that many business owners procrastinate over bookwork because they’re not very fond of it, but if you set aside a small amount of time each week (even just an hour) to reconcile, it’s not such a big deal at the end of the financial year.

This helps you to pick up any errors as close as possible to the time they happened – it gets much more complicated to untangle that kind of thing if time has passed.

The other thing you should be doing with weekly reconciliations is following up with any late payments if your business works on an invoice basis. As Mark Gandy for Less Accounting says, call people even if they’re one day late. Everyone who is 30+ days late was once one day late. Having a clear follow-up process stops things from spiraling out of control.

Automate Invoicing Requirements

If you’re doing business across borders, the chances are you will come across different invoicing requirements for each country you have customers in.

What is your plan to deal with sales tax, GST or VAT invoicing requirements? What about local rules for what to include on invoices? These are important considerations because you don’t want to end up in a position where you’re being penalized for not following correct procedures.

The easiest solution is to choose a software which automatically deals with those invoicing requirements for you. You don’t want to have to add manual checks to every invoice that goes out.

Final Thoughts

Accounting tasks may not be your favorite business activity, but really they’re only as painful as you make them.

You can streamline your processes and save a lot of time if you put good systems in place and automate as much as possible.

Your system should also include regular time to reconcile your accounts, even if that means hiring a virtual bookkeeper. If you deal with a little, often, it becomes much less of a daunting task later on.

When Tax Returns Are Due: The Ultimate 2020 Tax Compliance Guide

The phrase “nothing is certain but death and taxes” is a real thing for taxpayers. When tax returns are due, you need to file them on time or be faced with penalties and interest. Not only can this hurt you financially, but it also exposes your business to IRS audits.

Thus, it is important to know when tax returns are due, so you won’t have to pay more than you have to.  The prompt filing of your tax returns allows your company to remain in compliance and in good standing with the IRS.

The best way to save on taxes and prevent audits is by hiring a tax professional  who will file your tax returns on time. They can also help you save on taxes since they have knowledge on the tax code and the application of deductions and credits.

The Basics of Filing Tax Returns

he IRS underwent major changes in 2018. However, the filing deadlines remain relatively consistent with previous years. When you file your return, the amount of tax you’re required to pay (or receive) is determined. If you have a subsisting tax refund, you will receive your refund usually within two to three weeks.  If you file a paper tax return, refunds usually take a little longer.

Filing Deadlines Of Common Tax Forms

If you receive a W-2 form from your employer, it’s likely that your employer is already withholding taxes on your behalf.  However, self-employed taxpayers need to file estimated tax payments each year. The IRS Form 1040-ES must be filed on or before April 15th. However, for those who pay their taxes quarterly, you may file by June 15th or on September 15th. The last deadline for installments is on February 15th of the following year. This type of tax return concerns partnerships. You need to file them on or before March 15th.

This form is called the Estates and Trust Income Tax Return. It’s due on April 15th of every taxable year but is extendable until September 30th.

This is called the C-Corporation Income Tax Return. Corporations are composed of several shareholders who earn income from the venture. However, being a separate and distinct entity from its owners, it must be filed as a separate form when tax returns are due.

Corporations are required to file this by considering the corporate income tax rate, not the shareholders’ personal tax rate.

The deadline for this form falls on April 15th of every calendar year. However, the deadline can be extended until October 15th.

You must file this form by March 15th on a calendar year when tax returns are due. However, the deadline may be extended until September 15th.

Taxes are not paid at the corporate level. However, you must file annually and provide this information to the IRS.

This is the Foreign Bank Account Reports form. It reports the financial interest over foreign financial accounts and filed with the Treasury Department. It’s due by April 15th but extendable until October 15th when filed with Form 1040.

This tax return is filed by employers to their employees which includes the payment of employee compensation, taxes withheld, retirement information and more.

This is an information return that shows income received if you are an independent contractor. If you earn at least $600 as an independent contractor, you must file this accordingly.

This type of tax return is filed by financial institutions. It concerns bonds, mutual funds, sales of stock, and the mutual funds of a brokerage account.

If you earn from investment securities, the IRS requires you to file the information on Form 1099-B. It also shows your cost basis since investment gains or losses are what determines the amount of tax liability.

This tax return refers to real estate transactions. This is where you indicate your capital gains and losses on your annual income tax return.

Property Taxes

Property taxes must be filed promptly when tax returns are due. If your mortgage properties are out of an escrow account, failure to pay the dues puts your property at risk of foreclosure. If these are not escrowed, you should save funds ahead of time just to make sure.

The penalties for late payments when tax returns are due include interest, property liens, and sometimes, foreclosure. The annual property tax bills are usually sent to you by October of each taxable year.

You may pay them in two installments. The first installment is due by November 1st while the second falls due by February 1st of each taxable year.

What To File When You Incur A Penalty

Underpayment of Estimated Tax by Individuals, Estates, and Trusts. It is attached to IRS Form 1040s and IRS Form 1041.

This indicates whether you have a subsisting penalty with the IRS or if you have an overdue balance from the previous taxable period.

First, you must indicate the amount of your annual payment. This tells the IRS how many penalties you incurred when tax returns are due.

Next, you need to indicate a particular reason for filing Form 2210.

Are you requesting a waiver of your penalty? Do you wish to reduce your liability by using the annualized income installment method? Do you have objections or corrections regarding your penalty?

The third step is also indicating whether you want to use the short method or the regular one in paying for the penalties.

The short method is used when you have no estimated tax payments or when you only paid withholding federal income tax.

You use the regular method if you made estimated tax payments but settled them late. This also applies when you are an employee that has not been paid his wages and whose income is subject to withholding income tax.

Finally, the next step proves why a tax professional  is exactly what you need when tax returns are due. This is the part where you will be asked to compute the underpayment you incurred.

Accountants fill out this form without effort. They are experts in knowing how much your liability is by examining your books. They even file other forms so you do not worry about

The Benefits of Your Filing Tax Returns On Time

iling your tax returns ahead of time lets you save more money.

Retirement Plan Contributions

The IRS raised the limit to $19,000 for 401(k), 403(b), and most 457 retirement plan contributions.

The IRA contributions also increased up to $5,500 to $6,000 this year.

Tax Planning Services

You can prevent incurring tax penalties by hiring someone to promptly file with the IRS when tax returns are due.

Accountants are trained to complete financial statements and tax filing initiatives before they are granted their CPA licenses.

Imposing efficient tax planning generates tax-saving solutions. We mitigate your risks of incurring tax penalties and file returns on time so you can avail of tax exclusions and exemptions.