How to pay your estimated tax payments
I have a business. Should my business buy a car or track miles instead?
The first part of this decision should be based on the amount you plan on spending to purchase the vehicle. If, for example, you are a contractor and you are getting ready to purchase at $50,000 Ford F150 that you plan on using exclusively for work, you would want to have your business purchase the vehicle and pay for all the expenses related to that vehicle including: gas, oil, auto repairs, tire maintenance, insurance, registration fees, licenses, and depreciation (or lease payments).
The second part of this decision is the amount of time you plan on using the vehicle for personal vs business. If you have a personal car that you use for both personal and business and the car is inexpensive to maintain, like a Prius, you would want to track the business-related miles have your business pay you back using the Standard Mileage Method.
Standard Mileage Method:
Under the Standard Mileage Method, you take the total miles driven for work and multiple them by the standard mileage rate set by the IRS. In the first six months of 2022, that rate was 58.5 cents per mile. As of July 1, 2022, the IRS increased the rate to 62.5 cents per mile for the remaining of the year.
Reporting Cryptocurrency Transactions
Buying and selling Cryptocurrency is about the same as buying and selling stocks and bonds. You don’t need to report the purchase of crypto to the IRS, you only need to report the gain or loss at the time you sell or use it to purchase a good or service. Many Crypto exchanges are providing end-of-year tax documents to help traders categorize their gains/losses correctly on their tax return. If you use an exchange that does not provide these documents you will need to manually calculate your crypto income using the FIFO (First In First Out) method.
Can my business pay for my medical insurance?
Yes, you can. You will need to let your accountant or payroll processor know that you are paying medical premiums personally and give them the monthly premium amount. They can then add S Corp Medical to your payroll as a company contribution which will be added to your wages.
How do I set up a budget in QuickBooks Desktop?
Here is our step-by-step guide with screenshots:
Home Office Expense
I’m a W-2 employee, can I write off my home office expenses?
Unfortunately, the IRS took away all deductions, including home office, for W-2 employees in 2018. In exchange they allowed the employer to give an employee an allowance for home office and other expenses. They basically shifted the burden of paying you back for home expenses to the employer.
What is the difference between bookkeeping and accounting?
Bookkeeper vs Accountant
For most small business owners, the terms bookkeeping and accounting are used interchangeably. While the two roles share some tasks, they’re not synonymous. An accountant may be considered a bookkeeper, but a bookkeeper can’t be an accountant without some education and certifications.
A bookkeeper is typically in charge of the day-to-day recording of financial transactions for the business. This includes keeping thorough financial records of:
- Customer Invoices and payments
- Material supplier and subcontractor bills and payments
- Payroll and payroll taxes
For example, a bookkeeper for a construction company will need to record every financial transaction that occurs during the day, such as the purchase of lumber, materials, subcontractor bills, and employees working on a job need to have their time allocated properly to the job as well as the phase of the job.
A bookkeeper can be anyone who is good with numbers. No formal training or licensing is required to become a bookkeeper. As a result, it’s easier to become a bookkeeper than an accountant.
Hiring a bookkeeper or even using bookkeeping software will likely be less expensive than an accountant. Additionally, a bookkeeper can take on greater responsibilities by transitioning from an entry-level position into a role as a full-charge bookkeeper.
When most people think of an accountant, chances are tax return processing, tax planning and end of the month financials come to mind.
An accountant’s role can be viewed as less transactional and more analytical. Accountants take the financial data that’s been meticulously recorded and then extrapolate trends and information. By looking at the numbers, they can provide crucial business insights and advice for how to keep optimizing.
For many small businesses, not having a tight grasp on their finances was the cause of their demise.
Requirements to become an Accountant
There are educational and credential requirements to become an accountant. At the very least, they must earn a bachelor’s degree in accounting from an accredited college or university.
A certified public accountant (CPA) takes that a step further. They not only have to meet the schooling prerequisites but must also satisfy state requirements and pass the CPA exam. From there, they are expected to maintain their credentials and stay up-to-date with laws and regulations.
Common roles of an accountant include:
Controller Level Accounting
A good controller will:
- Teach the bookkeeper(s) to learn and enter data correctly
- Be in charge of the accounting system and proper maintenance of each account
- Provide monthly financial reporting to the owner and the bank
A partner to help the small business owner think strategically about your business. CFO and
CPAs are generally well trained in your industry and can provide insight and guidance on:
- Better understanding of the financial side of your business
- Improved decision-making capabilities from clearly seeing the hard and true numbers of your business
- A readily available sounding board to help with tough business decisions and help you clarify your business plans
- Establish strong financial controls in your business to reduce employee theft and increase profits
- Training and managing your accounting staff
- Improved quality and timeliness of financial information
- Budget preparation and monitoring
- Profitability analysis by service or product line
- Tax saving strategies
- Trend analysis
- Assistance in defining long-range plans and the quantification of goals
- Assistance in obtaining financing from banks, including assistance with negotiations
- Development of company accounting procedure manuals
- Analysis of equipment purchases, expansions, etc.
- Mergers and acquisitions assistance
- More time to focus on new services, new customers and other core business issues.
Form 1099 – How to Correct Filing Mistakes
There are two types of 1099 errors:
- Type 1 only requires one Form 1099 to be filed to correct the error
- Type 2 requires two 1099 forms to be filed to make the correction.
Type 1 Errors
Type 1 errors occur when you prepare a form with:
- The incorrect amount
- An incorrect code or checkbox
- An incorrect payee name or address
- Or, when you filed a form when one should not have been filed
To correct Type 1 errors:
- File the correct form with the correct amount, code, checkbox, name or address and check the CORRECTED box, located at the top of the form.
- Send the corrected form to the recipient
- Prepare the red Copy A to send to the IRS with the Form 1096 transmittal if paper filing. NOTE: For electronic filing, you do not need to send in a Form 1096, nor should you send in the originally filed forms with the correction to the IRS.
Type 2 Errors
Type 2 errors occur when you prepare a form with:
- The wrong payer information, including the wrong Taxpayer ID Number (TIN)
- The wrong recipient information, including the wrong TIN
- Or, when you prepare the wrong form (like a 1099-INT instead of a 1099-DIV)
To correct Type 2 errors, you will need to file two form 1099s:
- The first 1099 will need the exact same payer and recipient information as the originally filed form, but the amounts on the form will be all zeros and the CORRECTED box will be checked. This will remove the originally filed form from the IRS records.
- Then, you will need to file a new Form 1099 with the appropriate information as an originally filed form (not a corrected form).
- Send the corrected and new original forms to the recipient and prepare the red Copy A to send to the IRS with the Form 1096 transmittal, if paper filing. A different Form 1096 is required for each type of Form 1099 filed. For electronic filing, you do not need to send in a Form 1096.